As Southeast Asia emerges as a competitor in the capital markets, Vietnam is preparing growing digital companies for the global IPO market.

The Vietnamese stock market has been basically closed to new IPOs for a year. Bond markets and their banking sector have been bogged down by the controversy and reforms. The domestic stock index is down 30% since 2021.

However, Vietnam is home to many ambitious companies that are poised to outbid foreign competitors for dominance in the domestic markets and hope to make their mark in the global capital markets. The country’s domestic consumption is rising as the country recovers from the COVID lockdowns, with GDP growing by 8% in 2022. More importantly, a new generation of local high-tech companies are seeking to transform the local economy by driving new digital business models and, in Some cases, even disrupt global markets.

The most egregious example is the Vietnamese electric car company, VinFast, which filed for a $1 billion IPO on the Nasdaq stock exchange in December. VinFast, which is part of Vietnam’s largest conglomerate, Vingroup, seeks to compete with the Tesla Models Y and X with a lower cost, high-performance, long-range SUV that takes advantage of the latest autonomous and self-driving electric vehicle technology. Taking advantage of Vietnam’s significant manufacturing cost advantage and avoiding the tariffs that prevent China’s domestic electric vehicle manufacturers from entering the US market.

VinFast was able to develop and manufacture its first two EV models, the VF8 and VF9, in 18 months, demonstrating the quick execution and design that Vingroup and its president, Phạm Nhật Vượng, are known for in Vietnam. The company claims to have already had 58,000 pre-orders for its models and has shipped nearly a thousand initial vehicles to the United States. Its existing facilities in Vietnam are said to be able to expand to 300,000 vehicles annually, and the company plans to build an onshore facility in North Carolina that can produce an additional 150,000 electric vehicles once construction is complete.

The company’s highly automated electric vehicle factory in Haiphong has a capacity of 300,000 electric vehicles annually.

VinFast is essentially a “burn the boats” strategy for Vingroup, which has halted its internal combustion vehicle production to focus 100% on electric SUVs and motorcycles. At this price point, car uptake in Vietnam, where only 32% of the population owns a car, is likely to be negligible. Therefore, the company will need to be able to win over US and European buyers in a significant way to scale revenue quickly while increasing the billions of dollars required to support planned capacity expansion over the next three years. This is a groundbreaking transaction that foreign institutions and local companies will be watching carefully.

VNG Corporation is another Vietnamese company that is widely rumored to be seeking an IPO in the US sometime in 2023. VNG owns the ubiquitous messaging and social media app Zalo, which is used by 75 million of Vietnam’s 100 million population – So almost anyone with a cell phone. VNG recently introduced payment app ZaloPay, in a bid to replicate the success of Tencent’s WeChat app in China, which is the central hub for everything from payments to loans, insurance, ticket bookings and other basic daily transactions for many Chinese. VNG also has a strong local online gaming platform, media, and music streaming, among other digital businesses. As its recent assets gain scope and start to turn a profit, VNG will be a very interesting name for foreign investors to watch.

Another digital company that goes head-to-head with overseas competitors, Be Group is currently the No. 2 taxi ordering app in Vietnam and undercuts market share from Southeast Asian super app Grab in transportation and food services. Connecting.

Headed by a young, highly intelligent CEO, Vu Hoang Yen, Be Group leverages its status as a local champion of connecting public transport and air tickets to create the most comprehensive mobility data set for Vietnamese consumers, which will provide strategic advantage and multiple monetization paths. Be Group also owns a digital bank, Cake, which partners with one of the largest private banks in Vietnam, VP Bank, and provides instant issuance of credit cards, loans, time deposits and other digital financial products. While Be Group is still a few years away from going public, it is a great example of a homegrown digital company.

The Marcum Asia staff recently attended the Vietnam Venture Summit, hosted by local real estate investment firm Goldengate Ventures and Vietnam’s Ministry of Planning and Investment. The energy of the new generation of Vietnamese businessmen has been fully displayed. Startups ranging from gene-based medicine, SaaS platforms, and fintech to new home-grown consumer brands are tapping home-grown science and engineering talent at a fraction of the cost of the US or even China while starting to attract more significant funding from global private investment funds such as Such as GIC, Warburg Pincus, KKR, Mizuho Bank, and Baring Private Equity.

Vu Hoang Yen of Be Group said: “The younger generation is showing more and more that they understand the world better through speed and openness.” “This is critical because if you don’t understand the global and regional landscape, you will lose out on your local market. I see more of these leaders who are open to learning and understanding global technology and movements and are more interested in environmental and social issues.”

The next generation of companies in Vietnam benefits from significant tailwinds that are likely to drive a favorable growth environment over the next decade.

On the side of Vietnam, with three-quarters of its population being of working age and the total population expected to increase until 2050, urbanization continues, and tens of millions of its citizens are just beginning the transition from a subsistence situation to that of an emerging middle class. Vietnam’s low labor costs, high-quality infrastructure, and high levels of technical education make it a highly desirable location for multinational companies looking to diversify their supply chains away from China and Chinese entrepreneurs looking to establish a manufacturing base insulated from tariffs and geostrategic risks. . Vietnam’s government is stable, focused on economic development, and views the United States as a useful counterweight to its inescapably giant but sometimes arrogant neighbor to the north.

As an example of how global investors are beginning to view Vietnam as the next frontier for growth stocks, Carson Block of Muddy Waters, which has been a black house for many Chinese companies he accuses of engaging in accounting fraud and scams, has shopped in Ho Chi Minh City with a long-term financing. It only makes private and public investments in Vietnam. When a skeptic like Carson Block puts money to work on the long side, it’s a strong signal that the market is worth targeting.

What will it take for Vietnam to truly become a breeding ground for national champions and growth stocks that will attract the attention of overseas investors?

First, the Vietnamese government should establish clear guidelines and an effective process for approval of overseas listing. Currently, any overseas IPO will require approval from the Ministry of Planning and Investment, which is a less transparent process. Furthermore, IPOs in industries considered “sensitive” may require approval from the Prime Minister or the Council of State, and it is not clear if this can be obtained. If Vietnam really wants to develop world-beating companies and attract huge inflows of foreign capital, the government needs to provide a clear roadmap of what is needed and a timely path to receiving the permit.

Secondly, entrepreneurs in Vietnam must adapt to global accounting and governance standards. Many of the large conglomerates that dominate well-established private sector industries have multiple interlocking operating entities, captive banks, and securities firms, creating an inherent array of conflicts and related party transactions. The older generation of chairs was educated in Russia or domestically and may have difficulty adjusting to the transparency expectations required for listing abroad.

The good news is that the younger generation of Vietnamese entrepreneurs have a global outlook, and are well-educated digital natives. As their companies transition from start-ups to large-scale developing companies, they will drive profound changes in the economy and business culture. For now, investing in Vietnam is a game for those who are patient and willing to deal with the idiosyncrasies of a frontier economy with a socialist government system. The opportunities are vast – and transformation can happen in the blink of an eye.

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