Deutsche Bank's restructuring not expected to harm VN market
Recent developments at Deutsche Bank will have no effects on capital flows into Viet Nam, according to Bao Viet Securities Co (BVSC).
German Deutsche Bank early this week announced it will axe its global equities unit, cut some fixed-income operations and lay off around 18,000 staff as part of its restructuring plan.
As of March 31, the German lender managed 704 billion euros (US$788.7 billion) worth of assets across the globe in 15 countries.
The bank entered Viet Nam in 1992 and has invested in the Vietnamese equities market through the two funds – FTSE Vietnam ETF and Vietnam Phoenix Fund Limited, formerly known as DWS Vietnam Fund.
FTSE Vietnam ETF is an index-focused exchange-traded fund set up by Deutsche Bank in January 2008 and it is the second-biggest fund in Viet Nam. The fund is managing nearly $305 million worth of Vietnamese assets, up 5.8 per cent from one year earlier.
Large-cap companies’ stocks invested by FTSE Vietnam ETF include “Vin” companies – Vingroup, Vinhomes and Vincom Retail, dairy producer Vinamilk, food and beverage firm Masan, Vietcombank, petrol firm Petrolimex and SSI Securities.
Those large-cap stocks account for between 2.32 per cent and 15.55 per cent of the fund’s total investment.
Deutsche Bank also runs Vietnam Phoenix Fund Limited, which oversees around $150 million worth of Vietnamese shares.
Large-cap stocks targeted by the fund included listed firms such as tech group FPT and steel producer Hoa Phat as well as non-listed companies such as Greenfeed and Anova Corp.
Therefore, the announcement by Deutsche Bank has sparked concerns the Vietnamese equities market may be impacted.
The bank would carry out a series of changes to reduce 25 per cent of business costs by 2022, BVSC said in a note on Monday.
The bank would completely exit the global stock market and reduce capital for the bond market by about 40 per cent. The global stock market will be handed over to the French BNP Paribas.
The German lender would also set up a corporate banking unit to focus on corporate lending and expand its private banking segment and asset management services for individual customers in Asia.
DWS fund management would be strengthened to reach the top 10 largest fund management companies in the world.
Therefore, the funds “will not be negatively affected by this restructuring but may possibly benefit in the future,” BVSC said.
The financial company Bien An Toan’s investment director Huynh Minh Tuan told local media that the German bank’s decision would definitely weigh on investor sentiment because it is one of the top asset management businesses in the world.
FTSE Vietnam ETF is operated based on the capital raised from investors so it will not stop running unless investors decide to cash out – which is unlikely, according to Tuan.
The German bank may decide to sell Vietnamese assets at low price levels to quit the local market, putting pressure on other investors.
That scenario is possible but the Vietnamese stock market is quite vulnerable now and any buyers will need some time to prepare for the deals.
In addition, Viet Nam is rising as a new destination for foreign capital, so there is little chance for Deutsche Bank to exit the country, according to Tuan.