Vietnam still a magnet for foreign investors amid global economic uncertainty
Vietnam still a magnet for foreign investors amid global economic uncertainty
Vietnam will continue to attract foreign investors next year, especially through mergers and acquisitions (M&A), despite a slowdown in global dealmaking, given the ongoing global economic volatility and the risk of a global recession, according to a report by law firm Baker McKenzie.
According to the report titled “Global Transactions Forecast,” M&A deals will decline globally from the current US$2.8 trillion to US$2.1 trillion next year. In addition, initial public offering proceeds were predicted to fall 23% from an estimated US$152 billion this year to US$116 billion in 2020.
For Vietnam, its gross domestic product (GDP) growth may ease over the next 18 months due to a drop in exports caused by lower Chinese demand and increased global protectionism. Currently, Vietnam’s average annual GDP growth of 6.2% is higher than the global average of 2.8%.
Baker McKenzie expects crossborder acquisitions to dominate M&A deals in the coming years as the country’s solid socioeconomic fundamentals continue to attract overseas investors.
“Vietnam remains active in M&A right now, due to positive market factors and confidence that help create business opportunities as well as multilateral agreements that continue to prompt regulatory reform,” Seck Yee Chung, who heads Baker McKenzie’s M&A practice in Vietnam, said in the report.
The country was considered to have strong inbound activity this year. The largest crossborder signed inbound deal in the country this year was South Korea-based SK Group's US$1-billion investment in Vingroup, Vietnam's leading diversified business group.
This was followed shortly by South Korea-headquartered Hana Bank’s purchase of a 15% stake in the Bank for Investment and Development of Vietnam worth US$850 million. South Korea is the largest source of foreign direct investment in Vietnam, as the latter has become a production base for major South Korean multinationals such as Samsung and LG.
Despite continued interest from investors, Vietnam may experience a decline in M&A, as total transactions will dip 35% from the current US$2.6 billion to US$1.7 billion next year.
However, the country will pick up again after 2020 as it remains an attractive market.
