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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

FUNDS ARE READY

But Vietnam has few good deals

By Alejandro Reyes/ Hong Kong


POTENTIAL PLUS HYPE EQUALS let-down. That's how the investment equation is shaping up in Vietnam, once one of the most attractive emerging markets. Results from the half-dozen existing country funds have been disappointing. The London headquarters of fund monitor Micropal recently criticized many for being too liquid. In other words, the funds haven't invested much of the money raised. One, Lazard Vietnam, was 88% in cash at the end of last September.

Together the funds have $395 million to invest: Templeton Vietnam Opportunities, $117 million; Beta Viet Nam, $69 million; Vietnam Frontier, $67 million; Lazard Vietnam, $59 million; Vietnam Fund (Lloyds Bank), $58 million; and Beta Mekong, $25 million. Why haven't they? Too few quality deals, say the fund managers. Templeton's mandate stipulates that 65% of the fund must be invested in the country by this October. But after three years, it has placed just 10% of the money it has raised. Templeton chief Mark Mobius says his team has not been able to identify suitable ventures. It has considered more than 250 proposals, and signed only three.

Grinding bureaucracy, rampant corruption and slow progress on banking and legal reforms have dulled Vietnam's luster over the past two years. A number of high-profile fiascoes have also blunted investors' interest. In 1995 disputes with the government over the site of an oil refinery led France's Total to withdraw from a $1.3 billion project. Total was replaced by a consortium that included Conoco of the U.S., Malaysia's Petronas and the LG Group of Korea. But last month state oil company Petro Vietnam closed down the venture, saying it was not viable.

Vietnam does not have a capital market so when the closed-end funds invest they usually do so in companies (listed elsewhere) that have significant Vietnam exposure or in local ventures. Templeton has been buying such stocks as Hong Kong property group New World Development, which has a hotel in Ho Chi Minh City. Top performer Vietnam Frontier chalked up an 18% rise in net asset value (NAV) last August. Not bad, but it doesn't measure up to, say, Latin American funds' average increase of 31%.

Vietnam funds now trade at an 18% discount to NAV, compared to the 75% premium enjoyed three years ago. Indeed, Lazard, which is only 14% invested in Vietnam, is rumored to be considering liquidation. Templeton's Mobius may have to diversify into Southeast Asian equities. Says one fund manager: "Over the long term, Vietnam is still a good bet. But for now, things have slowed down. There are certainly more exciting emerging markets elsewhere." Smart investors will make the same calculation.


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