Private equity to enhance Vietnam stock market quality: VinaCapital exec

Private equity plays a crucial role in boosting the quality of Vietnam's stock market, especially after its anticipated status upgrade, says Nguyen Thi Dieu Phuong, deputy CEO of fund manager VinaCapital.

Vietnam's economy has experienced a year of many ups and downs. Despite facing challenges, the economy continues to grow positively. Vietnam is considered a bright spot in the region and is expected to have its stock market status upgraded by ranking agency FTSE Russell in 2025.

However, experts held that attracting sustainable investment capital also requires a focus on increasing the number of quality businesses in the market. In recent years, private equity has played a significant role in fostering, supporting, and creating quality businesses for Vietnam's economy and stock market.

Speaking at the talk show "Pho Tai Chinh" (The Financial Street), Phuong, who oversees private equity and negotiated investments at VinaCapital, highlighted that private investment in Vietnam has significant potential for growth, particularly in the context of continued macroeconomic growth. This growth would create large, high-quality businesses. When these businesses are listed on the stock market, they will contribute high-quality goods to the market, thereby increasing its size.

According to her, the long-term outlook for Vietnam's economy remains strong, underpinned by a young population and improving labor productivity. However, private equity activity has been relatively slow in 2024, as evidenced by the low number of M&A transactions in the first nine months.

There are many reasons for this, including weak consumer confidence and global geopolitical instability, leading to caution among foreign investors.

VinaCapital's research division estimated that the growth rate of profits from core business operations for companies in 2024 will be modest, around 8%. This could explain the reduced attractiveness of transactions for both investors and business owners, as reflected not only in private equity transactions but also in plans by listed companies to offer new shares.

Another issue is the limited number of truly high-quality private businesses, particularly those of medium and large scales.

The VinaCapital executive revealed that in the first nine months of 2024, her agency has reviewed and analyzed numerous corporate sale opportunities, including minority share offerings, control stake sales, and convertible loans, across various sectors. However, most of these companies are either very small, startups, or in the technology sector.

"However, this is just a short-term slowdown. Overall, international and regional investors are still very interested in opportunities in Vietnam's private equity sector," she said.

Vietnam's private equity market holds significant potential but also faces several challenges. The first challenge is limited transparency in the business environment, which raises concerns among investors due to incomplete or inaccurate information.

Many private companies, especially those unlisted, do not have audited financial statements or have not been audited by reputable international audit firms, leading to risks when evaluating companies.

Another challenge relates to the operation, monitoring, and assessment of capital usage after disbursement, Phuong said, adding that most private companies are SMEs still in the process of standardizing their processes and systems, which can lead to delays in project implementation and reduced capital efficiency.

Thus, investing in private companies requires skilled professionals with experience and capabilities to execute strategies and meet investor expectations, she noted.

Phuong added that the valuation of companies is often not aligned with the expected growth in the next 3-5 years. Most business owners set high valuation expectations, making it difficult to close deals. To address this, companies should seek professional advisors for a clearer and more accurate view of their business valuations, which would help expedite the deal-making process.

Lastly, ensuring exit strategies that align with the goals of the founders and the timelines of investors can be challenging, requiring effective communication between investors and founders.

Therefore, the private equity environment in Vietnam must continue to improve in areas such as information transparency, legal procedures, infrastructure, and human resources to create a more favorable environment for investment growth in the future, she recommended.

Private equiy plays crucial role

Phuong believed that the long-term foundation supporting Vietnam's economic growth remains robust. Specifically, in 2025, the most anticipated factor is the improvement in corporate profits, which will coincide with the recovery and growth of the economy. Vietnam's economy is forecast to grow at a strong rate of 6.5% to 7% next year, and profits from core business operations are expected to expand around 20%.

To attract more substantial capital flows after the market upgrade, the role of private equity is crucial in developing large-scale, high-quality businesses, she commented.

First and foremost, private equity helps local businesses improve management capacity and operational efficiency. Not only does it provide capital, but investors also accompany businesses in establishing transparent governance systems, tighten financial controls, and optimize processes. These are essential factors for enhancing business quality, meeting international capital market standards, and attracting major investors.

In addition, private equity can promote M&A and business expansion, especially in key sectors like technology, health care, finance, and manufacturing. Through M&A or expansion activities, private investors help create larger, more competitive businesses.

These firms will be in a better position to participate in global supply chains, attract more investment, and take leadership positions in their industries. When these companies are listed on the stock market, they will contribute high-quality assets, thereby increasing the market size.

Furthermore, with the potential market status upgrade, private equity can act as a bridge to help Vietnamese companies access a wider network of international investors, expand their horizons, and implement sustainable environmental, social, and governance (ESG) standards, she said.

This not only attracts foreign investment but also helps Vietnamese companies build reputable brands, ensuring long-term competitiveness, Phuong added.