Warburg Pincus invests $200m in Vincom (Reuters)

Warburg Pincus LLC, the private-equity owner of Neiman Marcus Group Inc., will lead a consortium to invest as much as $325 million in Vietnam’s Vingroup Joint Stock Co., the firm’s first Southeast Asia deal since 2010.

The group will spend $200 million for about 20 percent of the Hanoi-based company’s Vincom Retail property unit, Vingroup said in a statement. The New York-based firm may invest an additional $100 million, Vietnam’s largest shopping mall owner said.

Warburg Pincus, which raised $11.2 billion in May, joins a wave of private-equity firms betting on the country’s emerging middle class and real estate market recovery. The deal rivals KKR & Co.’s $359 million investment in a unit of Masan Group Corp. in January and will help Vingroup accelerate planned shopping mall developments

“There’s very good chemistry between the two companies,” Le Thi Thu Thuy, Vingroup’s chief executive officer, said in an interview. “We want to leverage Warburg-Pincus’ experience and take Vingroup to the next level. We want to internationalize this company.”

Vingroup plans to offer shares in Singapore this year and Warburg Pincus will invest as much as $25 million as part of today’s agreement, she said. Vingroup also plans an international bond sale, she said, without giving a time frame.

Warburg Pincus will gain positions on Vingroup’s board of directors as part of today’s transaction, according to the statement.

KKR Deal

A fifth of private-equity investors surveyed in a Coller Capital report in December said they are turning to emerging Asian markets including Vietnam and Indonesia as investments in China become risker.

KKR in January more than doubled its stake in Masan Consumer Corp., a Vietnamese fish sauce maker, making it the country’s largest private-equity deal. TPG Capital, the private-equity firm run by David Bonderman and James Coulter, said in March it was looking for its first Vietnam investment in nearly four years.

Warburg Pincus’s only investment in Southeast Asia was in Singapore’s Quest, an engineering services company, in 2010, according to its website.


Warburg Pincus Buys Vincom Retail for US$200 mln

 May 31, 2013 (Vietnamica) — On May 29, Warburg Pincus, the consortium led by U.S. buyouts fund, unveiled its plan to buy 20 percent of Vincom Retail, the retail unit of Vietnam’s Vingroup JSC (HOSE:VIC) for US$200 million (Dan Tri, May 29).

Warburg pledged to invest more US$25 mln in Vingroup’s first initial public offering (IPO) in the international market. In the future,  an additional US$100 million will be poured in Vincom Retail for expansion and retail property-related deals.

Vincom Retail is the country’s largest owner and operator of shopping malls with seven assets valued around $1.1 billion.

On May 28 session, VIC hit ceiling price of $3.6 per share and nearly 850,000 shares were transacted (VietFin, May 29)

Experts urge central bank rethink as kyat slides

Monetary experts urged Myanmar’s central bank to set an exchange rate that balances the need to generate exports and maintain affordable imports, as the national currency continued its month-long slide against the US dollar.

The Central Bank of Myanmar’s daily exchange rate, which is determined through foreign currency auctions with domestic banks, was K946 to the dollar on May 23, while official money changers were buying dollars for K945 and informal changers were offering K953-955.

On May 25, however, the kyat fell to 1000 for one dollar on the black market.

In official trade the kyat fell 2.3 percent against the dollar in the week to May 23, from 925 on May 17.

Matt Davies, deputy division chief for the International Monetary Fund’s Asia and Pacific department, told The Myanmar Times that exchange rate fluctuations have the potential to greatly impact on the nation’s trade sector.

He said on the sidelines of an IMF press conference that Myanmar needs to find a balance between allowing the US dollar to appreciate and making the nation’s exports cheaper abroad, while keeping the price of imports affordable as the country grows.

Myanmar has made great strides in liberalising its foreign exchange regime since President U Thein Sein took office, including allowing new private banks to open, giving permission for banks to open official money exchange counters, installing automatic teller machines and legalising remittances from abroad, Mr Davies said.

In April 2012, the central bank began a managed float of the kyat by holding daily currency auctions. The rate set by the bank is then used as a benchmark for private banks and private exchange counters, which are allowed to change money within 0.8pc of the central bank’s rate.

Mr Davies said the central bank is working to minimise exchange rate fluctuations without targeting a specific rate. However, it has also supplemented its foreign currency reserves by buying dollars and other foreign currencies, which is weakening the kyat.

He advised the central bank to build up its reserves so it has a buffer against external shocks.

Equipping the central bank with the tools to conduct domestic monetary policy is important for delivering the stability necessary for sustained economic growth, he added.

Mr Davies said inflation remains moderate at present but there are pressures, including from money growth, real estate prices and wage increases.

An official from the central bank’s foreign exchange management department said the dollar is appreciating against the kyat because private banks are bidding higher at the daily currency auctions.

“We can’t say the appreciation is too great … there are many factors that are coinciding to form a trend,” he said.

When the central bank started the managed float of the kyat, the dollar bought K818 but in the past 13 months it has appreciated by more than 15pc.

The official said the daily rate has seen changes up to a maximum of 1pc, adding that fluctuations would be larger if the central bank did not hold the auctions.

“This is not just a problem in Myanmar; we also have to deal with changes in the international economy. But we have to avoid fuelling an inflationary situation,” he said.

Even though the central bank has not been made independent from the Ministry of Finance and Revenue – and will not be until after the Central Bank Law is passed by parliament and signed into law by the president – it can act to change monetary policy, he said.

A finance officer at a joint-venture between foreign and local partners said the swift fluctuations created occasional problems with customers.

“We have to negotiate with the Internal Revenue Department and customers when the exchange rate changes too much in a month,” she said.

She added that the variance between the rates offered at official money exchange counters and in the informal market – as much as K10 to the dollar on May 22 – also drew complaints from customers.

Economist U Khine Htun said the dollar is strengthening against the Japanese yen, the British pound, the Australian dollar and the kyat.

He added that another factor causing the dollar to appreciate is the start, in March, of the withdrawal of Foreign Exchange Certificates (FEC) from the market.

He said businesspeople only want dollars now, adding that traders say they hope to see a stable exchange rate of about K1000.

Myanmar must not allow imports to become too expensive because there is a huge need to import materials to build infrastructure projects such as special economic zones in Yangon, Dawei and Kyaukpyu, U Khine Htun stressed.

The appreciation of the dollar benefits exporters – chiefly those selling natural gas, agricultural goods and fisheries products – but hurts importers of fertiliser, cement, diesel and the cheapest cooking oils.

“It encourages the export first-policy, but the immediate fluctuations are harming the whole economy and destabilising the market,” U Khine Htun warned.

“The central bank has not intervened effectively in the monetary market yet. It is acting more like a referee as currencies are traded by banks.”

By Aye Thida Kyaw│24 May 2013│The Myanmar Times

Local banks gain trust: survey

Nearly nine out of 10 Cambodians have confidence in local financial institutions, a trend that stands in sharp contrast to Europe and the US, a poll published last week found. However, industry insiders question the results, as the Kingdom’s financial services are still under-developed.

The poll from research-based consulting giant Gallup said that 87 per cent of Cambodians trust their banks. Gallup surveyed 1,000 Cambodians in April last year.

“In sharp contrast to Europe and the US, many Asian countries have weathered the global financial crisis well and emerged with considerable economic momentum. This momentum helps explain why confidence in financial institutions was highest in Asia last year – particularly among emerging markets in Southeast and South Asia, where median trust was 77 per cent and 75 per cent, respectively,” the Gallup press release said last Monday.

However, industry insiders said the survey outcome seems unusual for a country that still only has 13 per cent penetration of banking services across the population.

“If the level of trust really is that deep, why is such a small proportion of the population holding bank accounts?” Grant Knuckey, chief executive of ANZ Bank, told the Post.

Other factors may have affected the poll’s results. On its website, Gallup mentions that the survey was conducted only in urban areas and more respondents than expected report a completed secondary education, which may have impacted the findings.

“On the surface, [the result] should mean that banking sector penetration will continue to grow. However, given the very low existing penetration, [the poll] would suggest that a lack of trust is not a major reason Cambodians have relatively low usage of banking services,” Knuckey said. Other factors, like geographic spread and ease of usage, are also relevant for low usage, he added.

But other industry insiders said they’ve seen growing trust in financial institutions in the Kingdom.

“We observe that in Cambodia, as well as in other countries in Southeast Asia, people’s trust in their banking institutions is quite strong,” Annette Dixon, country director for the World Bank, told the Post.

This trust is reflected in the growing volume of bank deposits and the increasing number of bank accounts, she explained. The total number of deposits in the banking system grew last year by 29 per cent, according to figures of the National Bank of Cambodia.

“The perception that banks are safe is also a reflection of good economic performance and absence of major bank failures in the recent past in East Asia and the Pacific region,” she added.

“However, Cambodia still has a long way to go in terms of financial inclusion.”

In 2011, only 4 per cent of adults in Cambodia had a bank account, according to data collected by the World Bank.

Nguon Sokha, director general of the National Bank of Cambodia (NBC), said she has seen an increase in public confidence. However, trust has to be earned by all stakeholders, she added.

“The government, the NBC, and the banking community have each played their role very well, so far, in terms of developing the banking and financial sector, ensuring macro and financial stability, promoting good governance in the industry, providing quality and affordable services – and thus promoting confidence,” she said.

The increase in loans reflects the increase of trust, said In Channy, Acleda Bank’s CEO and president.

In the first quarter of this year, the value of loans outstanding increased by 5 per cent, he said. “We expect at least a growth by 20 per cent this year.

By Sarah Thust│27 May 2013│The Phnom Penh Post

Insurance premiums on the rise

The Kingdom’s total insurance premiums rose sharply in the first quarter of the year, compared with the same period the previous year, thanks largely to the growth of the economy and an influx of foreign direct investment, industry insiders said.

Official data from the General Insurance Association of Cambodia (GIAC) show that the industry’s premiums rose nearly 30 per cent in the quarter, to $12.21 million, compared with $9.45 million in the same period of 2012.

According to the data, premiums for fire insurance increased by 28 per cent, motor insurance by 18 per cent, personal accident insurance by 18 per cent and health insurance by 14 per cent.

Meanwhile the total amount of claims paid out by local insurers was $1.5 million, down 78 per cent compared with the same period last year.

GIAC deputy director of operations Ty Atith attributed the sharp growth in the sector to the country’s strong economic performance and growing trust among the public.

“The improvement of the economy is also definitely contributing to the growth. But what I have noticed is that the last few years, the motor insurance and fire insurance are increasing sharply – this emphasises that the people understand about the industry,” he said.

Youk Chamroeunrith, general manager of Forte Insurance, said that the company’s premiums rose by more than 30 per cent in the first quarter of the year, while total claims stood still.

Infinity’s CEO, David W Carter, told the Post that his company’s premiums went up by 30 per cent, while total claims grew by just over 10 per cent.

By May Kunmakara│27 May 2013│The Phnom Penh Post

VN set to embrace mobile banking

HCM CITY (VNS)— Most banking transactions in Viet Nam, around 80 per cent, will be one through mobile devices in the next five years, says Le Thanh Tam, CEO of International Data Group (IDG) ASEAN.

Tam, who is also CEO of IDG Global Solutions Vietnam and MRD Joint-stock Company, told the Vietnam Financial Times that Internet banking services will rank second behind mobile banking, while transactions using Automatic Teller Machines (ATMs) will reduce significantly in the coming years.

Wikipedia describes mobile banking as a system that allows customers of financial institutions to conduct a number of transactions through devices like mobile phones or personal digital assistants.

It says mobile banking “differs from mobile payments, which involve the use of a mobile device to pay for goods or services either at the point of sale or remotely, analogously to the use of a debit or credit card to effect an electronic funds transfer at point of sale payment.”

Tam attributed the development of the mobile banking to the recent explosion in the use of smartphones.

“By December 2012, there were 121.7 million mobile phones in the country, more than one for each Vietnamese citizen,” he said, adding, “this is a rather high rate compared with some neighbouring countries.”

In comparison with other countries that also use mobile payment services, Viet Nam has enough conditions as well as advantages to develop payment services for residents of rural and remote areas who cannot easily access traditional banking services, Tam said.

At present, most commercial banks in the country have not been able to fully tap the potential of rural markets, thus creating opportunities for intermediate payment services like mobile banking, internet banking, mobile payment and Automatic Tellers Machines(ATM)/ Points of Sales (POS) to develop, he said.

Since 2008, the State Bank of Viet Nam has allowed nine institutions specialising in supply of intermediate payment services to offer e-wallet services via the internet and mobile phones in order to meet the demand for e-transactions and the transfer of small amounts of money.

A digital wallet refers to an electronic device that allows an individual to make e-commerce transactions, including purchasing items online with a computer or using a smartphone to purchase something at a store.

By the end of 2012, the total number of e-wallets that had been issued by these nine organisations climbed to over 1.3 million, with the number of transactions reaching over 16 million worth nearly VND5.83 trillion.

Non-cash payment

In December 2011, the Prime Minister approved Decision No.2453 that aimed to boost non-cash payments through the banking system and further popularise them during the 2011-15 period.

Under the plan, the Vietnamese market will have 250,000 points of sale (POS) installed that can handle about 200 million transactions per year.

Market analysts say that Viet Nam has great potential to realise this target since 70 per cent of its working age population do not use modern payment services.

According to data compiled by the World Bank, only about 30 per cent of Vietnamese people of working age, mostly in major cities and provinces, are able to use modern financial and payment services.

However, these modern financial and payment services have only been developed based on individual accounts of customers at credit institutions.

This means that people in rural and remote areas who do not have individual accounts cannot reach these services, said Nghiem Thanh Son, deputy director of the State Bank of Viet Nam’s Payments Department.

As of March this year, 48 of the 52 registered organisations had issued 57.1 million cards. Most of them, 93.6 per cent, were debit cards.

Forty-six commercial banks have installed 14,300 ATMs and 101.400 POS that accept payment by cards. Over 76,000 POS belonging to 720 bank branches have been connected with 20,600 units that accept card payment (credit/debit) cards.

Over the last few years, credit institutions such as the Social Policies Bank, Agriculture and Rural Development Bank and People’s Credit Fund together with some other financial organisations have taken measures to expand and diversify financial products, especially for people who live in rural and remote areas.

Tam said, however, that the banks should update and acquire the latest technology to improve their management ability and meet customers’ demand, to mention their ability to control risk and handle huge amounts of data. — VNS

Industrial production rallies

HA NOI (VNS)— The industrial production index (IIP) increased 6.7 per cent year-on-year in May, placing total growth for the first five months at 5.2 per cent.

This represented an improvement over the first quarter, but still dragged behind last year’s growth, according to the General Statistics Office.

Still, the office’s economic specialist Vu Quang Ha said that the move showed industrial production was rallying after its recent slump.

Manufacturing and processing, which accounted for over 70 per cent of all industrial production, expanded 5.5 per cent in the first five months. But last year, they grew 6.3 per cent.

Some products in these areas saw significant growth, such as casted metals (up 15.3 per cent), leather (up 14.7 per cent), paper and paper products (up 12.7 per cent) and beverages (up 11.8 per cent).

But several major products did not grow and some even declined. Textile fabric rose only 5.5 per cent, crude oil increased a scant 3.3 per cent and raw iron and steel were down 7 per cent.

The consumption index increased 5.7 per cent year-on-year as of May, while the inventory index, though gradually declining, remained high at 12.3 per cent.

The inventory index went up significantly for many major products, such as computers and electronics and optical goods (up 46.8 per cent), electric devices (up 26.3 per cent) and furniture (up 32.2 per cent).

According to statistics office experts, the index was not showing signs of easing, with inventories of produced goods at 74 per cent in April and nearly 77 per cent in the first four months. The secure level is regarded as 65 per cent. — VNS