What is your assessment of Asia’s capital market in the past year, and how did Vietnam perform compared to other countries in the region?

Udhay Furtado, co-head of Asia Equity Capital Markets at Citi

Asia’s economy has had a challenging time since 2021, which was a peak for global capital markets. The subsequent interest rate increase by the US Federal Reserve had a knock-on effect for us, because as rates start going up, it impacts valuation and liquidity. From a monetary tightening perspective, Asia was caught up in quite an economic contraction. An additional aspect was the US and China geopolitics, dealing Asia a double whammy: the US rate issue and a contraction in equity issuances in China. The silver lining is that countries outside of Asia have been beneficiaries, albeit in a slower environment.

Vietnam stands out in this scenario. To investors coming from all over the world, Vietnam remains very attractive, as there is both a domestic growth and supply chain dynamic that continues to be sought after, particularly in the context described above.

For 2024, Vietnam’s outlook is a mix. The VinFast listing was a notable development, signaling the emergence of strong Vietnamese companies coming to the market. While the market in 2023 wasn’t fully open, this year promises greater openness.

Vietnam has a very strong pipeline when it comes to consumer tech and fintech. What investors do need to see, though, is some clarity around the real estate space, where risk appetite remains low. If Vietnam has an answer to that, growth could be a strong straight line.

How did Citi identify and take advantage of the opportunities in the past year?

Citi has been active across a lot of deals, whether it’s been VinFast, VNG, or some private companies. We are blessed to have had a long history, with a corporate and commercial bank set up in Vietnam. Working with companies in their early stages across Hanoi and Ho Chi Minh City, covering debt-structured financing to early-stage equity and capital market deals, has allowed us to create a significant footprint and identify these businesses. In addition, Citi is uniquely positioned to bring in our global network. Investors are now looking for that next growth spurt but are struggling a bit because of the situation in China. While India is growing, it’s overbought. As Vietnam is emerging as one of the next hotspots, it’s valuable for our foreign investors to see these great businesses in the country.

Citi will continue to invest in the market and connect global investors and multinationals to local opportunities and support local corporates’ global ambitions.

Do you perceive a strong and sustained demand for Vietnamese assets among investors?

People see great companies in Vietnam and would love to invest here. However, there are some challenges that need to be addressed. Liquidity is an important aspect, and accessibility in the market is also significant. Therefore, getting the initial public offering (IPO) mechanics right, for example, aligning with the global system, improving the flexibility for companies to raise capital and facilitating liquidity in the market itself - these would make the market more attractive.

In addition, there needs to be greater intention to get into the emerging market index. Investors can’t wait - they wish it had happened yesterday, so there’s a lot of pent-up appetite. Currently, each company has to overcome a lot of structural and market issues. While investors know that the supply chain has moved and the growth here is higher than anywhere else in the region, it’s hard to actually invest. Over the next 18 months, they will want to see that movement, and we should get the momentum going right now.

How do you assess the current IPO pipeline in Asia, and are there identifiable catalysts that could play a crucial role in driving a robust market in the coming year?

January witnessed a notable IPO volume surge correlated with changing interest rates. We’ve seen a significant reopening with big IPOs in biotech and other new-economy companies. Anticipating a Fed cut by Q2, is significantly impacting the US IPO market. While Asia, led by India, is gradually catching up, regions like ASEAN, South Korea, and China are preparing for IPOs, albeit with varying momentum due to lingering confidence-related issues. Vietnam should be in the middle of that IPO wave reopening. The pipeline here is very strong. There are some crucial companies and if you go across consumer, the energy transition, and tech, there should be many good companies coming.

There is a fair amount of capital raising, and there’s also a lot of activity in the private market. A good barometer of the IPO market is that we’re starting to see private activity again, and we see some Vietnamese companies raising money in the private markets.

How do you assess the funding ecosystem for startups in Vietnam?

There is a lot of innovation within the startup community here. As you go across the board, there are a number of private businesses around different segments of the market, where we should be seeing an ecosystem built by now. One of the issues people have is the depth of the liquidity and sophistication. Some of these companies are getting to a unicorn size.

In parallel, there are big global companies that would be a series B or C. Is there a local market funding ecosystem if you are a series B or C? I think in Vietnam, we are missing some of that segment of capital. In Silicon Valley or Shenzhen, you would see a deep ecosystem.

There are a few countries around Southeast Asia with that kind of ecosystem, but it’s a handful. That becomes a bit of a problem in terms of the depth of funding for those startups.