Vietnam ETF Soars Following Tile Deal
It may not be the sexiest bit of mergers and acquisitions news to cross the wires in 2012, but the Market Vectors Vietnam ETF (NYSE: VNM) is getting a lift today from, of all things, news of a tile acquisition. Shares of VNM are higher by nearly four percent on volume that easily eclipsed the daily average on a day not known for robust turnover on Wall Street.
One catalyst just might be news of Thailand's Siam Cement Group paying $240 million to acquire an 85 percent stake in Vietnamese tile maker Prime Group. Prime Group is also one of Vietnam's largest brick makers.
The deal, expected to close in early 2013, is the second by Siam Cement in Vietnam this year, according to the Vietnam Investment Review. Earlier this year the Thai company spent $5.5 million to acquire white cement maker Buu Long, the publication reported.
A deal with a $240 million price tag probably does not sound like much to those investing in developed markets such as the U.S., the U.K., Japan or Germany. In fact, $240 million is small by the standards of M&A activity in many emerging markets such as China and Brazil.
However, $240 million is fairly significant in Vietnam. Combine the overall market cap of the roughly 310 issues traded on the Ho Chi Minh City Stock Exchange and the nearly 400 names on the smaller (by market capitalization) Ho Chi Minh City Stock Exchange and the total market value of stocks listed in Vietnam is in the area of $40 billion.
Said another way, Exxon Mobil (NYSE: XOM), the largest U.S. oil company, by itself is nearly 10 times bigger by market capitalization than all Vietnamese stocks combined.
More importantly, the Siam Cement/Prime Group news comes on the heels of some M&A activity in Vietnam's highly volatile banking sector. Last week, Japan's Mitsubishi UFJ, that country's largest bank, announced a $743 million deal to acquire 20 percent of Vietnam Joint Stock Commercial Bank for Industry and Trade, or VietinBank.
While the combined value of these two asset purchases is not even $1 billion, news to this effect could be a boon for the Vietnamese economy and VNM in the new year. With foreign direct investment in the country down 15.3 percent this year to just over $13 billion, Vietnamese policymakers need to show foreign investors that their country will embrace asset purchases and related fare.
To his credit, Prime Minister Nguyen Tan Dung is pushing for more progressive policies aimed at enticing foreign investors to Vietnam. While the price tags may not be large, Vietnam has seen deals from Japanese and Thai firms in the past week alone, indicating that perhaps 2013 has the potential for better on the foreign direct investment front than 2012 was.
VNM is responding as the ETF traded above $18 earlier in today's session for the first time since August. The fund has gained almost five percent in the past five trading days.
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