Friday, March 14, 2008

Investors in China, Vietnam can expect 20% return on investment

SINGAPORE : Amid worries about an economic slowdown in the US, economists remain positive about growth in China and Vietnam.

The two economies are expected to continue booming, and according to US financial services giant Citigroup, investments there can reap returns of as much as 20% this year.

The economies of China and Vietnam are seen as among the fastest-growing worldwide.

China's GDP is expected to grow some 10.5% this year, and Vietnam's 8.1%. This will outstrip the average of 5% forecast for Asia as a whole.

Citigroup said investments in Vietnam and China can see returns of up to 20%.

"Let's say we use the US dollar to measure the return for foreign investors, and the return should be around 20%. One, we are expecting 7.5% currency appreciation this year. Two, profit growth in China should be comparable to the nominal GDP growth which was 14% in the past decade," said Shen Minggao, VP, APAC Economics & Market Analysis, Citi.

"If your firm is able to grow alongside the Chinese economy, then you should be able to grow at around 14%. So put them together, (you get) at least around 20% nominal rate of return measured in US dollars," he added.

Industries in China seen as having the best returns include food, luxury goods, manufacturing and the energy sector. Environment-related investments are also seen enjoying a boost.

"The government will try to invest more to improve the environmental condition. Those that are related to pollution treatment and also electric & energy efficiency improvement will benefit," said Shen.

For Vietnam, Citigroup said infrastructure, tourism, information technology and agriculture will see strong growth.

In infrastructure alone, Vietnam expects about US$7 billion in infrastructural developments this year.

"What is also amazing is that there is tremendous amount of opportunity in the agricultural sector. To get a 2% or 3% growth in any one country is considered to be fantastic, in terms of agriculture. Vietnam actually sees 6-7% growth. It is currently the world's largest exporter of coffee cashews, and second largest exporter of coffee, rice and peppercorn. So it is a huge producer of commodities, and as the global population increases and the agricultural land size decreases, commodity prices are going to rise," said Faisal Ameen, Managing Director & Country Head (Vietnam), Citi.

Overall, Vietnam remains attractive because of its low cost, which according to experts, is relatively lower than China.

GDP per capita in cities of Vietnam such as Hanoi and Ho Chi Minh is at US$1,000 and US$1,600 respectively while China's four cities including Shanghai, Shenzhen, Guangzhou, and Beijing sees about US$9,600 on average.

Citigroup expects Vietnam to attract at least US$15 billion in foreign direct investments this year, and China will see US$90 billion worth of foreign direct investments. - CNA /ls