Real estate has regained the top spot as the most attractive sector for private equity investment, Grant Thornton says.
Private equity investors’ optimism in the Vietnamese economy has dropped sharply as they continue to worry about inflation, high interest rates and a slowdown in domestic growth, according to Grant Thornton.
Negative sentiment toward the economy more than doubled to 51 percent, compared to 21 percent in the second quarter and only 4 percent a year ago, Grant Thornton said in a biannual report this week.
“The continuing decline in confidence towards Vietnam’s economic outlook is in part due to the Vietnamese macroeconomic situation and the current turmoil in the US and European Union,” said Alan Dy, audit partner at Grant Thornton Vietnam.
“Due to a high reliance on exports to the US and the EU, the Vietnamese economy is more exposed to the current external events than previously,” he said.
The consultancy company has, for the first time, added “weak macroeconomics” to the list of obstacles in Vietnam and it was chosen by 84 percent of the respondents as a hindrance to investment in Vietnam.
“The findings are commensurate with the overall economic outlook in Vietnam,” the report said. “Accordingly, many investors’ confidence toward the Vietnamese economy has fallen due to macroeconomic issues such as high inflation and the GDP growth rate.”
In line with the pessimistic view on the local economy, the attractiveness of Vietnam as an investment destination has fallen to the lowest level among the last six surveys, Grant Thornton said. The attractiveness decreased from 54 percent in the second quarter to 38 percent.
The percentage of respondents who plan to increase their investment allocation to Vietnam fell to 29 percent from 53 percent in the previous survey. Meanwhile, 43 percent of participants are adopting a “wait and see” attitude, according to the report.
Grant Thornton also noted that real estate has taken the position of the most attractive sector from education as there was an increase in the number of distressed assets in the second and third quarters of the year. The two sectors are now followed by healthcare, manufacturing, retail, and oil and gas.
“Surprisingly, real estate regained the top spot as the most attractive sector for investment; however, almost an equal number of respondents rated it as the least attractive,” said Ken Atkinson, managing partner at Grant Thornton Vietnam.
Commenting on the role of private equity investment, Atkinson said it will “continue to provide the means for successful private businesses to access capital to grow domestically and internationally.”
“This will, in turn, provide long-term benefits to the country,” he said, calling for the government to address the concerns raised by investors.