Despite unpredictable fluctuations in the world and the trend of cash flow shifting to developed economies, the flow of indirect investment (FPI) into Vietnam is still showing stable and positive signs. The following article will give foreign investors an overview of the FPI market and FPI capital management solutions for foreign investors.
Overview of foreign indirect investment (FPI)
Foreign indirect investment is considered an important resource for the development of the economy, playing an important role in mobilizing foreign investment capital into Vietnam. Foreign indirect investment, abbreviated to English as FII (foreign indirect investment), also known as FPI (Foreign Portfolio Investment), is the activity of buying financial assets abroad for the purpose of making a profit, through which the owner of capital do not directly operate and manage the capital use process. According to the International Monetary Fund (IMF), FPI is the buying and selling of securities (shares, bonds, valuable certificates) issued by a company or the Government of another country on domestic or foreign financial markets.
Along with foreign direct investment (FDI), foreign indirect investment (FPI) is also one of the forms of attracting international investment capital in order to supplement key resources for the State’s development investment, expansion and development business development of enterprises.
Forms and characteristics of FPI
– Common forms of FPI investment:
+ Investors directly buy stocks, bonds and other valuable papers of public joint stock companies and the Government issued on the stock market.
+ Indirect investors invest through securities investment funds or other intermediary financial institutions on the financial market.
– FPI investment characteristics:
During the time of using the investment capital, the ownership and the right to use capital are separated between the two entities. Investors do not directly participate in the management of the securities issuing enterprise or the general management activities of the securities issuing agency. They do not attach a commitment to transfer physical assets, technology, labor training and management experience, but only use money to buy and sell securities. Thus, FPI activities are pure financial investment activities in the financial market.
Investors make investment decisions that are not sustainable and are mainly based on the short-term interests of investors. Last but not least, investors can buy shares in Vietnam with the current maximum rate of 49%. Although Vietnam is in the process of financial liberalization, there are certain financial constraints on the financial markets.
FPI activities in Vietnam in the period of 2022-2023
Entering 2023, although the Covid-19 pandemic has been brought under control, the world economy still has many fluctuations and difficulties that have slowed down the overseas investment activities of major economies, affecting the global economy and reduce the attraction of foreign investment to Vietnam in 2022, especially in the last months of 2022.
Inflows of indirect investment (FPI) need 1 to 2 years to recover. The capital following the FPI line – for example through the stock market – will be positive at the beginning of the year but may be unpredictable in the near future. Vietnam’s economy recovered quickly after the Covid-19 pandemic, with GDP growth reaching a high rate in Southeast Asia. This creates favorable conditions for FPI investment funds to operate in Vietnam. The investment policy of the Government of Vietnam is always towards convenience and support for foreign investors. The fact that Vietnam signed free trade agreements with other countries is creating a more favorable investment environment, as well as expanding the market for FPI investment funds. When the global economy recovers and stabilizes, indirect investment capital recovers strongly and Vietnam has always become an attractive magnet for foreign investors to contribute capital and buy shares.
In summary, analysts forecast continued growth of FPI in Vietnam in 2022-2023 as Vietnam is becoming one of the most attractive destinations for foreign investment funds.
FPI capital management solution in Vietnam for foreign investors
Foreign investors interested in indirect investment in Vietnam should consider the FPI foreign portfolio management solutions in Vietnam listed below:
Understand relevant legal regulations:
Before investing, investors need to carefully understand the legal provisions related to indirect investment in Vietnam such as regulations on tax, investment, management capital… Understanding these regulations will help investors make the right decisions and avoid legal risks.
Seeking accurate and reliable information:
Investors need to search for information about investment projects, investors, and consulting units… to assess the attractiveness and feasibility of the projects. Investment project information must be reliable and provided by authorities or reputable units in the market.
Carrying out a risk assessment and project feasibility analysis:
Before investing, investors need to carry out risk assessment and feasibility analysis of investment projects. To make an accurate investment decision, investors need to carefully evaluate factors such as market conditions, economy, and investment policy.
Investment monitoring and management:
After investing, investors need to regularly monitor and manage their investments. It’s the way to detect and deal with problems as early as possible, thereby minimizing losses and increasing return on investment.
Adjust investment strategies:
Initial investment strategies may not be suitable for the current market and circumstances. Investors need to adjust their investment strategies to ensure maximum efficiency.
Conclusion
FPI presents foreign investors with opportunities to invest in global markets without having to establish a physical presence in those countries. By leveraging FPI capital management solutions, investors can maximize returns and minimize risks in this dynamic and ever-changing investment landscape. FPI foreign direct investment in Vietnam requires a thorough understanding of legal regulations, assessment of risks and project feasibility, investment management, and appropriate adjustment of investment strategies flexible. Only when fully implementing these management solutions can investors achieve profits and contribute to the economic development of the country.
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