Euromoney, September 2016
GIC’s acquisition of a 7.7% stake in Vietcombank is interesting for what it tells us about the parties on both sides of the trade.
GIC, the Singapore sovereign wealth fund entrusted with the state’s foreign currency reserves, has said for many years it intends to shift its focus from the developed to the emerging world, but has not always put its money where its mouth is – perhaps understandably, given a spell of several years in which that would have been an unwise strategic allocation.
When GIC announced its latest results in July, covering the year to March 31, there was evidence that the long-promised shift was taking place. Developed market equities fell from 29% of the portfolio to 26%, while EM equities climbed from 18% to 19%. There is a feeling that, tactically as well as long-term strategically, EM equities are starting to make sense again.
The Vietcombank purchase should be seen in that context. It fits exactly the themes GIC – and its fellow sovereign vehicle, Temasek – frequently advance about exposure to the rising middle class in developing Asia, and about gaining that exposure through the mechanism of financial inclusion.