Trade war is making a winner out of Vietnam's offshore loan market

[SYDNEY] As the US-China trade spat drags on, one winner is emerging. Vietnamese companies are borrowing the most in six years in the offshore loan market as Asia's fastest-growing economy benefits from businesses shifting their supply chains away from China.

The fledgling loan market in Vietnam is proving to be lucrative for bankers, offering some of the widest margins in South-east Asia. Dollar syndicated loan volumes have surged 119 per cent to US$2 billion so far in 2019 from the same period last year, according to data compiled by Bloomberg.

"Vietnam is a bright spot within the Asean syndicated loan market in otherwise a tough year," said Bryan Liew, Singapore-based head of Asean loan syndications at Standard Chartered plc. "Vietnam is likely to benefit from the shift in manufacturing capital from China amid the US-China trade war."

Vietnam tops list of biggest winners from US-China trade war

The Vietnam boom comes as loan volumes in the Asia ex-Japan region have fallen about 25 per cent year to date, with the sharpest decline seen in China amid deepening trade tensions.

At least US$1.4 billion of deals, including from state-owned PetroVietnam Gas, are in the pipeline. These five facilities are set to boost volumes after a record US$5.8 billion in 2018, the data shows. That said, Vietnam loans are still only about 4 per cent of the Asean market.

Vietnamese deals are providing some of the fattest margins in the region. Consumer finance company VPBank Finance paid 275 basis points over Libor on its 364-day US$215 million facility closed in March. The average margin for loans of a similar tenor from Asean borrowers was 105 basis points in 2018, Bloomberg data shows.

Vietnam's economy could soon be bigger than Singapore's

The South-east Asian nation was one of the fastest-growing sources of American imports from Asia last quarter. The communist-led nation's economy may gain 7.9 per cent in gross domestic product from trade diversions, according to a report by Nomura this week.

"Vietnam has a neutral standing with the US and it's an developing economy where the cost of business is still low," Mr Liew said. "Credit appetite overall is turning increasingly positive against this backdrop."

BLOOMBERG