From fish sauce to dairy and beer, lumpy investment bets in Vietnam have typically been placed on the country’s teeming working class and its growing propensity to consume.

Warburg Pincus has already been there and done that. The U.S. buyout firm is now using its web of connections to wager on the nation’s new rich.

The $370 million check it’s writing for an undisclosed stake in Techcombank  puts Warburg on the ground floor of a new cycle of wealth creation. The lender is focused on serving more affluent retail customers with wealth management, mortgages for pricey new condos, and Manulife Financial Corp. insurance policies.

Things looked a lot scarier when the PE firm bought a fifth of the country’s largest mall owner in 2013. Back then, Vietnam was still scrambling to fix a massive bad-loan mess, amplified to no small extent by Vinashin, now known as Shipbuilding Industry Corp.

A string of defaults by the shipmaker had a chilling effect on sentiment. Not only did Vinashin’s liabilities account for 4.5 percent of the nation’s GDP, but foreign creditors were also less than amused when a “letter of comfort” from the communist government failed to offer any succor. A lawsuit (later withdrawn) from pugnacious U.S. hedge fund Elliott Advisors didn’t exactly buttress Hanoi’s image as a welcoming destination.

But Warburg and rival KKR & Co., which in early 2013 doubled down on noodle and fish-sauce maker Masan Consumer Corp., have been rewarded for their faith in Vietnam’s revival. Warburg sold Vincom Retail JSC shares in a $709 million IPO, the country’s largest to date. The relationship with parent Vingroup JSC, a local real-estate heavyweight now moving into car manufacturing, meant getting an introduction to its banker, Techcombank, in which Masan is a large investor.

Techcombank, more formally known as Vietnam Technological & Commercial Joint Stock Bank, was also ravaged by the brutal credit cycle of 2008-2012. But after selling problem assets to a central bank-promoted bad bank, nonperforming assets are down to 1.6 percent of the total. That’s a relatively clean balance sheet ahead of a planned public float.

The economy is also very different today from the one that relied on exporting crude petroleum, rice, coffee and footwear. Samsung Electronics Co. has plugged Vietnam into the global smartphone supply chain. The South Korean behemoth assembles 30 percent of its phones in the country; it wants to raise the number of local suppliers to 50 by 2020.

While the Trump administration’s decision to pull the U.S. out of the Trans-Pacific Partnership has dealt a blow, Vietnamese exports will still get a lift now that the remaining 11 countries in the proposed trade bloc have decided to move ahead with tariff elimination.

Its young population makes Vietnam a strong contender to wrest a share of the Japanese-funded auto supply chain in aging Thailand. Thai billionaire Charoen Sirivadhanabhakdi’s investment in Saigon Beer Alcohol Beverage Corp., or Sabeco, is also a reflection of the growing belief that Vietnam will see faster income gains than Indonesia or the Philippines.

Just how successfully the country manages its fraught relationship with Beijing amid an expansion of President-for-life Xi Jinping’s belt-and-road initiative is one big risk for Western private equity. The other is macro-stability, crucial for sustainable wealth creation.

Authorities will need to be more cautious in managing exuberance — especially in real estate — than they were earlier in the decade. On the whole, though, the likes of Warburg and KKR are right to stay put and hope for more openness. The maximum stake allowed to any single entity in a Vietnamese bank is only 15 percent; total foreign equity is capped at 30 percent.

Still, getting one foot into the door is half the battle won. In the Philippines, good deals don’t even reach PE desks -- they get gobbled up by a small set of tycoons who want to control everything. In Vietnam, having a thick Rolodex still pays.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

To contact the author of this story: Andy Mukherjee in Hong Kong at

To contact the editor responsible for this story: Matthew Brooker at

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