CS Credit Suisse Group

SINGAPORE—Singapore's sovereign-wealth fund GIC Pte Ltd. will acquire a 7.73% stake in Vietcombank, Vietnam's largest bank by market capitalization, the latest in a series of bids by foreign companies for a slice of one of Asia's hottest frontier markets.

The deal is in part the result of Vietnam's increasing openness to outside investment as it looks to liberalize a bloated state sector and streamline regulations.

GIC will purchase 305.81 million shares in Vietcombank though a private placement, the two parties said in a statement Monday. This would be GIC's first significant direct investment in a commercial Vietnamese bank, according to the statement.

"GIC's strong reputation and experience will provide Vietcombank the support it needs to achieve its financial and business goals, both locally and internationally," said Nghiem Xuan Thanh, chairman of the bank's board of directors, in the statement.

Vietcombank, whose full name is Joint Stock Commercial Bank for Foreign Trade of Vietnam, is listed on the local stock exchange and has a market capitalization of about $6.9 billion. The joint statement didn't provide financial details about the stake sale, but people familiar with the process said that the deal value was likely to be around $400 million.

Market observers have said the growth potential of Vietnam's economy is among the highest in Asia, benefiting from a young population and a booming export sector that is taking business from higher-cost countries, particularly China. The Vietnamese economy is expected to grow 6.7% this year, the same pace as in 2015.

"This investment reflects our confidence in Vietnam's long-term growth potential," said Amit Kunal, head of GIC's direct investments group for Southeast Asia, private equity and infrastructure, in the statement. GIC manages about $344 billion in assets, according to the Sovereign Wealth Fund Institute, making it the eighth-largest sovereign-wealth fund in the world.

The fund, which last month warned of a difficult investment climate, has been seeking new growth in emerging markets. Earlier this year, GIC agreed to invest $387 million in PT Trans Retail, an Indonesian retailer and hypermarket operator. In 2013, along with Philippine conglomerate Ayala Corp., the fund paid $680 million for a nearly 10% stake in Bank of the Philippine Islands, the country's third-largest lender.

Vietnam's benchmark stock index, the VN Index covering the market in Ho Chi Minh City, is one of Asia's best performers year to date. It has touched a nine-year high in recent weeks and is up 15% for the year. The country also has a stock market in Hanoi, the nation's capital.

Foreign-investor interest in Vietnam has been growing. Late last year, Singha Group, owned by Thailand's seventh-richest man and the maker of the namesake beer, agreed to the largest foreign investment in Vietnam to date, spending $1.1 billion to acquire stakes in some of the subsidiaries of Masan Group, one of Vietnam's largest private companies.

In July of this year, Vietnam's government removed a longstanding foreign-ownership limit on Vinamilk, one of its most coveted listed companies, a decision that could further increase overseas interest.

The country has seen a handful of other large deals involving foreign interests. In April, France's Groupe Casino SA sold its stake in retailer Big C Vietnam to Thailand's Central Group in a deal valued at $1.14 billion. In 2012, Bank of Tokyo-Mitsubishi UFJ paid $743 million for a 20% stake in state-owned Vietnam Joint Stock Commercial Bank for Industry & Trade, or VietinBank.

Japan's Mizuho Bank owns a 15% stake in Vietcombank. Foreign ownership in Vietnamese banks is capped at 30%.

GIC on Monday said that the transaction was subject to regulatory approval and that it expected the deal to be completed by the fourth quarter of 2016. Credit Suisse acted as Vietcombank's financial adviser on the deal.

Vu Trong Khanh in Hanoi contributed to this article

Write to P.R. Venkat at venkat.pr@wsj.com and Jake Maxwell Watts at jake.watts@wsj.com

(END) Dow Jones Newswires

August 29, 2016 07:55 ET (11:55 GMT)

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