Vietnam Property Fund Net Asset Value and June 2012 Update (3023H)
10 July 2012 - 6:21PM
UK Regulatory
TIDMVPF
RNS Number : 3023H
Vietnam Property Fund
10 July 2012
Vietnam Property Fund Limited
"VPF" or "the Company"
NAV and June 2012 Update
Fund NAV Performance
The NAV per share closed at US$ 0.779 on 30 June 2012.
Investment Climate
Credit growth was a mere 0.4% for the first six months of 2012,
much lower than the Government's target of 12%, even though M2 grew
6.8%. One of the main reasons for this sluggish credit growth is
that banks are naturally very cautious about lending when
non-performing loans ("NPLs") are rising. In such an environment
credit worthy companies don't dare to borrow as lending rates are
too high whereas risky companies who want to borrow don't get
credit. This has been hampering economic growth as inflation
finally was brought under control. In order to fuel growth the
economy however will need a reasonable credit expansion. For this
occur it will require a clear plan on dealing with NPLs and further
restructuring of the banking sector. There is no such clear plan
for NPLs as of yet as the Government announced that they will not
use new cash to solve NPLs in order to avoid future inflation.
Instead they will employ financial instruments and the existing
regulatory framework to address NPLs, though it remains unclear
what financial instruments they have in mind. We expect the State
Bank of Vietnam ("SBV") to have a clear plan on NPLs in August.
Another reason for the low credit growth is that the effective
lending rates have not fallen sufficiently yet, despite substantial
reductions in policy rates during Q2 which are still at around
16-17%. Whilst some banks still offer 12 month deposit rates of
12%-13% others offer only 9%. Hence, if cost of funding is to be
reduced faster then it will be important to control and constrain
maximum deposit rates. Given that the banking sector restructuring
has only led to two M&A transactions thus far the Prime
Minister has recently urged the SBV to accelerate the restructuring
efforts. We understand that the SBV just finished a plan on 5 July
to restructure another nine banks which gives rise to the hope that
restructuring indeed will be accelerated in Q3. If so, we expect
lending rates to reach 12-14% on average.
In Q2 GDP grew 4.7% year on year compared to 4.1% in Q1,
resulting in a 4.4% GDP growth for 1H2012. Industrial &
Construction was again the driver for the slow down, declining from
5.8% in 1H2011 to 3.8% in 1H2012. Services were a smaller factor,
reducing from 6.2% in 1H2011 to 5.6% in 1H2012. Agriculture was no
exception and slowed, too, from 3.9% in 1H2011 to 2.8% in 1H2012.
The Government revised its GDP growth target down from 6-6.5% to a
more realistic 5.2-5.7% target. However, we think that it would be
quite a success to achieve a 5.2% growth as we expect credit growth
in 2012 to be much lower than the Government's target, i.e. only 8%
vs. the target of 15%. What further underpins our concern is the
Purchasing Managers Index data published by Markit of 46.6 in June,
which is the lowest number since Feb 2012. Nonetheless, we believe
that the real economy will slowly find its bottom in Q3/Q4
2012.
Investment Update
The financial year of 2011/2012 has come to an end on 30 June
with the feeling that it has once again been a year of two halves.
2H2011 brought to an end one of the worst years for the Vietnam
real estate market since the Asia crisis of 1997 with many
developers and land owners feeling the pinch as high interest
rates, slow sales and falling rents put many projects in jeopardy.
The fact there were not more bankruptcies as a result of bank
foreclosures and loan defaults is as much to do with the banks not
wanting to declare NPL's as developers finding solutions. The main
impact for VPF was felt in our listed equity portfolio which saw
poor performance during this period. Our project holdings, however,
held up well with strong performance from our PDD office building
and our projects being in the development phase as opposed to
struggling for sales.
1H2012 has been more interesting for us here at VPF. The stock
market saw some good performance in the first four months with real
estate and banking stocks - those that had performed the worst in
2011 - leading the initial recovery. The market has tracked
sideways since then however although this is more due to the issues
experienced around the world than being a specifically Vietnamese
slowdown. We are in the process of preparing our year end
valuations and annual report which will be available soon.
The future for the Vietnam real estate market is certainly on an
upward trend although it is unclear at this time when a full
recovery is likely. We are starting to see better sales in the best
residential projects such as Phu My Hung's Chateau villa
development providing good sales at high prices and Sapphire's City
Garden development seeing a marked pickup in activity. It is clear
that landed property like villas and townhouses are performing the
best with apartments still proving difficult to sell unless in a
central location. The phrase, 'an Englishman's home is his castle'
appears to be equally true in Vietnam as the majority of sales in
the landed property sub-sector are going to owner occupiers. In
terms of pipeline we have more good opportunities than ever before
and are currently considering an investment in a development
company, a hospital project, a logistics and storage business as
well as the more traditional residential and commercial project.
The next twelve months are likely to see the property market go
through further pain although we feel it will be time for VPF to
shine as we have cash to take advantage of distressed and better
priced projects.
For further information including the full June Monthly Report
please visit - www.vietnampropertyfund.com or contact:
Enquiries:
Rachel Hill
Dragon Capital Markets (Europe) Limited | Tel: +44 79 71 214 852
Freddy Crossley
Seymour Pierce Limited (Nominated Adviser and Broker) | Tel: +44
20 7107 8000
This information is provided by RNS
The company news service from the London Stock Exchange
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