VinaCapital expects strong recovery in property sector

(SINGAPORE) VinaCapital, Vietnam’s largest asset manager, expects a strong recovery in the country’s property sector and said that it has been buying stocks of firms such as Vinamilk that produce goods for domestic consumers. ‘The area that we like a lot at the moment is real estate,’ chief executive Don Lam told Reuters in an interview in Singapore.

Demand for homes had picked up since the Vietnamese New Year at the end of January as lower prices attracted local buyers, he said. ‘Prices have gone off from their peak by 30 to 35 per cent. On top of that, you have financing costs down by half and there’s a 30 to 40 per cent drop in construction costs.’

While Vietnamese exports have been hit by the global recession, the domestic economy remained relatively strong with GDP expected to expand by 4 to 5 per cent this year and retail sales by over 20 per cent, Mr Lam said.

VinaCapital, which manages around US$1.7 billion in assets, recently purchased shares of materials firm Hoa Phat and diary giant Vinamilk, Mr Lam added.

Mr Lam described Vina-milk, which also produces coffee products, as the ‘Nestle of Vietnam’, and said Hoa Phat had the strongest brand name among Vietnamese construction materials firms.
The firm is also eyeing listed power firms as many are trading below replacement cost. Listed power firms include Khanh Hoa Power and Pha Lai Thermal Power.

VinaCapital has three closed-end funds listed on the London Stock Exchange’s AIM market – VinaCapital Vietnam Opportunity Fund, VinaLand Fund and Vietnam Infrastructure Ltd.

Its funds invest in a wide range of listed and unlisted assets, and their property holdings include the landmark Sofitel and Hilton Opera hotels in Hanoi.

Mr Lam said Vietnam’s financial profile was stronger than most people thought as its large trade deficit, estimated at US$19.2 billion this year, was offset by strong foreign direct investments.

The country also enjoyed inflows from remittances by overseas Vietnamese which were mostly made through unofficial channels and hence were not captured by official data, added Mr Lam, who was born in Vietnam but brought up in Canada. Mr Lam said foreign investors have largely given Vietnam’s stock market a miss – despite a more than 70 per cent rise since February – but would probably return once global risk appetite recovers, giving the local bourse a further lift. — Reuters

Source: Business Times, 21 May 2009

Viet property market seen bottoming out

Prices at some developments may even rise 5-10% by end 2009: CBRE

THE residential property market in Vietnam is likely to have bottomed and prices at some developments may even rise 5-10 per cent by the end of this year, according to real estate consultant CB Richard Ellis (CBRE).

‘There won’t be anything like the demand we saw in 2007 and 2008, but at least it has stopped going down,’ CBRE Vietnam’s managing director Marc Townsend told BT.

From its peak in 2007, Vietnam’s property market began cooling last year as inflation soared, interest rates shot up, and construction costs increased. The global financial crisis weakened the sector further as international investors stayed on the sidelines.

The average asking price for luxury apartments in Ho Chi Minh City, for instance, fell from more than US$5,500 psm (US$511 psf) to just over US$4,500 psm over 2008, CBRE noted.

But some economic factors have since improved. According to Bloomberg yesterday, inflation in Vietnam fell to 9.23 per cent in April, from a high of 28.3 per cent in August last year. Mr Townsend said lending rates and construction costs have also eased.

While the economic slowdown has led to lay-offs in Vietnam, most white-collar workers still have their jobs, he noted. In many cases too, expatriates have been the first to go, benefiting locals who got to fill their positions.

More importantly, some Vietnamese developers have trimmed asking prices to revive buying interest.

CBRE noted that one developer recently launched projects at prices more than 30 per cent lower than those last year. The company could have sold over 530 apartments in just four days, it said.
Singapore developers have not trimmed prices so far, Mr Townsend said. ‘They have waited . . . and their patience has been rewarded with a strengthening of the market.’

Keppel Land’s recent release of more units at the Estella is an example, he said. The developer told BT it offered a limited number of units early this month and there was ‘an encouraging increase in the number of sales and enquiries’.

While Keppel Land kept the average selling price constant at US$2,000 – US$2,200 psm, it introduced – its first time in Vietnam – an optional staggered payment scheme for buyers.

Based on current sentiment, some residential properties may be able to achieve slight price increases this year, Mr Townsend said. Most developers are careful and will release a small number of units to test the market and create interest before raising prices, he said.

Source: Business Times, 21 May 2009