VPF Vietnam Prop.

TIDMVPF

RNS Number : 2911V

Vietnam Property Fund

10 January 2012

Vietnam Property Fund Limited

"VPF" or "the Company"

NAV and December 2011 Update

Fund NAV Performance

The NAV per share closed at US$0.730 on 31 December 2011.

Investment Climate

December indicators remained positive, showing that policy reform is bearing fruit. Exports were +18% year-on-year ("yoy") and imports +9%, continuing the established trend of the former outpacing the latter and bringing the full-year trade deficit down from $12.6bn in 2010 to $9.5bn. The core trade deficit (ex-oil and gold) was even better, falling from $14.1bn to $9.1bn. Credit and M2 growth were below 1% in Dec and reached 12% and 10% for the full year respectively. Inflation picked up a little, reaching +0.5% month-on-month (mom), up from +0.3% in Oct-Nov, a normal occurrence before Tet, the Vietnamese annual holiday. Annualising the monthly CPI figures shows that prices are coming under control. The full-year CPI was +18%, from the August peak of +23%, and is expected to fall rapidly to single digits. The corollary of these numbers is slower growth with GDP forecasted at 5.9% in 2012.

The consolidation of small, weak players has commenced. Three banks with common ownership and deep liquidity problems were merged into one, under the supervision of state-owned bank BIDV. The SBV prepared a M&A roadmap for "voluntary" consolidation of other struggling entities, probably 10 out of the total 43 domestic banks, that only account for about 6-8% of assets but represent a disproportionate share of bad loans. Expectations are for five more banks to undergo consolidation in the next six months, with state-owned banks supporting the process with oversight and capital.

The Government is done with the old economic model, of development pumped by aggressive fiscal and monetary stimulus through state-owned enterprises ("SOEs"). It is moving away from that discredited paradigm with the same urgency it showed in 1986 when it turned away from orthodox central planning. Officials now fully appreciate that forced high growth has its own political cost. It showed the limits of SOEs, which are now being rolled back and forced to divest non-core assets. A heavier cost than modest economic slowdown is less automatic employment prospects for the youth.

The legacy of boom/bust is a created many bad property loans. The extent of the problem has not been quantified, though it is understood that the official 3.4% NPL number is a fiction. Even the SBV Governor says it is two or three times higher, i.e. 7-10%. Whatever it is, it will likely increase during 1H12. The Government can probably muddle through with behind-the-scene recapitalizations, selective mandated roll-overs, leniency on loan valuations, the consolidation program, etc. Plus most loans in Vietnam are well collateralised and unofficial private wealth is ca 60% of GDP.

Investment Update

December provided a relatively quiet end to 2011 for VPF and the real estate sector as a whole. The market has been challenging, particularly during the latter half of the year, as the country wrestled with a number of macroeconomic issues which impacted real estate. High inflation, high interest rates and the specter of currently depreciation have all played their part in a cautious attitude from real estate investors. Coupled with a major reduction in credit growth targets reducing the availability of debt many developers and investors have seen prices drop and sales falter. VPF is in a very enviable position in this kind of market as it holds cash and is on the lookout during 2012 for the inevitable good value that will be coming into the market whether that be in the listed or direct arena.

VPF's valuations have held up reasonably well for the projects and real estate assets it owns although VPF was hurt by its listed holdings as the performance of the real estate sector and indeed the market as a whole continued in a downward direction. Again this can be viewed as a positive as most companies look cheap with low PE ratios and low liquidity in the market. Discounts to NAV are widely available in real estate companies which will leave open buying opportunities. We may not have quite seen the bottom yet but we are not far from it.

The price at which the Company is trading at a discount to NAV increased significantly during November and December 2011 as the share price dropped to $0.505 per share at the calendar year end. VPF is committed to reducing this discount and has already implemented it's buyback authority.

For further information including the full December 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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