Vietnam Property Fund Net Asset Value and August 2012 Update (0019M)
11 Settembre 2012 - 1:23PM
UK Regulatory
TIDMVPF
RNS Number : 0019M
Vietnam Property Fund
11 September 2012
Vietnam Property Fund Limited
"VPF" or "the Company"
NAV and August 2012 Update
Fund NAV Performance
The NAV per share closed at US$ 0.764 on 31 August 2012.
Investment Climate
HSBC's Purchasing Managers Index ("PMI") increased from 43.6 in
July to 47.9 in August. This implies that the economy continued
contracting but at a much slower pace than before; the first
improvement in the last four months. There were relative
improvements across the various sub-indices with the biggest
increases being recorded in the New Order Index, the New Export
Order Index and the Employment Index. These improvements point to
seasonal factors supporting the PMI as the economic activities are
being ramped up to prepare for the year end reporting season.
Similar PMI improvements were also reported last year in August and
September. However, given the current economic outlook, we are on
the skeptical side as to whether the PMI will keep on improving in
the coming months.
The arrest of Mr. Kien, co-founder of Asia Commercial Bank, for
questioning about alleged "wrong-doings related to his business
activities" caused temporary shockwaves within Vietnam. The
unofficial US$/VND exchange rate briefly shot up to US$/VND 21,100
but then settled comfortably within the trading band at US$/VND
20,950, an important indication that local confidence was restored
and remained intact. Interbank interest rates also returned to
normal levels, with overnight rates dropping from 8% down to 3%,
thanks to the State Bank of Vietnam's prompt infusion of additional
liquidity to stabilise the market. During the last monthly cabinet
meeting, Mr. Vu Duc Dam, the Government Office's spokesman,
referred to the recent events and assured the public that any
future actions taken by the Government would have little negative
effect on the markets and that the Government remained determined
to improve governance in the banking sector. Whilst we believe that
such actions from the Government will create short term volatility
for the system they are indeed necessary for the reform of the
banking sector.
According to a research project supported by the National
Assembly's Economic Committee ("NAEC") and the United Nations
Development Programme, Vietnam's non-performing loans in the
banking system are about 10-12% of total credit (about $123bn),
translating into $12-15bn of bad debts. The project report however
indicated that Vietnam may need less than $12-$15bn to recapitalise
the banks, a view that we endorse. Outstanding loans are 1.35x
collateralized. However, after taking actual market conditions into
consideration, the ratio should be adjusted to 0.72x, according to
our estimate, bringing uncovered bad debts to around $3.5-4bn; a
not insubstantial amount given the total banking sector equity is
about $12-$13bn. However, provided the Government is serious and
takes the appropriate approach we believe the bad debt problem can
be managed through a joint effort between the Government and the
banks over the next 2-3 years.
Investment Update
It has been a turbulent month in Vietnam with a couple of high
profile figures in the banking industry being detained by the
authorities to help with enquiries. This has caused significant
volatility in the stock market which has detracted from what was
looking like a sustained period of gains. It is unclear what the
future will bring but we beleive it is positive that the Government
is trying to deal with widespread crossholdings and vested
interests in the banking sector. Any move to improve the banking
sector can only be welcomed and this puts further pressure on
already beleaguered land owners and property developers. There is
clear pain in the market and the current landscape of foreign and
domestic investors has never been so bare giving a competitive
advantage for VPF. Whilst Vietnam is not at the top of most
international investors list of emerging markets to invest in, it
is the view of Dragon Capital that now is the time to pick up
bargains and plan for the inevitable upswing. Nothing happens
quickly in Vietnam but we are seeing more and more
opportunities.
We are also seeing macroeconomic indicators move in the right
direction with inflation coming under control at under 7% y-o-y,
bank lending rates dropping and the currency being relatively
stable for over a year now. This has not, however, been enough for
the real estate market to recover any momentum yet due to continued
restrictions on credit growth, particularly in the real estate
sector, while the specter of increased non performing loans
continues to plague both developers and banks alike. Financing is
still difficult to obtain in the current market but where credit
can be obtained interest rates are now being quoted around 15% to
18% for VND as opposed to 22% to 25% 12 months ago. This is not
quite low enough to make projects and feasibility studies work but
it is a step in the right direction. In conclusion, we may not be
at the bottom of the property cycle quite yet but we believe now is
the time to be planning for distress and then recovery as the
market will be opening up for more attractive deals.
For further information including the full August 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 / Tom Sheldon
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
END
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