Vietnam Property Fund Net Asset Value and July 2012 Update (5811J)
August 08 2012 - 6:45AM
UK Regulatory
TIDMVPF
RNS Number : 5811J
Vietnam Property Fund
08 August 2012
Vietnam Property Fund Limited
"VPF" or "the Company"
NAV and July 2012 Update
Fund NAV Performance
The NAV per share closed at US$ 0.780 on 31 July 2012.
Investment Climate
Trade balance in July continued to be positive for the second
consecutive month. Total export was US$9.6bn while import was
US$9.5bn, resulting in a US$100m surplus. Quarter on quarter
("3m/3m") core export slowed from 31% in June to 28% in July, which
was expected given the weakening demand from the US and EU, whilst
3m/3m core import accelerated from 11.5% in June to 15.5% in July.
The acceleration of import does not constitute a problem as it was
caused by materials import for export manufacturing and capital
investment rather than consumption which, 3m/3m in July, slowed
from -1.8% to -4.7%. We therefore believe that import growth will
stabilise in the coming months and that export will continue to
slow but that it will still grow at a faster pace than import until
year end. In view hereof we revised our previously conservative
trade deficit forecast from US$4.2bn to US$2.2bn for 2012.
As food and foodstuffs continued to decline, inflation in July
was negative for the second consecutive month, 0.29% month on month
("m/m"). This reduced year on year ("y/y")inflation from 6.9% in
June to 5.4% in July, raising concerns about deflation. However,
whilst aggregated demand is weak, core consumer price index ("CPI")
is still high at 7.4% y/y. In addition, 8 of 11 CPI components
increased over the last two months. Hence, it is too soon to be
concerned about deflation. It is likely that food prices have
bottomed out due to bad weather in the US and Russia. We therefore
expect that monthly inflation will be mildly positive again in the
coming months. CPI y/y will decelerate further to below 4.7% y/y
before seasonal effects will make it rise to around 5.5% in
December.
Credit growth remained slow in July, +0.57% year to date, which
is well behind the new credit growth target of 2012 that has been
reduced from 12% to 8%. It is expected that credit will only expand
4%-5% this year which suggests a worse than expected economic
growth in 2H12. HSBC's Market Purchasing Managers' Index ("PMI")
dropped to 43.6 in July from 46.6 in June offering further
indication that real economic activities have not improved. In view
hereof the Government announced its fiscal stimulus package
comprising 1) accelerated public spending in 2H12 (on average 50%
higher than in 1H12), 2) reduction of income tax for small and
medium enterprises (SMEs) by 30%, and 3) extension of the VAT
payment delay from 6 months to 9 months. The accelerated public
spending is not really new as the Government has traditionally
always spent 50% more during 2H. However, thevalue-added tax(VAT)
payment delay extension will be helpful. Given the modest stimulus,
however, it is unlikely that GDP will reach 5% in 2012. The only
other hope for economic growth is a steady decrease in lending
rates. We believe that 15% for lending rates is still too high and
consider that further reductions of policy rates are still
required.
Investment Update
It has been a rather quiet start to the new financial year in
the Vietnam property market with slow sales in almost all
residential projects being the norm for this beleaguered sector.
Delayed completion dates and funding problems continue to beset
office and hotel projects in Ho Chi Minh City ("HCMC") and Hanoi.
The latter issue has left a bit of a hole in the office market with
the majority of completed and income producing office buildings
either full or filling up with little new space expected to hit the
market any time soon. This has left a sweet spot for the few
developers who have planned and budgeted well and succeeded in
completing the construction of their buildings. This is
particularly true of President Place, a new green office building
in District 1 of HCMC, which is due to complete next month and is
already over 30% let at rents of up to US$35/m(2) per month. Whilst
some may see this as lucky, for us it is just reward for a
development team that has delivered a project on time and on budget
which is as rare as the Bengal tiger in these parts.
Our Investment Committee has been busy this month with several
new projects being taken to the first stage of our recommendation
and due diligence process. We continue to explore our strategy of
looking at alternative sectors away from the traditional
residential and office with approvals to continue with an
investment into a very well run development company at the Topco
level, to negotiate terms on a logistics / warehouse business in
HCMC and even to look into the prospect of a cemetery project.
Whilst there are signs of distress in the market, often the
projects that are introduced to us are so beset with concerns that
we cannot consider progressing them. We still hear the old story of
developers not wanting to sell a majority share in their projects
but rather burden with further debt in the vein hope that the
market may save them as opposed to selling out, cutting losses and
getting on with the next deal. This will change. We are well placed
to take advantage of either further distress or, for that matter, a
recovery in the market through our strategic investment with the
aforementioned developer. The next six months will we believe
finally lead us towards full investment in a market that remains
very difficult albeit much more attractive.
For further information including the full July 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
END
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