Read and follow the top economic indicators for Vietnam, M&A activity, and major developments in finance, banking, and legal. Published Monthly with contribution from LNT & Partners Law Firm.
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> Investment Digest Vietnam COLLIERS INTERNATIONAL November | 2013 The macroeconomic stability of Vietnam continues to make gains. GDP growth continues to accelerate quarter over quarter posting 5.5% growth in Q3. Inflation has slowed in October to 0.49% after posting high gains in Aug and Sept. The official exchange rate continues to remain stable at 21000. Forex reserves continue to grow at $32b, provisioning against 12 weeks-worth of imports. Exports continue their torrid growth, primarily fueled by FDI operations. Credit growth of 6.48%, while unlikely to reach 12% by EOY, has been strong in recent months after contraction in the first couple of months of the year. Banking restructuring and consolidation continue to take steps as smaller banks merge such as HD Bank and Dai A Bank and PetroVietnam Finance Corp and Western Bank in September. *Arrows indicate monthly trends **Data is accurate as reported by the source on the indicated date Overview Market Indicators 30-Day Trend Indicator October September Date 10 year bond yield 9.15% 8.84% 10/30 Credit Market +7.18% ytd +6.48% 11/1 Deposit Rate 7% - 9% 7% 10/30 Deposits +13% - 16% +11.74% - 13.78% ytd 10/28 Enery Prices unchanged unchanged 10/30 Exp/Imp +13.4% / +17.6% yoy +15.7% / +15.5% yoy 10/29 FDI +65.5% yoy to $19.2b +36% yoy to $15b 10/30 FDI Disbursement +6.4% yoy to $9.6b +6.4% yoy 10/30 Fitch B+ B+ 11/2 GDP +5.5% Q3, +5.2% ytd +5.14% ytd 10/21 Inflation +5.14% ytd, 6.74% yoy +4.63% ytd, 7.5% yoy 10/24 Lending Rate 7-9% short, 9-11% long 7-9% short, 9-11% long 10/26 Moody’s B2 B2 11/2 Overnight Rate 3.71% 2.77% 10/29 PMI 51.5 49.4 11/1 Refinance Rate 7% 7% 10/30 Repurchase Rate 5.5% 5.5% 10/30 Retail Sales 12.6% yoy +13.7% yoy 11/1 Standard & Poors BB- BB- 11/2 VND-USD 21,098 21,117 11/1 VN-Index 497.41, +18.9% ytd 492.63, +17.7% ytd 10/31 1 Vietnam Investment Digest | November 2013 | Market Indicators COLLIERS INTERNATIONAL
Transcript
> Investment Digest Vietnam COLLIERS INTERNATIONAL November
| 2013 Market Indicators 30-Day Trend Indicator Overview October
September Date The macroeconomic stability of Vietnam continues to
make gains. GDP growth continues 10 year bond yield 9.15% 8.84%
10/30 Credit Market +7.18% ytd +6.48% 11/1 Deposit Rate 7% - 9% 7%
10/30 Deposits +13% - 16% +11.74% - 13.78% ytd 10/28 Enery Prices
unchanged unchanged 10/30 Exp/Imp +13.4% / +17.6% yoy +15.7% /
+15.5% yoy 10/29 posting high gains in Aug and Sept. The official
FDI +65.5% yoy to $19.2b +36% yoy to $15b 10/30 exchange rate
continues to remain stable at FDI Disbursement +6.4% yoy to $9.6b
+6.4% yoy 10/30 21000. Forex reserves continue to grow at Fitch B+
B+ 11/2 $32b, provisioning against 12 weeks-worth of GDP +5.5% Q3,
+5.2% ytd +5.14% ytd 10/21 imports. Inflation +5.14% ytd, 6.74% yoy
+4.63% ytd, 7.5% yoy 10/24 Lending Rate 7-9% short, 9-11% long 7-9%
short, 9-11% long Moodys B2 B2 Overnight Rate 3.71% 2.77% PMI 51.5
49.4 11/1 Refinance Rate 7% 7% 10/30 Repurchase Rate 5.5% 5.5%
10/30 Retail Sales 12.6% yoy +13.7% yoy 11/1 restructuring and
consolidation continue to take Standard & Poors BB- BB- 11/2
steps as smaller banks merge such as HD Bank VND-USD 21,098 21,117
11/1 and Dai A Bank and PetroVietnam Finance Corp VN-Index 497.41,
+18.9% ytd 492.63, +17.7% ytd 10/26 11/2 10/29 10/31 to accelerate
quarter over quarter posting 5.5% growth in Q3. Inflation has
slowed in October to 0.49% after Exports continue their torrid
growth, primarily fueled by FDI operations. Credit growth of 6.48%,
while unlikely to reach 12% by EOY, has been strong in recent
months after contraction in the first couple of months of the year.
Banking and Western Bank in September. *Arrows indicate monthly
trends **Data is accurate as reported by the source on the
indicated date 1 Vietnam Investment Digest | November 2013 | Market
Indicators COLLIERS INTERNATIONAL
Investment Managers Letter Early numbers indicate a continued
strengthening of the 5.14% GDP growth in the first three quarters
over the same investment environment from both a macro and micro
view. period in 2012. However, Vietnams growth is dwarfed by Key
indicators have continued their upward trend from Q2 into
neighboring countries such as the Philippines (>7%) and the end
of the year as displayed on page 1. There are three China (>7%).
As you will see, domestic industrial output, retail things to watch
as you consider investing in Vietnam. growth, and credit growth are
showing slow gains. To make the most of the current FDI interest,
Vietnam must focus on In the banking and finance sector, continue
to watch Vietnam areas of talent transfer, support industries, and
oversight to Asset Management Company (VAMC) and State Bank of
bring domestic industry up to world standard. Vietnams (SBV)
handling of non-performing loans (NPL). The current mechanism
serves only to add near-term liquidity On the whole, 2013 has shown
much progress over the to a sector that is already awash with
capital and continues year before, but there is much work yet to be
done. In this to struggle to lend in a market void of demand.
Without a debt environment, distressed assets are not yet
internationally trading market or other similar market mechanism,
these accessible for most. I believe the opportunities lie in
investing NPLs will remain out of reach. with an eye on 2016-2020
in the mid-end residential and commercial office space. Once
domestic demand kicks in Secondly, keep an eye on the SBVs handling
of the currency. early-to-mid next year, the limited office space
in Vietnam According to various industry insiders and others
looking will fill quickly and flip the market to a sellers
orientation. In in, the VND is still over-valued and will be a
source of the industrial and manufacturing space the government,
with additional volatility. While Vietnams forex reserves are now
support from FDI operations, has been making a strong push
approximately $32 billion, a quick devaluation can still wipe to
incentivize support industries and increase localization. this out.
Additionally, Vietnam is looking to increase its fiscal Many
opportunities abound in Vietnam and can be uncovered deficit to pay
for an increase in public spending in target with the right focus.
sectors and infrastructure to stimulate domestic demand. Finally,
pay attention to the lackluster growth of domestic demand. The
tremendous growth and health of the FDI sector KYNAM DOAN
Investment Manager While Vietnam is by no means struggling, as
indicated by a [email protected] +84 1223 128 032 2 COLLIERS
INTERNATIONAL has overshadowed a troubling stagnation of domestic
demand. Vietnam Investment Digest | November 2013 | Investment
Managers Letter
VIETNAM INVESTMENT DIGEST | NOVEMBER 2013 Investment News VAMC
CURRENCY The VAMC has purchased VND 11.1 trillion of bad debts from
14 banks by the end of October according to VAMCs VP Mr. Nguyen
Quoc Hung. Approximately 67% of these bad debts are secured by real
estate and 22% are in manufacturing. The VAMC purchases these debts
with special 5-year, zero-coupon bonds and require the Following
the 1% devaluation of the VND in June, the SBV plans to further
devalue the currency by 2% before the end of the year, seller to
provision 20% of the value of the debt annually. according to PM
Nguyen Tan Dung. Several forces may be depressing the value of the
VND including the strengthening economy of economies that have
traditionally invested heavily in Vietnam like Japan, America,
Australia, Singapore, and However, as mentioned previously, the
current mechanism only serves to buy lenders a little time while
further locking up the underlying asset. Currently, there is no
clear procedure or legal framework for the VAMC and other lenders
to list their bad debts and for investors to find, assess, and bid
for these assets. Until a mechanism that can approximate a debt
trading market is set up, member-states of Europe. these bad debts
will remain out of reach. INDUSTRIAL GROWTH Additionally, while
banks can refinance up to 70% of the value of these bonds, no banks
have yet done so indicating healthy liquidity among Vietnams
lenders. RETAIL Low interest rates coupled with double-digit
deposit growth and the imperative to increase credit by 12% in FY13
may lead to higherthan-expected inflation once domestic demand
returns, which would then depress the dong further. Industrial
production has seen significant progress in the third quarter of
this year compared to the two previous quarters. These achievements
resulted from the development of the processing and manufacturing
sector with high manufacturing and consumption of export products.
Industrial Production index year to date has increased 5.4% year
over year. Of the ten months 5.4% general growth rate, the
manufacturing contributed 4.9%. Among the highest growth in
manufacturing are textile industry with the year to date increase
of 19.9% year over year, leather and related products with the
increase of 16.3% year over year, prefabricated metal products and
motored vehicles with the rise of 13.7% year over year and 12.9%
year over year. Vietnams total retail sales and service revenues
were estimated to have increased by 12.6% year over year to VND
2,159 trillion ($100.21 billion) in the first 10 months of 2013,
the General Statistics Office (GSO) said on its website. The trade
sector contributed 76.8% of the countrys total retail sales and
service turnovers with VND 1,657.8 trillion, increasing 12.1% year
over year. Hotel, restaurant sector accounted for 12.1% of the
country's total with VND260.2 trillion, rising 14.9% year over
year. Service sector accounted for 10.2% with VND 220.2 trillion,
rising 14.8% year over year. Tourism sector contributed 0.9% or VND
20.3 trillion, up 3.1% year over year. However, If price hike is
excluded, the retail growth rate would be 5.5% which is lower than
the rise by 6.8% (price hike excluded) in the same period last
year. This slow recovery is troubling and casts Industrial
investment is focused on Ho Chi Minh City, Dong Nai, Ba Ria-Vung
Tau, Hanoi, Binh Duong and Bac Ninh. These six localities are
making up nearly 70 percent of total industrial production value of
the country. WORLD BANK VIETNAM RANKS 99TH IN EASE OF DOING BUSINES
While Vietnam has improved its business environment slightly, it
still dropped 1 spot to 99th from 98th. The marginal improvement of
69 basis points to 61.13% in 2014 over 2013 lags behind the region.
The subcategory, Protecting Investors, gained the most, jumping 12
spots to 157 (out of 189) and Paying Taxes lost the most, falling 4
spots to 149. Vietnam has increased employers social security
contribution rate, contributing to the 4-spot drop in that
category. a shadow over much of the other positive growth data. 3
Vietnam Investment Digest | November 2013 | Investment News
COLLIERS INTERNATIONAL
VIETNAM INVESTMENT DIGEST | NOVEMBER 2013 Investment News
RESIDENTIAL REAL ESTATE INVENTORY AT $4.85 BILLION, DOWN 20% FROM
APRIL According to the Ministry of Construction, the value of real
estate inventory fell $200 million to $4.85 billion in September
from Aug (a 4% drop) and $1.23 billion from April (a 20% drop) with
low-income housing leading the way. Inventories in the two largest
markets, Ho Chi Minh City and Hanoi, have dropped by 16.1% and 15%
to $1.05 billion and $0.69 billion respectively in September
compared to August. Four major factors are thawing the residential
sector: 1. Real demand is returning and home buyer sentiment has
improved. It is consensus that residential prices are near or at
the bottom with certain products returning to the level of seven
years ago. 2.The government has additionally helped push the
affordable market with preferential 6% loans to both home buyers
and developers. 3.Developers have reduced prices sufficiently to
meet market demand. Prices have fallen 10%-30% across the industry
and even as much as 50% in the case of Novalands Sunrise City.
4.Developers have also added flexibility and other incentives, such
as Osaka Gardens offer of free foundations for land lot purchases,
Estellas extended payment terms of 50% down and zerointerest
payments over two years, and Vingroups offer of free management
service in Royal City, Times City, and Vincom Village. OCTOBERS PMI
OF 51.5 POINTS MEETS EXPECTATION HSBCs Vietnam Manufacturing
Purchasing Managers Index (PMI) has risen two months in a row to
51.5 after four months of decline earlier this year and is the best
reading since April 2011, the first month PMI was recorded.
According to HSBC, this is a strong indication that demand has
returned and the manufacturing sector has returned to output
growth. Payrolls have continued to expand and companies are
anticipating further production growth. New work has increased for
the second month in a row and has led to a rise in production.
Additionally, faced with increasing average input costs,
manufacturers have increased their charges for the first time since
March. M&A Seafood companies Hung Vuong Corp and Minh Phu Hau
Giang Seafood Processing Company have sold $42.3 million and $12.5
million in shares to foreign partners. Viettel purchased 70% of Cam
Pha Cement, worth approximately $6.7 million. REE Corp increased
their investment in Pha Lai Heat and Thu Duc Water of $1.9 million
and $1.2 million. Thien Minh Group acquired 89% of Hai Au Airline
for approximately $2.5 million OTHER NOTES Metro line 1 is being
further delayed because nearly 100 households in Thu Duc and Di An
have yet to hand over their sites. This will cost the city up to
USD$119,000 (VND 2.5b) per day. Line No. 1 was initially estimated
to cost USD$1.09 billion, but has now ballooned to USD$2.07
billion. In the January-September period, tax collection from the
State sector was 2% lower year on year, while tax payments from the
foreign direct investment sector rose 30%, and that from the local,
non-State sector increased 18%. PM Dung signed Decision
61/2003/QD-TTg on October 25 approving the release of 6 types of
national data needed to rate the countrys credit. Vietnams Ho Chi
Minh City Stock Exchange (HOSE) became an official member of the
World Federation of Exchanges on October 29. Chinas Manufacturing
PMI (CPMINDX) climbs to 51.4, NonReceive this and other reports by
joining our group: http://bit.ly/investVN Manufacturing PMI
(CPMINMAN) jumps to 56.3 and continues its steep climb from Aug
(53.9) and Oct (55.4). South Koreas PMI Increased to 50.2 in Oct
from a local min of 47.2 in July. Taiwans PMI increased to 53 in
Oct from 52 and Japans PMI Increased to 54.2 in Oct from 52.5. 4
Vietnam Investment Digest | November 2013 | Investment News
COLLIERS INTERNATIONAL
VIETNAM INVESTMENT DIGEST | NOVEMBER 2013 Major Economic
Indicators FDI TRADE FDI has been accelerating quickly over Q3 and
into Q4. Total FDI stands at $19.2 billion, a rise of 65.5%, while
disbursed FDI stands at $9.6 billion, a rise of 6.4%. This total
far outstrips the governments target of $13-$14 billion. Exports
have reached $107.97 billion and imports, $108.16 billion. Both
represent an increase of 15.2% over the same period last year.
While overall exports continue to grow strongly, domestic-based
exports increased only 3% to $35.9 billion underperforming
inflation. Korea and Singapore lead all other countries with
pledged investments of $3.6 billion and $2.7 billion respectively.
Manufacturing and processing lead all categories with $14.9
billion, or 78% of the total pledged. In October, there were two
major investments of $2 billion by China Southern Power Grid
Company and China Power International Holdings in a 1,200MW thermal
power plant and $1.2 billion by Samsung. INFLATION Industrial
production has seen significant progress in the third Inflation in
October slowed to an estimated 0.49% month-overmonth after
increasing sharply in September by 1.06% and August by 0.83%
according to the GSO. In the first 10 months of the year, inflation
is 5.14%, well within range of the target of 7.05%. Topping gains
were food by 0.91%, education by 0.53% and housing and construction
materials by 0.50%. VN-INDEX October ended the month at 497.41, up
slightly from Septembers close of 492.63. Foreigners continued to
be net buyers two months in a row propping the index near 500 due
to indications that the US will continue its quantitative easing
due to lackluster employment data. GDP 10M/2013 GDP stands at
5.14%, higher than last years 5.1%. GDP grew 5.54% in Q3, 5% in Q2,
and 4.76% in Q1. Analysts expect a GDP growth of approximately
5.6%-5.7% in Q4, increasing 2013s growth to 5.2%-5.3%. The
manufacturing sector is leading the way, improving 8.6% yoy in Q3.
CREDIT GROWTH TARGET OF 12% OUT OF REACH Lenders are awash in
capital, but are struggling to maintain lending standards while
attempting to attain year-end credit growth goals. Because of the
lack of credit demand by domestic business, banks would have to
significantly lower their risk standards to reach 12% by year end.
BUDGET DEFICIT CAP TO 5.3% The National Assembly is also preparing
to vote on raising the budget deficit cap to 5.3% by issuing $8.1
billion in bonds. They are hoping to raise capital to further
invest in infrastructure. FOREX RESERVES Vietnams foreign exchange
reserves are estimated at $32 billion, or 12 weeks of imports. This
figure is 60% higher than the $20 billion in reserves at the end of
December 2012. SBVs focus on shoring up the forex reserves will
help mitigate inflationary pressures and foreign withdrawal when
the US begins to slow its quantitative easing of $85 billion per
month. The Fed has indicated that they would continue with this
level of QE given recent lackluster employment numbers and GDP
growth. 5 Vietnam Investment Digest | November 2013 | Investment
News COLLIERS INTERNATIONAL
VIETNAM INVESTMENT DIGEST | NOVEMBER 2013 Legal Brief CIRCULAR
NO. 141/2013/TT-BTC A new circular by the Minister of Finance
guiding Decree No. 92/2013/ND-CP, which guided the Law on Corporate
Income Tax and Law on Value-added Tax amendments, was issued on 16
October 2013 and will take effect from 30 November 2013.
Accordingly, from 1 July 2013, the VAT rate applied for the sale,
lease, hire or purchase of social houses will only be 5%. Notably,
from 1 July 2013 until 30 June 2014, the sale, lease or lease for
purchase of commercial houses with a floor area of under 70m2 and a
sale price of less than VND 15 million/m2 will attract a 50%
reduced rate of VAT to 10%. DECREE NO. 121/2013/ND-CP From 30
November 2013, Decree No. 121/2013/ND-CP will take effect and
replace Decree No. 23/2009/ND-CP on administrative sanctions in the
activities of construction, real estate business, exploiting,
manufacturing and trading of building materials, infrastructure
management, development and management of houses and offices. In
these fields, the maximum level of fines is VND 300,000,000.
Furthermore, the statute of limitations for handling administrative
violations on real estate business, manufacturing and trading of
building materials and infrastructure management is 1 year. FOREIGN
INVESTORS MAY HAVE THE RIGHT TO SUB-LEASE REAL ESTATE The
abovementioned is referred to in the draft amendments to the Law on
Real Estate Business, which will be submitted to the Government.
The proposed law, if passed, will expand the rights of foreign
investors to sub-lease real estate. This will be a significant
improvement from the current law, which permits foreign investors
to only invest in new projects for sale or leasing. COLLIERS
INTERNATIONAL VN General Director [email protected]
Investment Manager | HCMC [email protected] Investment
Manager | Hanoi [email protected] + + Reach out to the
Vietnamese investment community. To contribute to Colliers
Investment Digest, contact [email protected] MONTHLY
INVESTMENT DIGEST This brief is published monthly by Colliers
Vietnam Investment Services, led by Peter Dinning and KyNam Doan,
with the assistance of our legal partner, LNTPartners. We advise an
asset portfolio that focuses on appropriate returns to match
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and domestic clients, including Fortune Global 500 companies as
well as well-known Vietnamese listed companies on a variety of
business and investment matters. 6 Vietnam Investment Digest |
November 2013 | Legal Brief
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