Although Viet Nam's stock market has yet to escape its depressed status, foreign investors at last week's Viet Nam Investment Summit held in HCM City still saw opportunities ahead.
"I believe in the growth of Viet Nam when looking at its growing middle class… the market is still coping with difficulties and lowering prices. Investors are tapping into these advantages, selecting a number of companies for their portfolio," said Srisant Chilvaranund, partner of the fund Aureos Capital (Thailand).
Developing countries often experience periods of economic chaos that also can offer opportunities.
He noted that floods in Thailand had prompted some Japanese producers to move their factories to Viet Nam.
Hana Dang, Viet Nam country manager of BankInvest (Denmark), said many opportunities in Viet Nam were available for investors, especially via merger and acquisition deals, at reasonable prices.
She stressed the need to stick to an investment strategy and find companies that have good governance.
Tomoyuki Kimura, country head for the ADB in Viet Nam, said the planned equitisation of many State-owned enterprises would make Viet Nam an attractive destination for investors.
Henk Ruitenberg, CEO at Prudential Viet Nam Asset Management, however said the small scale of Viet Nam's stock market was a big disadvantage.
He noted that it was equal to only 28 per cent of the country's GDP, while the rate was 51 per cent in Indonesia and 100 per cent in Singapore.
Further, the GDP of these two countries is much larger than that of Viet Nam.
Small-scale markets are often impacted by the herd attitude of individual investors that causes difficulties to institutional investors.
Lack of information is another disadvantage, according to Standard Chartered Bank CEO Louis Taylor.
Of the US$32 billion market capital, international investors represent $6.2 billion.
Their portfolios cover around 50 out of more than 700 listed companies, This is partly because the investors do not regularly receive information on all listed firms, and information is insufficient.
The weakened dong was cited as a concern of investors as their assets had suffered losses.
Taylor suggested that the Government stabilise the US dollar and Vietnamese dong exchange rate by controlling dollarisation in real-estate deals.
He also urged the Government to maintain a tight monetary policy to limit inflation, and show consistency in policy messages to gain confidence from the public and investors.
It was noted that the cap for foreign ownership, at 30 per cent at listed banks and 49 per cent at others, effectively blocks an increase in foreigner's stake in desirable shares like that of Vinamilk.
Although stock market liquidity remains low due to high interest rates and inflation, Kevin Snowball, CEO of the PXP Viet Nam Asset Management, said macroeconomic factors had experienced positive changes and if international investors waited for a clear picture, they might miss the train.
Da Nang real estate
In the third quarter of 2011, the Government's efforts to control inflation made more headway, with month-on-month (m-o-m) inflation in September at a lower 0.82 per cent.
This was 0.27 percentage points lower than the m-o-m inflation seen at the end of the second quarter.
Standard Chartered bank, the IMF and the ADB all forecast 5.8 per cent year-on-year (y-o-y) GDP growth for Viet Nam in 2011.
Da Nang's GDP in the first nine months again outpaced that of Ha Noi and HCM City with a growth rate of 13.1 per cent.
The prospects of improvement in the industrial sector, especially in high-tech industries in the city and surrounding provinces, are bright.
This is partly due to Viet Nam-Singapore Industrial Park's signing an MoU to conduct a feasibility study for a 1,020-ha integrated township in Quang Ngai Province.
In addition, a five-year plan with the IBM was established to develop modern IT infrastructure in Da Nang, and EADS, the European aerospace and defence manufacturer, is looking to develop an industrial park in the city.
No new office building opened in the third quarter, but one building was remodelled to provide additional office space, which added to the total of 82,393sq.m available.
While Grade A vacancy is up 8 percentage points on the previous quarter, vacancies in Grades B and C, as well as overall vacancy, is down both on a quarterly and yearly basis.
On the residential market, CB Richard Ellis managing director Marc Townsend, said there was no new condominium supply, nor were there any launches, in the third quarter.
Similar to residential markets in Ha Noi and HCM City, the market in Da Nang continues to be affected by waning consumer confidence, high inflation and reduced access to capital.
In the retail sector, the Da Nang Square came online in the third quarter, adding 4,100sq.m to supply.
This is a hybrid of a traditional market, with many individual stalls, but similar to a modern shopping centre with improved services such as air conditioning.
Residents' shopping habits in the city are expected to change significantly in the future, with a shift already appearing.
Da Nang Square and iCenter, an authorised Apple retailer, also opened in the third quarter.
The outlook for serviced apartments is improving, with the Government increasingly amenable to the growth of the industrial sector in the city. This is a large driver of serviced apartment demand.
In the hotel sector, 272 new four-star hotel rooms came online in the third quarter from the Mercure Da Nang property.
An increasing number of international operators are entering the market, including a Marriot, a Renaissance property, and Intercontinental Hotels Group with a Crowne Plaza property. Hyatt is expected to open its project in the fourth quarter.
In the first nine months of 2011, Da Nang welcomed nearly 2 million tourist arrivals, a 30 per cent year-on-year increase.
Fraudulent salt sales
The South Basic Chemicals Company was found recently selling 23,000 tonnes of industrial salt for food purposes.
The salt was imported for industrial purposes to make sodium hydroxide (NaOH), which contributed to higher profits for the company. It also adversely affected domestic salt production.
The salt sale fraud had a negative impact on the fairness of the market and domestic prices.
A big gap exists between the tariffs imposed on salt imports that have quotas for industrial use and those that are off-quota, at 15 per cent and 50 per cent, respectively.
Large volumes of domestically made salt are in stock. Figures from the Ministry of Agriculture and Rural Development (MARD) as of September 20 showed that Viet Nam salt output stood at 755,400 tonnes.
Salt in farmers' and production businesses' stock amounted to more than 216,000 tonnes at the end of September.
Farmers are expecting to make some profit if the price is VND1,200 (US$0.055) per kilo, but currently the price stands at VND 900-1,200 in the north and VND500-700 in the southern centre.
According to Ho Xuan Hung, deputy minister of MARD, Viet Nam does not allow imports of salt for food purposes. Only high-quality salt for industrial purposes is permitted.
Thus, the sales by the South Basic Chemicals Company were in violation of State regulations. Hung said this occurred as a result of poor supervision that extended from import to distribution channels.
He suggested that immediate investment in key industrial salt production areas was needed. This would ensure high quality as the country is able to produce a sufficient volume, but quality cannot currently be ensured.
"Production of low-quality salt is redundant, while high quality salt is in short supply," said Hung.
Of the 300,000 tonnes of high-quality salt for the country's chemical industry, the domestic supply represents less than 30 per cent. Around 188,000 tonnes will be imported next year.
He said his ministry would work with the Ministry of Industry and Trade to review domestic supply and real demand of industrial salt to ensure proper utilisation.
In addition, MARD planned to devise a salt development strategy next year that would focus on production areas that have competitive advantages.
It would also promote increased investment in national storage capacity in order to prevent future shortages.
(source: VNS)
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24/10/2011 01:54:44 PM | 