RNS Number : 1101X
Vietnam Property Fund
09 February 2012
Vietnam Property Fund Limited
"VPF" or "the Company"
NAV and January 2012 Update
Fund NAV Performance
The NAV per share closed at US$0.735 on 31 January 2012.
January consumer price index ("CPI") came in at +1% month-on-month ("m/m") which was higher than last month. This was mainly due to the Vietnamese New Year ("Tet") which was much earlier this year than usual. Compared to last year this was much lower when m/m inflation reached 1.75% in January and 2.5% in February. CPI year-on-year ("y/y") continued to drop and recorded 17.3% in January, down from 18.1% last month. Prices were generally more stable during this Tet with both food and non-food m/m inflation decelerating in January compared to last year: Food +1.02% this year vs. 2.5% last year and non-food +1.0% this year vs. 1.22% last year. Given the current weak demand and monetary and fiscal policies, we expect y/y inflation to further reduce to 11.8% in April and to single digit in May or June.
The General Statistics Office ("GSO") estimated exports in Jan at US$6.5bn, or -11.1% y/y, and imports at US$6.6bn, or -18.7% y/y, implying a much reduced trade deficit compared to last year when trade deficit reached US$880m. As a result, our 12 month rolling core trade deficit (ex oil and gold) came down to US$8.5bn, the lowest in two years. Core export growth 3m/3m decelerated fast from 29.2% in December to 15.1% while core import growth 3m/3m dropped from 15.8% in December to only 5.8%. We believe that this was mainly due to Tet which this year was much earlier than in previous years and we therefore expect export growth to bounce back in the coming months.
In 4Q 2011, the market was worried that USD loan redemptions and the traditionally high demand for USD before Tet would put pressure on the VND to depreciate. But instead the VND became stronger since November thanks to a decelerating inflation, falling trade deficit and rich USD inflows. There are many factors that can impact the currency: inflation, trade deficit, gold flow and sentiment. The first two are on a downward trajectory according to our view. The latter two are hard to predict but we believe that sentiment on gold and USD is much less bullish compared to last year. We are therefore optimistic and believe that depreciation of the VND in 2012, if any, will be very modest in the range of 2-3%.
As expected, interbank rates have come down thanks to the seasonal impact of Tet which lowered payment demand: O/N was down from 14.5% to 13% and 2 week down from 16% to 15%. We expect the Government to continue working on the restructuring of the banking system to enhance their efficiency and to lower lending rates in 2Q 2012. We have seen recently some signs for further banking sector consolidation and signs are positive that the Government continuous pursuing the banking sector reform vigorously.
The traditionally quiet month of January between the calendar New Year and the Lunar New Year holiday was made shorter with the Tet holiday coming early and writing off a week. However, the performance of the VN Index during January was very encouraging with an increase of 10.7% making it the best performing stock market in Asia behind only Hong Kong. Consequently, the listed portion of our portfolio experienced some much needed performance increasing by 8.1% although total returns were slightly more muted. The macroeconomic picture continued to improve with inflation dropping to 17.3%, an almost continual month on month drop since August last year with the exception of December. The inflation target of under 10% by the year end is looking more and more realistic with interest rates likely to fall as a consequence. We believe this is the key to unlocking the sluggish real estate market.
We were also pleased to see higher return from VPF's investment in the PDD Office building in 2011, despite an extremely difficult office market across Vietnam. The PDD company reported a rise of 7.4% in net profit after tax, depreciation and amortization ("NPAT") during 2011, which is also 39% higher than the company's budget. We have expressed concerns in the past about the lack of efficiency in the running of this building and are glad to note that this is improving. PDD's 4.6% reduction in revenue was effectively offset by 16% reduction in operating costs. Also, in 2011, the company managed to obtain approval to amend the depreciation schedule of its fix assets which significantly reduces the annual depreciation by 41%. The higher NPAT made VPF's net investment yield rise to 15% (as opposed to 14% in 2010) for this specific holding.
For further information including the full January Monthly Report please visit - www.vietnampropertyfund.com or contact:
Dragon Capital Markets (Europe) Limited | Tel: +44 79 71 214 852
Seymour Pierce Limited (Nominated Adviser and Broker) | Tel: +44 20 7107 8000
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