Net Asset Value(s) (2038D)

TIDMVPF

RNS Number : 2038D

Vietnam Property Fund

14 May 2012

Vietnam Property Fund Limited

"VPF" or "the Company"

NAV and April 2012 Update

Fund NAV Performance

The NAV per share closed at US$ 0.794 on 27 April 2012.

Investment Climate

Most observers expected the petrol price increase in March to have a major impact on April's month on month ("m/m") inflation and anticipated inflation m/m to reach 0.8%-1.2% whilst we forecasted 0.3%-0.5%. However, the actual April m/m inflation surprised all and came out at only 0.05%, the lowest m/m inflation in 36 months. Given the high base effect the inflation year on year ("y/y") continued to drop, from 14.1% in March to 10.5% in April. Food and foodstuffs were down 0.8% m/m thanks to favorable food supply and weak aggregate demand, causing prices of two key items, namely rice and pork, to decline. We expect inflation to reduce further to 8.5% y/y in May and 7.5% y/y in June.

According to estimates by the Ministry of Trade, April's trade deficit came in at $400m, resulting in a trade deficit of just $18m after 4 months. April export was reported at $8.6bn bringing export year to date to $33.4bn, or +22.1% y/y. Foreign Direct Investment ("FDI") enterprises were the key contributors, posting a growth of 36.4%, while local enterprises edged up by only 4.3%. April import was estimated at $9bn resulting in import year to date of $33.6bn, or +4.4% y/y, with local enterprises showing a decline of 11.9% and FDI enterprises an increase of 25.9% y/y. 12m rolling core deficit as a result continued declining from $6bn in March to $5.1bn in April, implying that our trade deficit forecast of $7bn for 2012 may now be conservative.

Economic data is pointing to an economy in stagnation, a rapidly declining inflation and local trade companies losing market share to FDI companies. Even though deposit rates are capped at 12%, most banks continue to command lending rates of 17-19%. Whilst this gives banks a very high net interest margin ("NIM") it severely hurts enterprises. The State Bank of Vietnam ("SBV") therefore has issued Circular 14 to apply a lending cap for specific sectors which is equal to the savings deposit rates for more than 1 month (currently at 12%) plus 3%. Beneficiaries of the lending cap are agricultural companies, processors of export products, small and medium enterprises (SMEs) in labour intensive industries and enterprises involved in supporting key industries. Even though lending rates remain high, interbank rates have fallen to a very low level: O/N rate is just 4-5% while the 1month rate is 8%, implying that banks have ample liquidity. We therefore believe that the SBV should further accelerate the bank restructuring process in order to eliminate weak banks and to thereby allow rates to drop faster. On the fiscal side, the Government is planning to propose a support package worth $1.4bn to the National Assembly for cash-strapped enterprises which includes a delay or a reduction in corporate income tax (CIT), a deferring of value-added tax (VAT) and tax exemptions.

Investment Update

After a fairly torrid year in terms of performance for our listed equity portfolio in 2011, we have seen a significant recovery in all of our equity positions with a particularly strong performance in April. Our view has been that the real estate sector was overly affected by market sentiment and the recent bounce back has gone someway to vindicate this view. For the month of April we have seen a significant gain of 25.1% in US$ terms for our listed holdings with DIG gaining 35%, BCI gaining 24% and, perhaps most surprisingly, SCR gaining over 70%. The year to date performance equates to a gain of nearly 72% for our listed holdings which is more than twice the gain seen for the whole VN Index for the same period. Whilst the real estate sector still has its issues this is the first indication that investor confidence is beginning to return. It is worth noting that the listed element of the portfolio is 19% of the portfolio so the performance of the fund as a whole has been obviously more muted at 9% year to date. We have, however, managed to break through the $70m mark in terms of NAV with the NAV per share now close to $0.80. We are delighted that the market is now moving in the right direction.

Our cash position is providing us with access to a lot of opportunities as high interest rates continue to cause problems for a lot of land owners and developers in the country. We continue our efforts to get further deals completed before the year end. We will report more on this in the coming months.

For further information including the full April Monthly Report please visit - www.vietnampropertyfund.com or contact:

Enquiries:

Rachel Hill

Dragon Capital Markets (Europe) Limited | Tel: [phone]

Freddy Crossley

Seymour Pierce Limited (Nominated Adviser and Broker) | Tel: [phone]

This information is provided by RNS

The company news service from the London Stock Exchange

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