Vietnam Property Fund NAV and December 2012 Update (3764V)

TIDMVPF

RNS Number : 3764V

Vietnam Property Fund

11 January 2013

Vietnam Property Fund Limited

"VPF" or "the Company"

NAV and December 2012 Update

Fund NAV Performance

The NAV per share closed at US$0.74 on 31 December 2012.

Investment Climate

Vietnam posted Q4 GDP growth of +5.4%, compared to +5.1% in Q3 and +4.8% in Q2. The full-year expansion was +5.0%, below the 2012 revised target of +5.2% and the 2011 growth of +5.9%. The Service sector was the biggest contributor to growth with +6.4%, slightly slower than 7.0% achieved in 2011. The Construction and Industrial sectors slowed faster, as expected, from +5.5% y/y in 2011 to +4.5% in 2012. Agriculture, accounting for 22% of GDP, slowed, too, from 4% in 2011 to 2.7% in 2012, mainly due to the limited access to credit and severe fishery diseases. In 2013, Vietnam will aim to achieve GDP growth of 5.5% which should be realistic given that (1) exports are expected to remain robust and consumption imports low, (2) credit expansion, which has been virtually frozen in the last 18 months, should gradually increase as the Government starts tackling Non Performing Loans and (3) confidence has started improving.

December CPI came in at 0.27% m/m or 6.8% y/y, which was lower than 11.8% y/y in 2010 and 18.1% y/y in 2011. Excluding the adjustments made to both the education and healthcare items, which were policy driven and not monetary related, the CPI increased by only 3.4% in 2012, which underlines that demand is not a concern for inflation. We forecast that CPI y/y will technically increase from 6.8% at the end of 2012 to 8.5-9% in Q2 2013, before slowing down to around 7-8% by end of 2013. Equally positive news come from the trade side, which reversed a deficit of US$10 billion in 2011 to a small surplus US$0.3 billion in 2012. This was thanks to strong export growth and weak consumption import demand. Vietnam's recovery is further supported by a stabilizing local currency, which benefited from the Government's successful management of the gold and forex market, reflected by an increase of FX reserves from US$8 billion to around US$21 billion in 2012 and a stable USD/VND exchange rate since March 2011. We expect FX reserves to increase in 2013 by another US$6 billion. All this points to Vietnam being well on its way to achieve its first stepe. to restore macro stability.

The Government has discussed and proposed solutions to resolve bad debts and stimulate the economy. The anticipated package comprises three elements: (1) taxes: reduce VAT by 30% for investments in social housing and small size apartments with less than VND15 million/m(2) , reduce CIT??? and provide special treatment for land-use-fees, (2) Asset Management Company (AMC) and bad debts: Provide VND20-40 trillion cheap credit for buyers of social housing projects, allocate VND100-150 trillion for AMC and VND36 trillion / year for three years from the budget to resolve Government related guaranteed debt and (3) relaxation of the rules to allow foreigners buying property, the possibility of opening up foreign room for some selected banks and allowing non-voting shares to be traded. These are all good measures with positive impacts on final consumers, but we will have to await the execution of the program.

Investment Update

This month has been the end of a dismal year for real estate in Vietnam. Many developers, land owners and property companies have seen the value of their assets slashed, while rents and sale prices continued their downward trend. Nonetheless there is no shortage of cranes and construction projects underway and it is really surprising how projects manage to tick along no matter how bad the economic conditions. It is true that a number of projects have been stalled for some time, in some cases over 12 months, but it seems that the new year has brought more activity. It is likely that Tet, the Lunar New Year holiday which will be celebrated in February this year, will be the catalyst for the resumption of more projects. There has been a lot of discussion recently that the Government will be implementing policies to assist the real estate sector not to only survive but recover in 2013. It is not totally clear at this time what these policies and stimulus packages might be but we can expect subsidized interest rates and even reform in ownership for overseas Vietnamese (Viet Kieu) and foreigners who wish to buy apartments. Such policies, if implemented, may provide a fillip to the stock market in the new year so we watch this space with interest.

Most participants in the real estate sector will be pleased to see the back of the old year and hope for better news for 2013. Whilst our own house view is not altogether pessimistic we are also realistic about the slim chances for a sustained recovery in the real estate market. 2013 will see the bottom of the market in terms of residential sales, although the excess inventory of existing stock will take some time to clear, thereby delaying a recovery. This is not bad news for VPF as we have cash to spend and are now concentrating our strategy on distressed assets. 2013 will be a good year for selective acquistion and preparing our investments for the inevitable upswing.

At the end of the month VPF repurchased shares totaling 2.37m which will hopefully have removed the selling pressure for the time being. The board of directors remains committed to a buyback program in order to manage the discount to NAV.

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

Enquiries:

Rachel Hill

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

Rick Thompson,Tom Sheldon,

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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