Vietnam Property Fund NAV and February 2013 Update (4766Z)

TIDMVPF

RNS Number : 4766Z

Vietnam Property Fund

07 March 2013

Vietnam Property Fund Limited

"VPF" or "the Company"

NAV and February 2013 Update

Fund NAV Performance

The NAV per share closed at US$0.754 on 28 February 2013.

Investment Climate

The State Bank of Vietnam ("SBV") Governor Nguyen Van Binh stated in a recent media meeting that monetary policies will be conservative to control inflation, yet flexible to support growth. Therefore in order to achieve the Government's target of 5.5% GDP growth and inflation below 8%, the SBV set the credit growth and M2 growth target at 12% and 14%-16% respectively. This looks to be sufficiently supportive for growth, yet reasonably conservative to manage inflation, especially when compared to the actual credit expansion of 8.9% in 2012. The SBV will also aim to tackle banking liquidity and NPLs more thoroughly and to gradually lower lending rates from 13-17% at the end of 2012 to 10-13% in 2013.

GDP growth has declined for two consecutive years now with 2012 delivering GDP growth of only 5%, the lowest in 13 years. It is likely that a negative feedback loop came into play here as decreasing income has led to falling confidence which, in turn, led to reduced spending and thus further income reductions. This was no doubt caused by the prolonged tight monetary and fiscal policies to tame high inflation and cool down a hot property market. However, since June 2012 macro-economic risk indicators have been steadily improving and property prices have declined to more reasonable levels. Nonetheless, we believe property prices have not bottomed yet, although they are probably not far from the bottom as transaction levels are starting to pick up. Prospects are positive for lending rates to decline to 10-12% as confidence and the economic outlook improve which, in turn, should lead to a reversal of the feedback loop with rising income leading to rising confidence, thus leading to rising spending and rising income. This is indeed what appears to be happening as credit growth accelerated from the bottom of 2.6% year on year ("y/y") in July 2012 to 9.9% y/y in February 2013. Some observers are concerned about a drop in total credit by 0.16% for the first two months but in our view this is still a substantial improvement when compared to the negative credit growth of 2.5% during the same period last year. More importantly, credit growth was estimated at +0.85% month on month ("m/m") in February which is much improved from the -1.7% in February 2012. As the economy is slowly recovering we can expect credit growth to gradually recover, thereby making the 12% credit growth target look realistic.

Industrial production in February declined 21.3% m/m, but still increased 10% y/y. The large monthly decline was due to the timing of the Tet holiday in 2013. Overall, industrial production in the first two months increased by 6.8% y/y which is stronger than the 3.9% during the same period in 2012. Particularly noteworthy is the improvement in real estate related areas such as steel and cement with the latter increasing 19.4% y/y versus a decline of 14% last year while the former decreased by only 1.3% versus -24% last year, signaling increasing business confidence and stronger economic activities.

Investment Update

With the Tet holiday taking out a whole week in February it is usually one of the quietest months in Vietnam as most people take time out to visit family both in the country and overseas. We had no such luxury here at VPF as we managed to buy into our first development project for quite some time. We have been concerned over the level of pricing of assets pretty much since VPF's inception and it is somewhat of a relief to be able to finally find a deal worth doing. The project comprises a 2.7ha site in the Thao Dien area of District 2, Ho Chi Minh City, and benefits from good river frontage to the Saigon River. The project is currently zoned for apartments but it is our intention to change the use to villas and create a luxury gated compound in this popular expat and wealthy Vietnamese enclave. We look very much forward to working with our development partner, Sapphire, for the first time on an actual development project as we believe they are one of, if not the best, developers in the country. To date a deposit of 10% of the land price has been paid to the seller with the balance due on receipt of approval to change the use to villas. We are confident that the landed villa sector is the most buoyant sector in Vietnam and the exceptional location of this site will benefit future sales.

We also continued exiting from one of our listed equity positions with nearly 75% sold as at the end of February and will report in more detail once the exit is complete. In terms of pipeline, we are considering a discounted purchase of completed apartments in a centrally located project in Ho Chi Minh City which should yield good returns at current market price levels and become even more interesting as and when we will experience an inevitable price increase over the next 18 months. The property market in Vietnam is still weak but we believe that we will see the bottom in 2013. It is noteworthy that Vietnam seems to have slipped off the schedules for most of the Asia property conferences this year, right at the time when investors should be considering Vietnam as a location ready for a potential upswing. Over supply still exists in the apartment and office sectors but that will not last forever and investing in the best projects with the right partners will we believe pay dividends over the next year or two. The contrarians are starting to take an interest again and we are confident that cash will be available to fund bigger and more interesting projects. It won't happen immediately but it may be the right time to take another look at Vietnam.

For further information including the full February 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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