Vietnam Property Fund NAV and January 2013 Update (4750X)

TIDMVPF

RNS Number : 4750X

Vietnam Property Fund

08 February 2013

Vietnam Property Fund Limited

"VPF" or "the Company"

NAV and January 2013 Update

Fund NAV Performance

The NAV per share closed at US$0.76 on 31 January 2013.

Investment Climate

Last year the State Bank of Vietnam (SBV) increased FX reserves by around US$15bn and by another US$2bn in January, bringing estimated FX reserves to US$30-31bn in January, the highest ever. This beats any forecasts including our own optimistic forecast of US$23bn for end of 2012 and confirms that Vietnam does not have any issue with its Balance of Payments. Vietnam's issue in the past, for example during 2010/11, has rather been with Errors & Omission (E&O) where a lack of domestic confidence resulted in domestic capital flight, thereby causing high E&O. In 2012, the tide changed and Vietnam experienced domestic capital inflows as an increasing number of people gradually switched their holdings in gold and US$ to local currency. In view hereof and given the strict policies on gold and US$, it is fair to say that SBV has done well in de-dollarizing the system, breaking the linkage between gold and the grey FX market and thereby creating a more effective monetary system. As a result Vietnam has enjoyed an unprecedented period of stability in the FX market over the past 24 months. We expect FX reserves to reach US$39bn by the end of 2013 on the back of increasing trade surplus, continued FDI and improved E&O which will boost local confidence and provide support to the ongoing banking reform.

The HSBC Vietnam Manufacturing Purchasing Managers' Index (PMI) increased to 50.1 in January, up from 49.3 in December. Although the PMI was just marginally above 50, this is the second time in 3 months that the PMI crossed the threshold of 50. Based on the PMI chart, it looks as if the economy should have seen its bottom in Q2 2012 and is now slowly finding its way out of the bottom. This view is further supported by import of motorcycle and car parts accelerating since Oct 2012 and production of cement and steel increasing rapidly:

-- 3m/3m cement production growth: -7% in July 2012 and 15.1% in January 2013

-- 3m/3m steel production growth: -4.6% in September 2012 and 19.2% in January 2013

Monthly inflation in January came in at 1.25%, higher than the 1.0% last year, resulting in an increase of CPI y/y from 6.8% last December to 7.1% in January. Most of the items in the CPI basket decelerated except for healthcare and food. Healthcare increased from 0.14% m/m in December to 7.4% m/m in January as some provinces, which haven't adjusted their healthcare cost in 2012, did so in Jan 2013. Food prices increased slightly from 0.3% m/m in December to 1.3% m/m in Jan whilst all other items continued decelerating from 4.2% y/y in December 2012 to 4.0% y/y in January, implying that aggregate demand remains weak. Given that this year the Lunar New Year falls into February we expect inflation in February to be higher than January. Historically from 2002-2012, February inflation was at 2.2% m/m. Given the low base in Q2-Q3 2012, we believe CPI y/y will accelerate gradually to 9-9.5% in July before coming down to 7-8% y/y in December 2013.

Investment Update

The first month of the new year is always a fairly difficult time as the break between Christmas and Tet (the lunar new year holiday here in Vietnam) can lead to a feeling of lethargy amongst the population that can put most business on hold for a month. Fortunately that is never the case here at VPF. We commenced the exit from one of our listed positions this month and had achieved nearly 50% of our targeted full exit by the end of January. We will report on this in more detail once the full process has been completed. Unfortunately it is unlikely that we will make a profit from this sale but the stock has seen some reasonable performance over the past month which has exceeded our expectations. Indeed, the Vietnam Index has been one of the star performers in the year to date with an increase of approximately 16% which has driven reasonable performance from our property stocks.

We have also been progressing several project investments and are currently very close to investing in a very well located, river front, villa development in HCMC with a respected developer. The price of land has finally started to look good value in this city as owners and developers are squeezed from all sides with debts, interest payments, lack of liquidity and very few investors in the market to bail them out. In addition we are close to agreeing terms on an investment in a development company and have started to look at new opportunities in the budget hotel sector. This is an area that has been of interest to us for some time although to date the cost of land has created huge barriers to entry. Our SDI project has also received some good news for the first time in several months with the shareholders finally agreeing on a strategy to move the project forward that will lead to the injection of new funds that will allow the project to move forwards. In general we consider it to have been a very positive start to the year and, while we take our Tet holiday next month, we can prepare to make 2013, the year of the snake, a success.

For further information including the full January 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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