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Friday, May 30, 2008

Property scene in Vietnam still good

PETALING JAYA: The Vietnamese economy is going through a tough period with high inflation, a poorly performing stock market and a depreciating currency but Malaysian investors there are not unduly worried at the moment.

“A cooling off in the economy, which has recorded an average gross domestic product growth of 8% in the past three years, is a good breather for the country.

“The current snags will not tailspin into anything worrisome and Vietnam is on track for sustainable growth,” Berjaya Land Bhd chief executive officer Datuk Francis Ng told StarBiz yesterday.

He said Vietnam was attracting a huge inflow of foreign direct investments (FDIs), which totalled US$25bil last year. Most of the FDIs were in infrastructure development, manufacturing and property development sectors.

Such comments are comforting to investors who have over the past few months become anxious over the state of Vietnam's economy.

Fitch Ratings has cut the country’s credit rating, and its currency is taking a beating. Its stock market has been closed for the past few days due to a computer glitch.

But the main cause for concern is rising inflation, which in May topped 25%, and the measures taken to cool it.

TA Securities property sector analyst Kamarul Zaman Hassan told StarBiz that Malaysian property players had not been too concerned about the currency and inflation crisis now facing that country.

”The market is still there for property in Vietnam,” he said, adding that many investors saw the current turmoil as a short-term correction.

“Vietnam has seen a lot of inflows of funds in the past three years, so a correction was expected,” Kamarul said. “But in the long term, the players expect growth to continue as it has in the past three years.”

Ken Peng, a Citigroup analyst who covers Vietnam, said in a report dated Tuesday that the weakening of the dong was a result of severe foreign currency shortage.

“The central bank (SBV) is curbing foreign currency supply to preserve foreign reserves for refined petroleum imports and other contingencies,” he said.

The potential for further currency depreciation was worsening Vietnam’s balance of payments position, Peng said.

A host of Malaysian companies have made a steady beeline for Vietnam, one of South-East Asia's fastest growing economies. From rubber glove makers to can manufacturers, Malaysian companies have been increasing their exposure to Vietnam.

But the group that has made the biggest splash has been the construction and property players, which view Vietnam as a huge earnings kicker to their Malaysian-centric operations.

Berjaya Land has six projects in Vietnam – two in Hanoi and four in Ho Chi Minh City. The projects, with an estimated gross development value (GDV) of RM40bil, will span from 2009 to 2020.

Its maiden residential project, The Thach Banh New City project in Hanoi, with GDV of US$500mil, will be launched in the middle of next month.

“The take-up of recently launched residential projects in Ho Chi Minh City is still very strong. We are in Vietnam for the long term and are confident of the long-term growth of the economy,” Ng said.

A WCT Land Bhd spokesman said the Vietnamese government was very pro-active in assisting overseas companies develop designated areas in the country's cities.

“Fundamentally, the property market should still hold out quite well, given the huge population of 85 million, of whom more than half are less than 30 years old,” he said.

WCT Land, which has been granted an investment certificate to undertake a mixed commercial development in Ho Chi Minh City, will be launching next year the Platinum Plaza, which has a projected GDV of RM1bil. The project comprises a shopping mall, a hotel, two office towers and serviced apartments.

WCT Land is also in the process of getting its next investment certificate for the RM2bil Gateway Point on 8.4ha near the commercial business centre of Binh Thanh District in Ho Chi Minh City.

SP Setia Bhd is also on track to launch its maiden residential project, EcoLakes in My Phuoc in Binh Duong province, at the end of next month.

Last June, SP Setia teamed up with government-linked conglomerate Becamex IDC Corp to develop the RM2.5bil township.

Gamuda Land Sdn Bhd, too, will launch its Yen So Park integrated development on 500 acres south of Hanoi this year. The RM8bil project will comprise high-rise office towers, four- and five-star international hotels, a convention centre, shop offices and residential components.

By The Star - StarBiz - (by Angie Ng and Loong Tse Min)