Vietnam: High grade apartment prices going down on profuse supply

Last update 08/11/2010 04:29:23 PM (GMT+7)

High grade apartment prices going down on profuse supply

VietNamNet Bridge – The more profuse supply and the lack of investment capital both have forced real estate developers to ease sale prices to attract more buyers.

Real estate developers have to slash sale prices

FLC Company has announced the plan to put apartments at FLC Landmark Tower project on Le Duc Tho Road in Tu Liem District on sale for the second phase. The apartments are being offered at 28 million dong per square metre. The registrations to buy the apartments should be made from November 1, 2010 to November 15, 2010.

According to FLC, the price of 28 million dong per square metre has been kept unchanged if compared with the price set for the second phase of sale, even though the prices of construction materials, and the prices of gold and dollar have increased sharply. Meanwhile, buyers would get the credit support from the Bank for Investment and Development of Vietnam (BIDV) and Techcombank. The two banks promise to give the loans worth up to 85 percent of the values of the apartments.

The fact that the prices remain unchanged – though in fact, if set against the dollar and gold prices, they have even decreased – shows the difficulties currently faced by real estate developers.

Not only the developer of FLC Landmark Tower decides to keep the sale prices unchanged. Other developers have also been trying to attract customers by launching promotion campaigns and offering other discounts to buyers.

Capitaland Ha Thanh, for example, the developer of Mulberry Lane project in Mo Lao town in Ha Dong District, has decided to offer the price discount of 10 percent to  thouse who buy two apartments at the same time.

Besides, buyers will be able to borrow money from VIBank to purchase the apartments. The values of the loans could reach 65 percent of the values in the contracts, if borrowers mortgage the apartments. The values of loans could even reach 90 percent of the values of contracts, if borrowers mortgage other kinds of assets for the loans.

Most recently, Lam Vien Company also announced that the actual sale prices of the high grade apartments at Richland Southern will be five percent lower than the initially announced prices. Moreover, buyers will also have the right to delay the process of making payment and be exempted from the management fee for the first two years.

Last week, a transaction selling a 170 square metre apartment at TSQ project in Ha Dong District was successfully carried out. The apartment was sold for $1150 per square metre, what real estate brokers in Hanoi consider as the lowest price among all the projects in the last six months (the project is expected to be completed in June 2011).

The gap between the original prices (the prices at which real estate developers sell apartments to buyers in the primary market) and the prices in the secondary market (the prices at which the buyers sell to other buyers in the secondary market) has narrowed by more than 50 percent. For example, the original price of a 104-square metre apartment at Usilk project is $850 per square metre. Previously, the gap between the prices was just 350-500 million dong, while now the gap has reduced to 150-160 million dong ($80 per square metre)

In the golden age of the high grade apartments ( in 2007 and first half of 2008), real estate developers announced new sale prices once every three months, and the new prices were always higher than the previous ones. By doing so, analysts say, they made people think that the prices would increase further in the future, thus prompting them to rush to buy apartments.

However, they have to change their strategy now, when the market has cooled down due to the global economic recession.

According to CBRE, a real estate service provider, in the second half of 2010, 10,000 new apartments in Hanoi were put on sale, raising the total number of new apartments on the primary market to 20,000. CBRE believes that the profuse supply will keep the apartment sale prices stable from now to early 2011.

P.V

http://english.vietnamnet.vn/en/business/1223/high-grade-apartment-prices-going-down-on-profuse-supply.html

Exchange rate paradox occurring only in Vietnam

Last update 05/11/2010 05:17:23 PM (GMT+7)

Exchange rate paradox occurring only in Vietnam

VietNamNet Bridge – The greenback is losing its value against most other currencies in the world, but it is appreciating against the Vietnam dong. The exchange rate paradox is harming the national economy, forcing the government to apply urgent measures to stabilize the market.
Vietnam to use reserves, won't devalue 
The urgent government’s meeting on November 3 evening ended at 9 pm. Several measures were put forward to deal with the uncertainties on the forex market and prevent high inflation.

An unscheduled press conference was convened on the morning of November 4. Le Duc Thuy, Chair of the National Finance Supervision Council was assigned by the Government to inform the press about new policies on forex management. Representatives from the State Bank of Vietnam did not appear at the conference, where a series of new decisions relating to the monetary policies and forex management were announced.

The paradox only exists in Vietnam
The dollar price on the black market has been increasing continuously over the last two weeks, far exceeding the official exchange rate. On November 3, the dollar price once soared to 21,000 dong per dollar, much higher than the ceiling price of 19,500 dong per dollar.

Meanwhile, according to Thuy, the greenback has been losing its value against nearly all other currencies in the international market. In Russia, for example, ruble, not dollar, is required in making payment because people fear that the dollar will depreciate further.

Foreign experts said that with the loosened policy currently applied by the US Federal Reserves (FED), the dollar value would decrease by 20 percent in the time to come.

As such, a paradox exists: the gold price is increasing and the dollar price is decreasing in the world, while the gold price is increasing and the dollar price is also increasing in Vietnam

Overly high dollar credit growth rate is the “culprit”

Thuy said at the press conference that all macroeconomic indexes are very “beautiful”. The GDP growth rate may reach 6.7-6.8 percent, higher than the targeted level at 6.5 percent. The trade deficit would not be as high as previously thought, about 12.5 billion at maximum. 

Therefore, the high price of the dollar is a problem which needs to be solved.

According to Thuy, earlier this year, a lot of businesses rushed to borrow money in dollars. However, the problem was that they did not use the dollar, but they sold dollars on the market, thus causing an artificially high supply on the market. As a result, at that time the dollar price decreased and sometimes was even lower than the official exchange rate.

However, after that, businesses have to buy dollars to pay back debts, leading to increasing demand and the temporarily exhausted supply.

It is clear that to some extend, there exists the imbalance in dollar supply and demand. Besides, the prediction that the inflation rate in 2010 would exceed 8 percent has also made the Vietnam dong weaker.

Dong devaluation will not occur

In current circumstances, the move that people expect from the central bank is the further devaluation of the dong. However, the government has decided that Vietnam will not devalue the dong.

The Asia Development Bank has recently advised Vietnam not to adjust the exchange rate. Government officials have all agreed that adjusting the exchange rate at this moment is not a wise move and could even have very bad consequences.

The Vietnam dong has not become so weak that it is necessary to adjust the dong/dollar exchange rate. The dong devaluation also will not be a powerful tool to help boost exports. Especially, Vietnam is expecting to see exports increase significantly this year.

If Vietnam adjusts the exchange rate at this moment then it will send the inflation rate soaring. If so, the National Finance Supervision Council has estimated that the increase in the price of goods would be double-digits or more. Meanwhile, the top priority task for now is to obtain macroeconomic stability, especially, to control inflation. If the government fails to do that, people will lose their confidence.

However, the State Bank of Vietnam will take necessary measures to cool down the forex market. It will “pump” foreign currencies into circulation to ease the situation.

The announcement has raised the concern that this could make Vietnam’s foreign currency reserves become “thinner”. However, Thuy has reassured the public that the foreign currency reserves are sufficient enough. In the long term, Vietnam needs to increase its foreign currency reserves and will so when there are more favorable conditions.

Le Khac

http://english.vietnamnet.vn/en/business/1169/exchange-rate-paradox-occurring-only-in-vietnam.html

Vietnam: In critical situations, information must be transparent

Last update 08/11/2010 03:35:07 PM (GMT+7)

In critical situations, information must be transparent

VietNamNet Bridge – When the national economy shows signs of uncertainties, experts say, the information released by management agencies must be transparent, while the policies must be consistent in order to stabilize the market and calm the public down. However, these things are still not evident in Vietnam.

Exchange rate paradox occurring only in Vietnam 

At a recent press conference where urgent measures to regulate the national economy were informed, Le Duc Thuy, Chair of the National Finance Supervision Council, stressed that one of the most important measures to stabilize the market is to provide accurate and transparent information in order to create public confidence.
Nevertheless, the two most important agencies in charge of regulating and supervising monetary policies prove to be contradictory with each other. 
Whom to believe?
Le Duc Thuy, Chair of the National Finance Supervision Council told the press that in the first 15 days of October, the Vietnam dong deposits at banks were reduced by 45 trillion dong ($2 billion) in comparison with late September. 
Also according to Thuy, the deposits in foreign currencies have been increasing. By late September 2010, the foreign currency deposit balance had been 40 trillion dong lower than the foreign currency outstanding loans. Meanwhile, the gap between the deposit balance and outstanding loans in foreign currencies had reduced to 20 trillion dong by early October, which meant that the foreign currency deposits had increased by 20 trillion dong. The figure has been explained by the fact that people have withdrawn Vietnam dong to purchase foreign currencies or gold.
However, after that, the State Bank of Vietnam affirmed that some newspapers reported wrong information about the Vietnam dong deposit balance, saying that in fact, the Vietnam dong deposit balance at the banking system has been increasing.

According to the State Bank of Vietnam, by October 15, the Vietnam dong deposits had increased by 0.64 percent (nearly 5400 billion dong) in comparison with September 30, 2010. Therefore, the central bank has accused some newspapers of reporting wrong information.
Regarding the interest rates, Thuy has said that the Government does not strive to slash interest rates at any cost and that it allows commercial banks to set up the deposit and lending interest rates in accordance with the market supply and demand.

However, in a meeting with representatives of the Vietnam Banking Association (VNBA) and representatives from commercial banks on November 5, chaired by the State Bank, when there was a proposal to raise the ceiling deposit interest rate from 11 percent per annum to 12 percent, the State Bank requested VNBA to come forward and to coordinate the implementation.
This has caused conflicting information about the intervention by the State Bank of Vietnam in the implementation of the new interest rates.
After that, an official from the State Bank said that easing interest rates is the decision of VNBA’s members, and that the management agency does not intervene with their decision.
However, people still have doubts about the intervention of the management agencies in banks’ operation. Two weeks ago, commercial banks were put under  pressure to push their interest rates down, though the inflation rate in the first nine months of the year was relatively high.
Macroeconomic stability – the top priority task
Thuy has admitted that the consumer price index (CPI) has been increasing and causing concerns. Macroeconomic stability should be seen as the top priority task, and curbing inflation is the most important goal.
In fact, right at the beginning of October, economists issued warnings about the possible high inflation rates. Vo Tri Thanh, Deputy Head of the Central Institute for Economic Management stressed that it was necessary to continue to tighten monetary policies in order to curb inflation. “Everything is very clear: the macroeconomic stability must be the top priority,” he said

At this moment, the most important thing is that management agencies need to do is to provide transparent information and keep consistent policies so as to avoid eroding the public confidence.
Le Khac

http://english.vietnamnet.vn/en/business/1209/in-critical-situations--information-must-be-transparent.html

How much gold kept among Vietnamese people?

Last update 10/11/2010 09:00:00 AM (GMT+7) 

How much gold kept among Vietnamese people?

VietNamNet Bridge – Newly released information that Vietnam has imported 1000 tons of gold in the last 20 years has stirred up the public. Experts now try to guest how many tons of gold are being kept among Vietnamese people and what Vietnam should do to use the huge capital in the most effective way.

The information about the 1000 tons of gold imported in the last 20 years was released by Le Duc Thuy, former Governor of the State Bank of Vietnam, now Chair of the National Finance Supervision Council. The head of the council did not confirm the existence of 1000 tons of gold among the public, but he said: “I am sure that a large volume of gold is being kept in people’s homes”.

Thuy commented that Vietnam should not make a hasty move to prohibit the transactions in gold. The prohibition can only put gold out of the official circulation, while the gold will still exist in the society. Meanwhile, gold should be seen as an important source of capital, and if gold cannot be put into official circulation, it will be “sitting idle”, not making profit, or will be traded on the black market. i.e out of the control of the management agencies. Thuy believes that it would be better to attract the huge capital (gold) into banks instead of prohibiting transactions in the gold.

While the national economy needs more and more capital from different sources for its development and investment, gold trading floors have been shut down and the gold prices have been continuously climbing to new highs. One week ago the State Bank issued a legal document to scale down the activities of mobilizing capital in gold and lending gold.

However, a senior official of the State Bank of Vietnam has denied the fact that 1000 tons of gold is now lying under people’s pillows. “To date, no one can say for sure how much gold is being kept among people,” he said. 

The figure cited by the former Governor of the State Bank is sourced from the World Gold Council and the figure does not include the illegal imports and the import volume through other unofficial channels that the organization still cannot reckon up.

Meanwhile, the general director of a famous gold trading company guesses that people are only keeping 200 tons of gold because when the world’s gold prices were higher than the domestic prices, a substantial volume of gold was illegally exported,. However, he stressed that 200 tons of gold would also be a large volume of capital, worth $10 billion and the capital should be put into business rather than sitting idle.
Meanwhile, VnExpress newspaper quoted a director of a big bank in Hanoi as saying that the management agency needs to consider the specific characteristics of the market in Vietnam. In other countries, gold is considered as a type of good and not a tool of payment. Therefore, the volume of gold kept among people is not very big. Meanwhile, in Vietnam, gold is not only used as a kind of good (jewelry products), but also as a kind of asset (people store gold instead of cash)

If the management agency tries to weed out gold from the official channel, even though people still want to keep gold as their assets, this is really a kind of the management agency’s “voluntarism” which wastes a large amount of capital.

“It will be not the right time to weed out gold from the official channel until gold is no longer favored by people,” he said.

Meanwhile, the central bank, while trying to protect its view that it is necessary to prohibit transactions in gold, said that the massive mobilization and lending in gold have been making the dollarization in the national economy more serious and encouraging speculation.

Governor of the State Bank of Vietnam once declared that in case the market has gold in excess, the central bank may spend money to purchase gold to increase gold reserves.

P.V

Vietnam: Gold and dollar prices escalating, no one benefits

Last update 09/11/2010 04:59:02 PM (GMT+7)

Gold and dollar prices escalating, no one benefits

VietNamNet Bridge – The gold and dollar prices have been increasing continuously, threatening businesses. Especially, the weaker dong does not benefit exporters, even making their business worse.

At 9:45 am of November 9, the gold price jumped to 38.2 million dong per tael, increasing by 2.5 million dong per tael compared with the opening prices (one tael is equal to 1.2 oz). Meanwhile the dollar price soared to 21,250 dong per dollar, the highest level so far.

The dollar prices quoted by commercial banks have been stable, at 19,495-19,500 dong per dollar at Vietcombank, and 19,470-19,500 dong per dollar at Eximbank.

The Japanese yen has also appreciated against the dong. At 8:20 am, the yen price was quoted at 246.63 – 253.99 dong per yen, an increase of three dong per yen in comparison with the week’s opening price. The euro is now trading at 28,101.00 dong per euro.

In principle, the dollar appreciation will benefit exporters, because the weak local currency will make domestic products cheaper, thus more competitive in the world market. But in fact, export companies are now like cats on hot bricks. 

Tran Quoc Manh, Chair and General Director of Sadaco, said the dollar price increases have pushed the prices of input materials, transport fees and labour costs high up.

Manh admitted that the company has earned more money thanks to the dollar appreciation, but the profit is not big enough to cover the higher production costs. Especially, Sadaco, like many other producers in Vietnam, have to import input materials to make final? products in Vietnam. Therefore, they now have to pay more money for the import materials due to the more expensive dollar. Manh stressed that when policy makers think of the monetary solutions to encourage exports, they should consider of the fact that Vietnamese producers have to pay for imported input materials in dollars.

Besides, export companies complain that though they sell foreign currencies to banks, when they need money to make payment for material imports, they cannot buy foreign currencies from banks at the prices at which they had sold themto banks before.

Nguyen Thi Cuc, Deputy General Director of Phu Nhuan Jewellery Company (PNJ) said in September, her company earned $300 million from gold exports and sold the sum to banks. However, her company now cannot buy dollars from banks at the quoted prices.

“The banks, though admitting that PNJ is a loyal client who should get priority in dollar purchases, still refuse to sell dollars to us, saying that they cannot sellat such low prices,” Cuc complained.

In fact, banks still have dollars to sell, but at the prices set by banks, not the prices quoted by clients. 

Le Dang Minh, Managing Director of Gimeno, a fashion company, said that he has just bought dollars from a bank. Though the quoted price was 19,500 dong per dollar, in fact, Minh had to pay 20,100 dong per dollar. Minh said that he still does not know how to “legalise” the gap of 600 dong per dollar. As the input materials cost 70 percent of the values of his products, the dollar price increases have made the company suffer losses.

However, Minh believes that those who suffer the most now are labourers, whose salaries do not increase in proportion with increases in the goods prices.

Minh does not think that export companies deliberately refuse to sell dollars to banks, thus causing the dollar shortage. He said that only the companies which have profuse capital can keep dollars on their accounts. Meanwhile, small companies like his have to sell dollars to banks right after they earn the money, because they need money to continue production.

Thanh Van

http://english.vietnamnet.vn/en/business/1282/gold-and-dollar-prices-escalating--no-one-benefits.html

Vietnam: High bank interest rates, high production costs for businesses

Last update 12/11/2010 05:29:56 PM (GMT+7)

High bank interest rates, high production costs for businesses

VietNamNet Bridge – Higher dollar, higher loan interest rates, higher prices of input materials and weak purchasing power all have made businesses worried.
In an effort to curb the inflation, the Government is making efforts to reduce money supply to ease the pressure on prices. However, analysts have warned that this will hurt production companies which are normally dependent on credit.

Businessmen have also said that any measure adopted by the central bank to cope with high inflation will result in an increase in both deposit and lending interest rates.

The lending interest rate hike will put manufacturers and traders in a difficult position, in terms of their expenses including the import of raw materials 

Doanh Anh Tuan, Deputy General Director of ITC, an investment and trade company, said that the demand for borrowing capital from ITC in particular and Vietnamese businesses in general is now very high, because they are now making products for Tet sale season. Meanwhile, the lending interest rates are on the rise, thus putting hard pressure on production.

According to Tuan, ITC has to import input materials in big quantities to serve the local production, therefore, it has a high demand for dollars. Tuan said that since the beginning of the year, ITC has lost $2.5 million after two dong/dollar exchange rate adjustments.

ITC now has 300 billion dong of working capital, 30 percent of which comes from bank loans. Therefore, the interest the company has to pay for the loans will be a big burden.

Representative from a fibre export company in Da Nang said that anticipating the possible cotton price increases in the world market, his company plans to import a big volume of cotton for the upcoming production season. However, the company still cannot borrow dollars from banks, while the cotton price is escalating every day.
Secoin, which specializes in making and trading construction materials, has decided to delay some investment projects, because it does not want to risk borrowing too much when the lending interest rates are overly high.

Garment companies said that though there are many orders from foreign partners and the export prices have increased by 15-20 percent, they are still facing a lot of difficulties due to the higher production costs. Ho Le Hung, Deputy General Director of Hanosimex, said that even when export companies can enjoy higher export prices, they cannot pocket much money, because they have to pay for import materials.

In 2010, Hanosimex plans to export over $30 million worth of products. However, in order to obtain the export turnover, the company will have to import nearly $30 million worth of input materials.

Hung complained that it is now a very difficult period for businesses, and that Hanosimex despite getting privileged treatment at banks as their loyal customer has to think carefully before deciding to borrow money, , because the current interets rates are toohigh.

Source: Dau tu

http://english.vietnamnet.vn/en/business/1416/high-bank-interest-rates--high-production-costs-for-businesses.html

Vietnam: When a securities company leaves the market

Last update 29/10/2010 06:00:48 PM 

When a securities company leaves the market

VietNamNet Bridge – The news that Vincom Securities Company (VincomSC) has announced the plan to withdraw from the market has immediately caused a stir-up in the market. Analysts believe that many other securities companies would follow the move, especially when the stock market is getting cool.

VincomSC on October 26 announced the close down of its trading floor in the north to focus on the headquarter in the south. The move is part of the economic group’s plan to give up securities trading.

The leave of someone would be the opportunity for others

The withdrawal of VincomSC, a company with 18,000 securities accounts, is believed to create opportunities to other operational securities companies.

Just one day after VincomSC released the announcement, on October 27, a lot of securities investors came to VincomSC’s trading floor in Hanoi to listen to the news and make necessary procedures to close accounts there. An officer of the trading floor said many investors came to place orders to sell securities, withdraw money from their accounts, or open accounts at other securities companies.

An investor told VietNamNet that the first thing he had to do after hearing about the close down is to withdraw all the money from his account. He said that he would open an account at a company headquartered in the north, rather than a one in HCM City.

Long, another securities investor, also said that he and some of his friends have also closed the accounts at VincomSC. They are planning to open accounts at big securities companies belonging to commercial banks, because they believe once the companies are backed by banks, they would get support from the parent banks.

Long even believes that the market would witness another withdrawal , and that it would be better to open accounts at big companies than small ones.

VincomSC has said that the current clients of VincomSC in the north will have three choices, either to maintain their accounts at the company which would then be transferred to the trading floor in HCM City, or to close the accounts at VincomSC, or transfer the accounts to VPBank’s Securities Company.

It seems that most investors choose the latter option.

Having realized that a big number of investors are looking for suitable service providers, securities companies have been rushing to approach the investors and persuade them to become their clients\. Some of the companies have sent staff to VincomSC’s trading floor to meet and persuade new clients.

A broker from a securities company has revealed that at this moment, when the market is gloomy, it is the right time for securities companies to develop the scope of?? services. Therefore, it would be a very important task to seek more clients now. His company not only tries to access individual investors, but also VIP clients, and institutional investors.

When the stock market becomes gloomy

In fact, many securities companies have narrowed their business scope after a lot of ups and downs in the market. The first thing they did was to shut down branches in small areas with few investors. Some even had to stop providing the services which require high chartered capital. Some others have been trying to transfer capital to foreign partners.

Three years ago, when the stock market was scorching hot, securities companies were mushrooming. There are about 100 operational securities companies now. However, in fact, securities investors only know 20 biggest companies, while the other companies are all small and less known. The top 10 companies alone are holding 50 percent of the market share, while the other 90 companies have share the other 50 percent.

Previously, when the market was hot, small companies still did well by trading securities themselves. However, as the market has become gloomy, the companies cannot live solely on services.

It is clear that the small stock market in Vietnam is not a big cake which can be divided into enough pieces to all securities companies. Therefore, analysts have said that it would be not a surprise if other companies follow VincomSC’s move and decide to leave the market.

Le Khac Hiep, Chair of Vincom, the parent company of VincomSC, admitted that the company has not been doing well, failing to meet the business targets.

Le Khac

http://english.vietnamnet.vn/en/business/904/when-a-securities-company-leaves-the-market.html