RNS Number : 2080I
Vietnam Property Fund
17 November 2008
Vietnam Property Fund Limited
'VPF' or 'the Company'
NAV and October 2008 Monthly Update
The share price fell during October to close at a mid-market price of US$0.63. The net asset value (NAV) closed at US$0.953 per share. These moves are modest compared with the 23.6% retraction in the equity market, where VPF's two listed holdings reside. Following last month's first investment of size, our cash position is 77.18% of NAV, or US$66.37 million. There has been no trading activity since 24 October. The opportunity to buy at a generous discount remains. A bid of any size should move the offer side back to NAV.
After this year's liquidity squeeze, October's negative CPI figures gave State Bank of Vietnam the opportunity to defrost credit markets; which they did with gusto. Deposit rates tumbled 300bps, motivating a plunge in interbank O/N rates by 400bps, to sub-10% levels. This is the first case of sustained liquidity since Q1. Yet, credit growth remains underwhelming. Banks are herding into government and sub-sovereign bonds; the rally has pushed yields down 400bps to c.11% across all tenors with momentum for single digits. However, the bond market bull-run is running out of steam, after which we expect credit to resurge with a vengeance. Whilst great news for the industrialists, property developers remain pariahs to the banking credit officer, and government rhetoric. Even when purging the hyperbole, the property market's apparent 'correction' has not enhanced supply. Figures for high-end apartments show only a 20-30% contraction, with continued softness from slowing FDI, leading to lower expat demand. Taking a six month view we expect banks to gingerly ease financing back to developers, which plays well with the fund's co-financing strategy (and a preference for hungry over starving projects). Some distressed type levels are surfacing, but as our focus remains the fundamental Vietnam growth story, we favour reasonable prices on reasonable projects over base flamboyance.
Vietnam's property market, suffering from the global malaise, is coming to terms with the new de-leveraged world. Whilst prices across most property classes are starting to show some stability after recent declines, recalcitrant local developers having put unfounded faith in the depth of foreign investors' pockets, and are only now reacting to the cold splash of reality that securing financing is no easy task. By leveraging our strong cash position so aggressively, the prevailing market situation is impacting directly on VPF's deal pipeline, now rich with proposals for projects that have stalled through an inability to secure commercially viable financing. The Investment Committee is currently reviewing ten investments, having rejected six, and is closely watching two property companies, showing good value. VPF is equally focusing on origination activities in the urbanising frontier provinces, which have maintained credible economic growth, even during the down-cycle.
For further information including the full October 2008 Monthly Report please visit - www.vietnampropertyfund.com or contact:
Rachel Hill, Dragon Capital Markets (Europe) Limited | Tel: +44 79 71 214 852
Stuart Lane / Christopher Wren, Seymour Pierce Limited | Tel: +44 20 7107 8000
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