VinaCapital Expects Strong Recovery In Property Sector

Source : The Business Times, May 21, 2009

VinaCapital, Vietnam's largest asset manager, expects a strong recovery in the country's property sector and said that it has been buying stocks of firms such as Vinamilk that produce goods for domestic consumers. 'The area that we like a lot at the moment is real estate,' chief executive Don Lam told Reuters in an interview in Singapore.

Pathway to growth: Demand for homes has picked up as lower prices attracted local buyers

Demand for homes had picked up since the Vietnamese New Year at the end of January as lower prices attracted local buyers, he said. 'Prices have gone off from their peak by 30 to 35 per cent. On top of that, you have financing costs down by half and there's a 30 to 40 per cent drop in construction costs.'

While Vietnamese exports have been hit by the global recession, the domestic economy remained relatively strong with GDP expected to expand by 4 to 5 per cent this year and retail sales by over 20 per cent, Mr Lam said.

VinaCapital, which manages around US$1.7 billion in assets, recently purchased shares of materials firm Hoa Phat and diary giant Vinamilk, Mr Lam added.

Mr Lam described Vina-milk, which also produces coffee products, as the 'Nestle of Vietnam', and said Hoa Phat had the strongest brand name among Vietnamese construction materials firms.

The firm is also eyeing listed power firms as many are trading below replacement cost. Listed power firms include Khanh Hoa Power and Pha Lai Thermal Power.

VinaCapital has three closed-end funds listed on the London Stock Exchange's AIM market - VinaCapital Vietnam Opportunity Fund, VinaLand Fund and Vietnam Infrastructure Ltd.

Its funds invest in a wide range of listed and unlisted assets, and their property holdings include the landmark Sofitel and Hilton Opera hotels in Hanoi.

Mr Lam said Vietnam's financial profile was stronger than most people thought as its large trade deficit, estimated at US$19.2 billion this year, was offset by strong foreign direct investments.

The country also enjoyed inflows from remittances by overseas Vietnamese which were mostly made through unofficial channels and hence were not captured by official data, added Mr Lam, who was born in Vietnam but brought up in Canada. Mr Lam said foreign investors have largely given Vietnam's stock market a miss - despite a more than 70 per cent rise since February - but would probably return once global risk appetite recovers, giving the local bourse a further lift. -- Reuters