Vietnam : Monthly Investor Report

VietNam Holding Limited ("VNH" or the "Company")

Monthly Investor Report

A report detailing the activities of the Company for the month of November 2014 has been issued by VietNam Holding Asset Management Limited, the investment manager of the Company. Electronic copies of the report have been made available to shareholders on the Company's website athttp://www.vietnamholding.com/latest-publications.aspxand a summary of the report is included below.

Investor Report Summary

Vietnam News

The Purchasing Managers' Index was up from 51.0 in October to 52.1 in November, on the back of stronger output and new orders, as well as falling global commodity prices, low domestic inflation, and low labour costs.  Consumer prices actually deflated in November, by -0.27%, largely as a result of two recent reduction in petrol pump prices.  This takes the CPI to 2.1% YTD and 2.6% YoY.  The ANZ-Roy Morgan Vietnam Consumer Confidence Index rose by 6.2 points in November, to 140.9, suggesting that domestic consumers are feeling more up-beat about themselves and the economy that surrounds them. 

This is also reflected in the reported up-tick in credit growth 10.2% by late November.  Meanwhile bad debts are down to 3.9% of total loan portfolios, it is claimed, thanks in part to the work of the Vietnam Asset Management Company.  The VAMC has plans to begin setting its own (market-based) valuations on the distressed debt it buys from commercial banks in 2015, rather than relying on the (inflated book value-based) valuations that sellers have tended to provide.  So far, the VAMC has bought US$4.5bn in bad debt, of which just 4% has been on-sold, so over 95% of these bad loans remains on its books.

The National Assembly signed off Vietnam's socio-economic plan for 2015.  The plan includes: a target GDP growth rate of 6.2% in 2015, a 10% rise in export earnings, inflation at 5% or below, and the creation of 1.6m new jobs.

VNH Insights

The VNAS index ended November at 570.24; a drop of 2.96% over the last month.  Nonetheless, the VNAS remains up 12.14% YTD.  Foreign net selling in the latter part of the month was part of the reason for this decline, along with a new rule from the central bank that will limit the amount of margin lending that commercial banks can provide to clients, to 5% (down from 20%) of their registered capital.  And those banks with NPLs in excess of 3% of their overall loan portfolio may conduct no margin lending whatsoever.

While this margin lending tightening was widely expected by the market, the State Securities Commission's announcement that the raising of the foreign equity cap from 49% to (probably) 60% will not now transpire until October 2015 - the deadline for the SSC to submit a revised Decree 58 to the prime minister for approval - at the earliest, came as something of an unwelcome surprise.

On the other hand the National Assembly revised Vietnam's housing law, which now allows eligible foreign individuals and companies to buy and lease property for the first time.  Some conditions remain but this still marks a major sea-change in government policy.

Vietnam's real estate market has begun to warm up, with numerous developers dusting off old residential and township plans, while others scout for new locations. Improved infrastructure has helped pave the way for new real estate projects, along with some more realistic pricing, declining interest rates, and various government support programmes.  Tellingly, the US$1.4bn package to help underwrite affordable housing has driven more supply in the low- to mid-end market and catalysed purchasing momentum in this segment, while the new housing law's sanctioning of foreign property purchases should help revive market momentum in higher quality and high-end property projects.  Turning to VNH's own portfolio, during the end-September 2013 to end-November 2014 period, the value of  our real estate stocks - comprising BCI, IJC, NBB and HDG - surged by 72.6%, compared with 27.4% for the VNAS' real estate segment.

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