FEBRUARY 2011:ISSUE 08 • The real estate news and information source • www.coldwellbankervn.
com
Signal of
Global Economic Improvement
Ben Shalom Bernanke
U.S Federal Reserve Chairman
As reports were expected to forecast German
exports increases and falling initial jobless
claims in the U.S., the Japanese Yen weakened
along with the U.S. dollar’s decline against the
Euro. Australia’s dollar was also strong against
the U.S. dollar at only 0.9% lower than this
year’s high on reports of the country’s steady job
growth since 2007. Economists are pointing that
these new developments are signaling the
improvement of the global economy.
“Economies around the world appear to be
recovering nicely,” said Yuji Saito, director of
the foreign-exchange department at Credit
Agricole Corporate and Investment Bank in
Tokyo. “Sentiment is likely to be ‘risk on’ and
the bias is for the dollar and the yen to be sold.”
Meanwhile, South Korea’s won was traded near
its highest level against the dollar in over two
years as traders expected the Bank of Korea to
raise interest rates this week on China’s recent
rate hike. South Korean Finance minister Yoon
Jeung Hyun said that his government needs to
act “preemptively” to curb inflation pressures
because price gains can weaken the foundation
Real Estate Investment in 2011:
Challenges and Opportunities
Thang Long Boulevard
The longest Boulevard in Vietnam
According to experts, this year’s real estate
market in Vietnam will face many challenges.
However, there will still be opportunities for
investors as risks can lead to rewards. Real
estate is one sector where investment risk
correlates with hefty profits.
MORE CHALLENGES
One expert warned that in 2011, unstable
macroeconomic factors could threaten the
economy as a whole, and subsequently have an
impact on the real estate market. This year may
not be a pleasant year for investors, with market
fluctuations adding further sensitivity.
One of the greatest hindrances now facing the
real estate market is capital shortages due to
climbing credit interest rates up to 16%,
resulting in limited property investment capital.
Therefore steps for money mobilization seem
unfeasible. The government is considering the
proposal for real estate mortgages at foreign
banks which risks failure to get approval in
2011. FDI has also presented inefficiencies,
making it even more difficult to raise funds.
In 2010, CPI rose 11.75%, a relatively high rate
compared to other countries in the region. The
price increases can cause instability to the
economy, resulting in more complex variations
in property prices. In addition, exchange rate
fluctuations and tight credit supplies are
important factors affecting business activities in
real estate. Without the right decision, investors
are susceptible to facing debt repayment
problems upon the maturity of loans.
Mergers and acquisitions (M&A) will continue
to be mainstream occurrences in 2011.
Transaction volume and quality of real estate
transfers and M&A are forecasted to increase.
The recent improvement in Vietnam’s real estate
market is attributed to the growing volume of
Stricter Guidelines For
FOREIGN INVESTED REAL ESTATE PROJECTS
Real estate sector has the highest registered FDI in 2010
The Director of the Foreign Investment
Agency under the Ministry of Planning and
Investment Do Nhat Hoang was recently
interviewed about the disbursement of
foreign direct investments.
How was last year’s FDI disbursement?
By December 21 last year, FDI enterprises had
disbursed US$11 billion in investment projects,
a 10% increase compared with 2009. Such
figures reveal FDI projects had achieved the set
disbursement goals.
Regarding FDI attraction, last year saw 969 new
projects being granted investment licenses
worth a total registered capital of $17.23 billion.
Total registered capital, including additional
investment, amounted to $18.59 billion the same
year, equal to 82.2% compared with 2009. These
figures also showed that more prudent decisions
S&P 500 Beats
Estimates Amidst the Global Recovery
U.S. stock market rallied the most since 1936
More U.S. companies are beating sales forecasts
than in any time during the last four years while
helping to extend the most significant stock-
market rally since 1936. Companies such as
Caterpillar Inc. and United Parcel Services Inc.,
which serve as economic barometers for their
building and delivery businesses, are among the
71% of the S&P 500 Index companies exceeding
analysts’ revenue estimates for the last quarter.
Sales also outperformed projections by an aver-
age of 2.2%, the most in two years.
Although U.S. earnings have surpassed the Wall
Street estimates for seven consecutive quarters
now, sales had remained sluggish and trailed
forecasts on average wince 2008. Bank of
America Corp. and Penn Capital Management
say that the unexpected revenue growth is a posi-
tive sign for the economy and companies will no
longer have to lay off workers or close plants.
During the recession, employers cut up to 8.75
million jobs.
“You really did need top-line growth because the
cost- cutting got to where you couldn’t cut any
more,” said Eric Green, a money manager at Penn
Capital Management in Philadelphia, which
oversees $5.6 billion. “But you’re seeing it now.
Many companies are having that nice top-line
growth, and as that goes up, it should have a mag-
nified effect on earnings. It’s very positive for the
equity markets.”
U.S. Dollar and Gold
Surge after Tet Holiday
Gold price forecast in 2011 could rise up to 15%
As businesses re-open after the long Tet holiday,
both the U.S. dollar and gold showed strong gains.
Gold approached VND36 million per tael while
the dollar neared VND21,500 levels. These were
sharp increases when compared to their levels
before the holiday when the dollar was around the
mark of VND21,000 and gold traded at approxi-
mately VND35.55 million per tael.
One gold shop owner in An Dong Market in
District 5 of Ho Chi Minh City indicated that
transaction volume was at a modest level and high
prices discouraged many buyers. However the
precious metal is believed to bring good luck in
the New Year, accounting for its recent popularity.
Chinese Rate Increases
May Cause the Yuan’s 17-year High
Chinese 100 Yuan banknotes in Shanghai, January 17, 2011
Credit: Reuters/ Carlos Barria
After the third interest rate increase by the
Chinese central bank in four months, the
government’s steps to curb inflation have
triggered gains in stocks coupled with falling
bonds. If history is any indicator, the Yuan may
hit a 17-year high in the near future.
As the currency of the world’s fastest growing
economy, the yuan recently traded at 6.5824 to
the U.S. dollar in Shanghai after the Lunar New
Year holiday, a gain of 0.2% since the weeklong
break began. On January 21, the Yuan reached
6.5808, the highest level since China unified
official and market exchange rates at the end of
1993. Meanwhile, the one-year interest rate
swap increased 19 basis points to 3.84%.
Emerging economies are battling inflation as
their markets prove attractive to speculative
capital from the mature markets in the U.S. and
Europe which are seeing near zero interest rates.
Furthermore, China’s base rate is still below its
inflation rate, providing extra incentive for
people to spend their money rather than keep it
in the banks.
Thomas Rutz, head of emerging markets and
currency in Zurich at Clariden Leu AG, which
manages $1.3 billion in developing-market
assets, says that “they fear risk of overheating.
Tightening in the currency should go in line with
the policy rate tightening. I still believe in the
yuan going to 6 per dollar this year.”
While the quarter-percentage point increase in
of a stable economy. The Bank of Korea held a
policy meeting on Feb. 11.
BEN BERNANKE TESTIFIES
The seasonally adjusted exports for Germany rose
1% in December from the previous month, its
biggest increase since September. This was
according to the median estimate of economists in
a Bloomberg News survey. Another survey
indicated that Americans filing first-time claims for
jobless benefits fell by 5,000 to 410,000 last week.
Losses in the dollar were not significant before
Ben Bernanke, U.S. Federal Reserve Chairman,
testified at the hearing of the House Budget
Committee. “Bernanke is likely to emphasize
fiscal tightening,” analysts led by Hans-Guenter
Redeker, London-based global head of
foreign-exchange strategy at BNP Paribas SA,
wrote in a research note. “While this would
normally be negative for a currency, it will
prove positive for the dollar in this case, given
concerns over sovereign risk.”
The publicly traded debt of the U.S. has
increased to a record $8.97 trillion, double that
Song Ngoc Apartment
Mid-range apartment in District 8 -
Project invested by M.V Corp.
real estate M&A, which is reflected in property
price acceleration pace as well as cash flow into
this sector.
In expanding markets, investors have to be more
cautious of making investment decisions which
require more diligent foresight. This, in turn,
means that larger companies will have greater
advantages when developing projects. The level
of competition will also be fiercer, making it
harder for investors to successfully penetrate the
market.
MORE OPPORTUNITIES
Despite what may seem as daunting challenges,
the economy is still expected to take gradual
steps towards stability and sustainability.
Investors are therefore put in a favorable
position, as the success of the real estate market
is always associated with and parallel to the
growth of the economy.
Real estate analysts are also forecasting home
prices to sustainably grow in 2011 while the
land fevers of the past are not expected to
reoccur in the foreseeable future.
Among the reasons for this forecast is that the
government has stressed infrastructure
enhancement with fund commitments from
foreign organizations. Completion of the key
infrastructure projects will then facilitate the
development of the real estate market.
Particularly, that main driver behind this
stabilized growth is the continually improving
infrastructure plans in Hanoi. Many highways,
urban roads, and belts are being
comprehensively and modernly improved and
prompting new construction projects: the
expansion of Le Van Luong street, belt 3, and
Thang Long Boulevard, among others.
The overall plan for Hanoi will soon be
had been made when licensing FDI projects.
But new FDI committed capital continued to
be poured into real estate. What is your
assessment of the situation?
The Ministry of Planning and Investment
licensed a real estate trading project worth $4
billion last December. That decision meant real
estate became the highest segment to attract
committed capital of $6.84 billion, accounting
for 36.8% of total FDI registered capital. Prior to
that, FDI projects in real estate were much
lower.
However, foreign investors mainly remained
interested in processing and manufacturing. By
November last year, foreign direct investment
poured into this segment meant that it was the
most popular category for FDI. Statistics
showed total registered capital poured into these
SIGNIFICANT GROWTH
Stronger worldwide economic growth coupled
with the recent unexpectedly positive sales
figures have helped to boost up the S&P 500 by
29% since its 2010 low in July. At its fastest pace
since May 2004, the acceleration of U.S.
manufacturing and increased consumer spending
helped the index top 1,300 on February 1, a
31-month high.
As the U.S. unemployment rate slipped to 9%,
the lowest level since April 2009, stocks again
rallied. This was despite the low number of new
hires in January which was accredited to heavy
snow storms keeping job seekers at home.
According to S&P index analyst Howard Silverb-
latt, the S&P 500 has surged 94% since March
2009, its biggest advance for any comparable
period since 1936.
CLEAR SIGNS
According to analyst estimates complied by
Bloomberg, the total revenue for S&P 500
companies may rise 7.5% this year, the most
since 2007, as well as reach an all-time high of
$1,017.44 a share.
“The market has been saying with a pretty clear
signal since the August lows that double-dip fears
were misplaced, that we were set to see a reaccel-
eration in economic activity in 2011, and I think
Gold traders unoptimistic for 2011
When contacted by the Daily, all local traders said
that they were not expectant of the bullion trade in
2011 despite the high profits seen in the previous
year. Although some international traders have
forecasted gold prices to increase by up to 15%,
targeted profits for this year were not high due to
the unpredictable nature of both the global gold
prices and local policies.
Nguyen Thanh Long, general director of Saigon
Jewelry Company (SJC), observed that as the U.S.
economy is finally showing significant signs of
recovery, many investors will forego the safe-
haven precious metal and instead take on risks in
the one-year deposit rate by China’s central
bank now stands at 3%, this benchmark is still
substantially lower than Brazil’s (11.25%),
India’s (6.5%) and Russia’s (7.75%). According
to Daiwa Capital Markets, China’s inflation may
have risen to as high as 6% in January as the
holiday season triggered increased demand and
snowstorms damaged food crops.
YUAN APPRECIATION
The yuan has appreciated 3.7% since a two- year
peg to the U.S. dollar was relaxed in June and
helped to reduce import costs. The currency then
increased by 0.3% after the October 19 rate
increase and a subsequent 0.6% in the week
following the last interest rate rise on December
25. There are some U.S. lawmakers who have
been critical of the exchange rates, saying that
China is artificially manipulating its currency
and keeping it weak to help the country’s
exports.
“The yuan will end up being stronger than what
the market is discounting in a year’s time,” said
Venkatraman Anantha- Nageswaran, the global
chief investment officer in Singapore at Bank
Julius Baer & Co., which oversees some $172
billion of assets. “The final outcome in
one-year’s time will be between 6.2 and 6.4.”
According to a median forecast of 25 analysts
surveyed by Bloomberg, the yuan is expected to
COLDWELL BANKER Vietnam
Newsletter ISSUE 008
of 2007, resulting from spending boosts to
sustain the nation’s economic expansion.
CHINESE RATE POLICIES
Before reports could forecast the country’s
fastest inflation acceleration pace in 30 months,
the central bank of China increased interest rates
for the third time since October. Effective as of
February 8, the People’s Bank of China
indicated that the one-year lending rate will now
stand at 6.06%.
“Some think Bank of Korea may follow China
in hiking rates this week,” said Kim Jin Ju, a
currency trader at Korea Exchange Bank in
Seoul. “U.S. stocks rose yesterday and this is
boosting the won.”
‘POSSIBLE’ RECESSION IN NEW
ZEALAND
Australia saw employers adding 17,500 jobs in
January in its 11th straight month of gains,
according to economists surveyed by
Bloomberg News. The survey also indicated that
the unemployment rate remained at 5%, the
lowest in two years.
Meanwhile, New Zealand’s dollar depreciated
against all of its 16 major counterparts after
Finance Minister Bill English told parliament it
was “possible” the nation’s economy slipped
into recession in the second half of last year.
“English’s comments continue a tried and tested
tradition of kiwi leaders trying to talk the New
Zealand dollar down,” said Adrian Foster, Hong
Kong-based head of financial-market research
for Asia at Rabobank Groep NV.
The N.Z. dollar, also known as the kiwi, fell
0.5% to 77.15 U.S. cents, approaching on its
lowest level since Jan. 26. English told
parliament’s finance and expenditure select
committee that the nation’s economic recovery
will face some challenges.
Source: Bloomberg
approved, serving as a prerequisite for the
sustainable development of the capital while
boosting the popularity of new projects and
offering plentiful supplies.
The southern real estate market also has some
promising aspects in 2011, as Ho Chi Minh City,
Binh Duong and Dong Nai are considered as
attractive investment destinations.
In addition to various new construction projects
in the new city, Binh Duong is carrying out a
series of infrastructure projects including Binh
Duong Boulevard, a metro system linking Ho
Chi Minh City and My Phuoc – Tan Van
Highway. After completion, the transport
systems will not only shorten traveling time in
the areas of Binh Duong, Ho Chi Minh City,
Dong Nai, and Ba Ria – Vung Tau, but
completely change their appearance also.
In Dong Nai, the Ho Chi Minh City – Long
Thanh – Dau Giay Highway has been executed
while implementation of Long Thanh Airport
has just started. With the advantages of having
more “appealing” land prices against those in
Ho Chi Minh City together with more
investment in infrastructure, Dong Nai has
drawn special interest from investors.
Forecasts indicate that real estate products with
small scale and reasonable prices will emerge in
2011. The supply will be the same as that in
2010, and mid-range segment will occupy the
most market share. Furthermore, stricter state
regulations in 2011 will also aid in healthy
market development, increased transparency,
and favorable conditions for investors.
According to the assessment of Association of
Foreign Investors in Real Estate (AFIRE),
Vietnam belongs to the top 4 emerging markets
for real estate in 2011 along with Brazil China
and India.
Source: cafef.vn
areas totaled $5.1 billion, accounting for 27.3%
of total FDI registered capital. It is clear that
high and regular FDI capital still poured into
processing and manufacturing. This trend will
continue this year.
How will Vietnam attract FDI this year?
FDI attraction will be more selective, with focus
given to attracting high-tech, clean technology
projects and those projects which are able to turn
out competitive products, export products and
projects serving the development of support
industries.
Projects which have an adverse impact on security
and national defense, the environment, projects
with small registered capital but large land use
needs, gigantic real estate projects, projects desig-
nated to exploit natural resources, projects with
outdated technology and without deep processing
process and those projects with high energy
consumption will be scrutinized in accordance
with the law or will be refused a license.
Not least, we will focus on inspecting the imple-
mentation of licensed projects in progress this
year. We will also ask authorized offices to
strictly punish or even revoke licenses from
projects which occupy large areas of land but are
slow in their implementation.
With high expectations of a global economic
recovery and determination to improve the Viet-
namese investment environment, FDI disburse-
ment is expected to increase this year. As sched-
uled, between $11 billion and $12 billion will be
disbursed this year. Of which, foreign countries
will invest around $8-9 billion.
About $20 billion in FDI registered capital is
forecast to be poured into Vietnam, an increase
of 11% compared with 2010.
Source: SaigonMoney.com
all of that is true,” said Scott Migliori, the San
Francisco-based U.S. chief investment officer at
RCM, a unit of Allianz Global Investors that
oversees more than $145 billion. “The market has
already told us that the economy is going to grow
pretty robustly in 2011.”
David Bianco, the chief U.S. equity strategist at
Bank of America, says that the faster-than-
estimated sales may indicate the end of corporate
expense reductions aimed at propping up earn-
ings and the demand for goods and services will
increase.
OPTIMISTIC COMPANIES
Caterpillar, the world’s largest maker of construc-
tion equipment, indicated that it added approxi-
mately 19,000 jobs in 2010 including a 15%
increase in the U.S. “We’ve become somewhat
more positive about economic growth in the
developed economies,” says Mike DeWalt,
Caterpillar’s director of investor relations.
Emerging from bankruptcy in July 2009, General
Motors Co. said its U.S. sales rose 22% in Janu-
ary, also beating analysts’ estimates. The com-
pany is planning to add a third shift and 750 jobs
at its assembly plant in Flint, Michigan, in order
to meet the increasing demand for pickups. The
company’s shares have increased 11% since its
IPO in mid-November.
The world’s largest package-delivery company,
UPS, saw its share price rally to levels last seen in
April 2008 upon their announcement of adjusted
profit jumping 44% and sales climbing 8.4%. The
company cited an unexpected increase in online
holiday shopping for their performance.
Meanwhile Google Inc. executives are preparing
for the company’s biggest year in terms employee
growth with plans to add 6,000 people. Google’s
revenues posted January 21 beat forecasts by
5.1%.
Dupont, the biggest U.S. chemical maker by
stock-market value, adjusted 2011 profit fore-
casts as they reported higher-than-estimated earn-
ings and sales. The company’s shares have risen
6.9% so far this year. “As the global economy
recovers, we drove volume and price up in all
major regions of the world,” Nicholas Fananda-
kis, the chief financial officer of DuPont, said in
an earnings conference call on Jan. 25. “If this
was a video conference, you’d see me sitting here
with all smiles.”
Source: Bloomberg
more lucrative investment channels. The core
business of SJC last year, gold bar trade, generated
a pre-tax profit of about VND372 billion which
was 13% higher year-on-year. This year, on the
other hand, the company has lowered its bullion
trade profit targets to VND350 billion. Long said
that the company will instead shift its focus
towards jewelry making.
Phu Nhuan Jewelry Company (PNJ), the leading
jewelry maker and trader in Vietnam, also shared
similar views on the near future of the market.
Nguyen Thi Cuc, deputy general director of PNJ,
told the Daily that interest rates and foreign
exchange rates were causing less favorable busi-
ness conditions. She also added that the company
will only slightly raise its revenue and profit
targets for bullion trade this year based on the
difficulty to predict the market’s movements.
Sacombank Jewelry (SBJ) reduced its profit target
for 2011 by 30% year-on-year compared to last
year’s growth rate of 130%. General Director
Nguyen Ngoc Que Chi expects gold bar sales to
increase 50% while the targeted growth rates for
gold quality assessment and jewelry trading stood
at 700% and 300% in revenues.
Source: The Saigon Times Daily
further appreciate another 4.5% during 2011.
Separate surveys indicated that India’s rupee is
expected to gain 3.3%, while Brazil’s real and
Russia’s ruble are forecast to fall 1.8% and 3.8%
respectively.
HIGHER YIELDS
As banks were meeting the demand for
securities on orders of setting aside more funds
as reserves, China’s government bonds fell this
year, driving 10-year yields to their highest level
since September 2008. Bloomberg’s data
indicated that the rate rose 12 basis points to
close at 4.03% on Feb. 1, and 8 basis points after
China last raised rates.
“As they raise interest rates more, it’s an admis-
sion that controlling money supply in China is
not working to curb inflation,” said Kobsidthi
Silpachai, head of capital markets research at
Kasikornbank Pcl in Bangkok. “It also shows
that they need to eventually make the yuan more
flexible.”
CREDIT RISK
The OTC market data firm CMA indicated that
the five-year credit-default swaps on China’s
bonds rose one basis point to 74 on February 8.
Credit-default swap indexes serve as
benchmarks for protecting debt against default
and traders use them to speculate on the quality
of credit. The increase suggests that perceptions
of China’s creditworthiness are deteriorating.
The CSI 300 Index gained slightly after the rate
increase, similar to the week following
October’s increase. However, the index fell
slightly in the week after December 25. The CSI
is still 14% below the previous year’s level
before tightened monetary policies were imple-
mented. These policies by the People’s Bank of
China include raising the reserve rate require-
ments for major banks on seven different occa-
sions in 2010 and stricter lending for second and
third home purchases in addition to the interest
rate hikes.
Source: Bloomberg News