Real estate sector eyes recovery
 
The domestic property market was expected to recover this year with the addition of more investment from home and abroad, as well as a looser credit policy, experts said.

The Ministry of Construction said the market would recover earlier if the Government offered a flexible credit policy in combination with flexible banking interest rates and high liquidity in capital flows to this market segment.

"The Government will loosen the credit policy for the real estate sector for the long term," said Dao Manh Hung, Head of Investment Department at the Savills Viet Nam Ltd Company, a foreign real estate consulting firm in Viet Nam, during a conference on development of the Ha Noi real estate market in the last quarter of 2011.

"In the short term, the real estate market needs foreign and domestic investment to reduce the capital shortage in banks which are the major source for capital in the local property market."

"Savills Viet Nam has promoted conferences abroad calling for investment from other countries. For example, the company organised a conference in Japan in September to attract investment to the local property market."

"The local property market is still in its early stage of development so it has great potential for foreign investment. Additionally, the real demand for property is high," Hung said.

At present, supply does not meet demand due to visible price fever on the market.

"There will be more mergers and aquisitions (M&A) among property projects this year in order to boost available capital for the projects," Hung said. "But there needs to be more transparency in the development of the M&A trend."

Nguyen Minh Tuan, deputy director and head of the Research and Consulting Department at CB Richard Ellis Viet Nam Ltd Company (CBRE), said the Government's solutions in the legal and financial systems should be synchronised.

Viet Nam's real estate market currently depended on banks for the majority of its funding, typically in the form of short term loans, while the market had not received medium and long-term capital support from funds such as the housing development fund, housing saving funds and real estate trusts funds, Tuan said.

The Government should have strict regulations to develop these funds, he said, adding that the regulations would help the funds to attract more capital.

Le Chi Hieu, chairman of Thu Duc Housing Development Company's management board said the property market would remain in difficulty until June when the market would experience better conditions due to inflation control and reduced banking interest rates.

The property market would start to recover from early 2013, Hieu said, saying the problem now was how to overcome difficulties until then.

Luong Tri Thin, chairman of Dat Xanh Group, said the firms would develop professional investment and business strategies to maintain operations and even find new development opportunities.

The Ministry of Construction reported that prices for all segments of the property market in the major cities of Ha Noi, HCM City and Da Nang, along with other provinces and cities nationwide, fell at the end of 2011. Some projects in Ha Noi offered 30 per cent reductions against earlier in the year.

The price reduction was a good sign for investors to restructure their investments and for customers with a real demand for property to enter the market, the ministry said.

Stocks dip in the capital city

Shares fell this morning in Ha Noi with the HNX-Index losing 0.8 per cent to conclude at 56.55 points.

Losers outnumbered gainers by 121-85.

Market value on the Ha Noi Stock Exchange decreased 18.7 per cent against yesterday's session to VND158.1 billion (US$7.5 million) on a volume of nearly 19.4 million shares.

VNDirect Securities Co (VND) surpassed Kim Long Securities (KLS) to become the most heavily traded stock with around 2.1 million shares changing hands.

Meanwhile, on the HCM Stock Exchange, the VN-Index gained slightly towards the end of the session, finally adding 0.3 per cent to finish at 358.86 points.

Losers, however, exceeded gainers by 125-91. Trading volume plunged 56.8 per cent over yesterday's level to just VND348.76 billion ($16.6 million) on a volume of 23.7 million shares.

Among the blue chips, insurer Bao Viet Holdings (BVH) and Vietinbank (CTG) hit their ceiling prices, but the majority of large-cap shares retreated or closed unchanged. Food processor Masan Group (MSN) was at one point at its ceiling price mid-way through the session, but eventually closed down 2 per cent.

With 1.13 million shares exchanged, Sacombank (STB) was the most active code in HCM City.

Viet Nam shares keep building
 
Shares continued to build on last week's rally yesterday, with improved trading value on both of the nation's stock exchanges – even as other markets in the region sank on last Friday's news that international credit ratings agency Standard & Poor's (S&P) had downgraded a number of European nations due to the ongoing eurozone debt crisis.

On the HCM City bourse, with 165 winners out of 280 codes, the VN-Index added 1 per cent over the previous Friday's session to reach 357.87 points. The value of trades nearly doubled Friday's level, hitting VND842.4 billion (US$40 million) on a volume of 29.4 million shares.

Although most blue chips performed well, with food processor Masan Group (MSN) reaching its ceiling price, insurer Bao Viet Holdings (BVH), Eximbank (EIB) and real estate developer Vincom (VIC) tumbled between 1.6-2.9 per cent. BVH announced late last week that last year's earnings were estimated at around VND15.5 trillion ($740 million), an increase of 20.7 per cent over 2010, while profits were expected to reach roughly VND989 billion ($47 million), an gain of 22 per cent.

Saigon Securities Inc (SSI) was the most-active share in HCM City with over 1.5 million traded. It gained a solid 2.9 per cent in value before the close.

On the Ha Noi Stock Exchange, the HNX-Index rose by 1.3 per cent to conclude the session at 57.00 points. Market value climbed 23 per cent to VND194.4 billion ($9.26 million) on a volume of 25.9 million shares.

With 3.16 million shares exchanged, Kim Long Securities Co (KLS) became the most-active share nationwide.

Shares of PetroVietnam Engineering Co (PVE) rose 2.1 per cent on news reported yesterday that the company had sold a 10-per-cent stake to its strategic partner, French oil and gas group Technip. The shares were purchased at VND14,500 per share, while PVE concluded trading yesterday at a price of only VND9,600.

ACB Securities Co analyst Cao Tan Phat discouraged investors from buying at this time. The approval of a proposed scheme for restructuring securities companies would not have any immediate effects on the market, he said, warning that global oil prices could spike due to tensions between the US and Iran.

Foreign investors were net buyers on both bourses yesterday, picking a combined net of VND44 billion ($2.1 million) worth of shares.

Prices remain stable for Tet

Prices of goods for the Tet (Lunar New Year) holiday have remained stable even though purchases have risen in recent days.

Of the total goods quantity stocked for Tet, 30 to 40 per cent are from companies that are participating in the city's programme to stabilise prices of essential goods.

Forty to 50 per cent are from the city's three wholesale markets and the remaining are from other companies, according to the Department of Industry and Trade.

Le Ngoc Dao, deputy director of the Department of Industry and Trade, said companies taking part in the price-stabilisation programme have completed their stocking of goods for Tet, valued at more than VND5.5 trillion.

Prices for these goods are 5-10 per cent lower than market prices, she said.

At the end of the third quarter of last year, several food companies began to prepare goods for Tet, including advancing money to farmers to raise pigs and poultry.

Vissan began preparing for Tet in August, and now has more than 40,000 pigs and 6,000 tonnes of processed food.

Van Duc Muoi, Vissan general director, said there would be no shortage of essential goods, and that prices would be stable through Tet.

Pham Thanh Hung, deputy director of Ba Huan Company, said the supply of eggs for Tet was secure, with his company producing 1.5 million eggs a day.

In case of higher demand, Ba Huan can increase its production to 2 million eggs a day, Hung said.

The quantity of essential goods that supermarkets and companies stock for Tet has risen 15-10 per cent against the same period last year, according to the city's Food and Foodstuff Association.

More than 90 per cent of stocked goods for Tet have been made in Viet Nam.

"This year the quantity of imported goods fell by more than half against previous years," Nguyen Thu Phuong, general director of the Nam Duong Import and Export Company, said. "Domestic companies have successfully set up their product brandname and markets, and imported goods have become more expensive."

In the city's three wholesale markets, the quantity of inbound goods has increased by 80-100 per cent in recent days.

Binh Dien wholesale market is receiving about 2,000 tonnes of vegetables, fruits, seafood and pork products a day.

Similarly, the quantity of inbound goods at Thu Duc wholesale market has increased by 100-200 tonnes a day.

However, the prices of several vegetables and fruits have begun to drop because of an abundant supply and low sales, according to market management boards.

The price of fresh food such as seafood is expected to rise only slightly in the next few days.

The city's Department of Finance said that prices had remained stable because of ample inventory of food companies.

Nguyen Quoc Chien, head of the department's Price Division, said the department had set up several inspection teams earlier this year to monitor prices.

The teams, in cooperation with departments and agencies, have checked prices and supply of companies taking part in the city's price-stabilisation programme of essential goods.

Ha Noi flats fail to sell despite discounts

The housing market in Ha Noi has remained frozen even as prices have fallen, according to real estate companies.

The director of the Thai Minh Quang property trading centre said that many investors have found it impossible to sell their products even at floor prices.

Phan Xuan Can, chairman of Sohovietnam Property and Consultancy Company, affirmed that apartment prices had fallen sharply since the end of 2011, adding high interest rates had put pressure on many secondary investors.

According to Can, investors accepted the need to cut down their profits.

For example, he said, one investor slashed his price by more than VND4 billion (US$190,000) in order to sell his property in the Bac An Khanh Project.

Another secondary investor in the Bao Son Dragon Project decreased his ask by more than VND5 billion ($238,000).

Can suggested that many investors had been forced to sell their houses and apartments in the centre of the city to pay off their loans.

However, only houses priced under VND5 billion had success on the market. The more expensive ones cannot be sold, said Do Quang Huy, an official from the Hapulico real estate trading floor.

According to a report by CB Richard Ellis Viet Nam, last year's fourth quarter saw the largest overall price reduction in condominiums for sale.

The report said that the secondary asking price for condominiums in Q4 has come down in all segments, accounting for almost the entire annual reduction.

During that time, prices were down by 3.5 over the previous quarter and down by 4 per cent in comparison with the same time last year.

Last year was the first time that the market saw a declining supply at the end of a year.

CBRE's experts forecast that the market would be warmer in the middle of this year when the investors cannot suffer more loss and buyers cannot wait for lower prices.

Fuel company fears losing money owed by partner

Vietnam Airlines’ jet fuel arm Vinapco said it might not be able to recover the VND24 billion ($1.14 million) it lent to the now bankrupt Indochina Airlines (ICA).

Tran Huu Phuc, Vinapco’s general director, said ICA’s owner, song-writer Ha Dung, told him even if Vinapco sued him, there would be nothing he could do. It is the third year that Vinapco hasn’t been able to recover ICA’s debt, Phuc said.

Vinapco has considered bringing Ha Dung to court, but the possibility of recovering the debt is “still unknown”, he said. The situation is getting worse since ICA has had its licensed revoked recently, Phuc said.

Vinapco repeatedly sent documents and contacted ICA in an effort to settle the unpaid debt in 2009. It brought Ha Dung and his company to the Hanoi Economic Court at the end of 2010.

But since Ha Dung was absent in the first trial, and did not send any authorized representative, the court failed to issue any verdict. Vinapco then brought the lawsuit against Dung to a court in HCMC, but the final result has yet to come out.

Last July, the HCMC People’s Court issued a verdict asking Ha Dung to pay $1.3 million to Asia Commercial Bank before declaring bankruptcy. Ha Dung has been banned from traveling abroad since.

As of last year, ICA owed around $70 billion ($3.6 million), VND800 million ($41,000) of which was owed to 35 travel agencies in Hanoi.

These creditors are also considering lawsuits.

ICA’s flight license early last month was officially revoked by the Ministry of Transport because the carrier hadn’t operated for 12 months.

ICA, the first Vietnamese private carrier to obtain a license, in May 2008, was established by composer Ha Dung, who also acted as the airline’s general manager.

It began flying on November 25, 2008 with 2 leased Boeing 737-800 aircraft. But it hasn’t flown since November 2009 because of financial problems.

Hanoi office vacancy rate hits record high

The market vacancy rate of office buildings in Hanoi last quarter increased to 28 percent, the city’s highest rate ever, according to a recent report by CB Richard Ellis Vietnam (CBRE).

According to CBRE’s quarterly report, the vacancy rate for office buildings belonging to the Grade A category in the fourth quarter of last year soared to 34 percent, up from the mere 5 percent recorded in the previous quarter.

Meanwhile, Grade-B offices experienced a vacancy rate of 24 percent, up from 18 percent in the third quarter.

The total vacancy rate for both grades is the unprecedentedly high 28 percent, thanks to several new entrants to the market such as VA, Detech, and Mipec Towers, the report said.

“Average asking rents trended down due to new entrants in both Grade A and B, although no change in asking rents recorded in existing projects,” it stated.

CBRE said investors are willing to provide heavy incentives, such as free signage, longer free rent periods, or discounts without changing headline rents, to attract tenants.

In the city’s downtown, for instance, tenants can have a 3-5 year free rent period with leasing terms of 3 to 12 months.

The consultancy firm also said that new supply in the fourth quarter of last year was 143,000 square meters, or 15 percent of the total supply of the year.

However, CBRE stated that the rapid increase in supply will “lead to increased vacancy as demand is yet to catch up in near term.”

Meanwhile in Ho Chi Minh City, CBRE said in another quarterly report on market development in the city that rents for Grade-A office slumped in the last quarter of 2011 due to the fact that the Bitexco Financial Tower and Vincom Center, both of which have been operational for a year, still have low occupied rates.

“Bitexco Financial Tower and Vincom Center put downwards pressure on Grade A rents,” the report said.

Meanwhile, running counter to the high vacancy rates of these newcomers, seven more mature buildings are still over 95 percent occupied.

“They also have been able to maintain rental rates at, or usually higher, than market average,” the report said.

Dollar prices down as demand slumps ahead Tet

The selling prices of the greenback in both official and unofficial markets have cooled down over the last week thanks to the increased supply against falling demand.

Most money exchangers in the areas around Ben Thanh market in Ho Chi Minh City now sell the greenback at VND21,200 a dollar, down by VND200 a dollar compared to last week, newswire Saigon Times Online reported.

According to an exchanger on the Phan Chu Trinh Street in District 1, demand for dollars has slumped in the last few days. Meanwhile, exchangers have increased supply thanks to purchases from foreign tourists and overseas Vietnamese who have returned to the country to celebrate the coming Lunar New Year.

Supply has increased against falling demand, so prices have dropped, he said.

However, the foreign currency exchanging activities around Ben Thanh market have been conducted secretly, with most exchangers only trading with frequent customers, for fear of receiving a steep fine and having the on-trade money confiscated, as per law.

On October 21, the government issued a new decree which established higher fines for violations in the financial sector.

Accordingly, the illegal trading of foreign currencies is subject to a VND500 million (US$24,000) fine, and the confiscation of the traded amount of money.

Violators of the regulation will have their foreign currency exchanging licenses revoked for 12 months.

Earlier this month, two money exchangers in Hanoi were fined VND100 million each for trading only a few hundred US dollars.

Meanwhile, a banker from Sacombank said most banks now have an adequate supply of the greenback, thanks to supply from exporting companies and remittances.

Buying demand has stayed unchanged since most businesses prepared sources of foreign currencies in advance, or stopped buying since the Lunar New Year is only a week away, he said.

Last October, it was difficult for businesses to buy US dollars from banks, and those who could buy also had to suffer the high exchange rate of more than VND21,700 a dollar.

Sacombank now sells the greenback at VND21,060 a dollar, down by VND300 a dollar compared to the rate recorded in late December, 2011. The official listed price is VND21,036 a dollar.

Meanwhile, the interbank dollar exchange rate remained unchanged today, at VND20,828 a dollar for the last three weeks.

Last year, the dong was depreciated by more than 10 percent, with the highest depreciation falling in mid February, when the rate was increased by 9.3 percent compared to the VND18,932 rate that had been kept for the previous seven months in a row.

Overhaul of banks to force mergers

Bank mergers are forecast to strengthen the sector following the Government's push to restructure and improve their competitiveness.

The Government had targeted inflation lower than 10 per cent and would need to restructure the economy and the banking sector would be one of three pillars in the restructuring process, said Le Dang Doanh, former head of the Central Institute for Economic Management.

Doanh said the Government had set a credit growth rate of 15-17 per cent which would classify commercial banks into four groups: healthy, medium, below medium and weak.

Weak banks were already seeing the need to merge to avoid bankruptcy, he said.

The merger of Ficombank, Tin Nghia Bank and SCB was one example that was guaranteed by the Government.

State Bank Governor Nguyen Van Binh said weak banks accounted for 5 per cent of the country's total commercial banks and that they would be drastically restructured with caution and improved safety in mind.

Binh said participation of private sector banks would be encouraged.

Chairman of the National Financial Supervisory Committee Vu Viet Ngoan said it would not cost much to restructure the sector by merging weak banks.

"Credit institutions have established a fund for risk equal to 60 per cent of the country's total bad debts," he said.

Financial and banking expert Nguyen Thi Mui said the participation of private sector banks in the restructuring process would reduce risks for State owned banks.

Mui said State-owned commercial banks' current support for weak banks was carrying risks for the whole system.

Banking expert Nguyen Chi Hieu said the 37 domestic banks now operating would be reduced by one third.

"Risks of some banks would be opportunities for others," he said.

Buying apartments requires 50 years saving: CBRE

An average-income earner has to save money for more than 50 years to be financially capable of buying an average-class apartment, a recent market study by CB Richard Ellis has found.

The market research, jointly conducted by CBRE and market researching firms TNS and Nielson, was aimed at figuring out how many years households in Hanoi and Ho Chi Minh City have to save up money in order to be able to afford an apartment.

The research was conducted under the assumption that households will annually set aside 19 percent of their full-year total income for a house purchase.

The study findings show that average-income households, who earn around VND160 million (US$7,680) a year, or VND13 million a month, have to save up for 30 years to be able to purchase a low-class apartment worth VND880 million.

It would take these consumers 51 years to have enough money to buy an average-class VND1.5-billion apartment, and as many as 96 years for a high-class apartment worth VND2.8 billion.

Meanwhile, households of the high-income class, whose annual incomes top VND480 million, also need to save for 10 years to buy a low-class apartment, while the respective time of saving for average- and high-class apartments are 17 years, and 31 years.

For their part, households who earn VND60 million annually have to save for 77 years to buy a low-class apartment, and 113 years for an average one. If they want a high-class apartment, they simply have to save up for 249 years, the study said.

Although the study is not a comprehensive reflection of the real market development, it can be inferred that it is not easy for consumers to purchase apartments with finance merely sourced from their annual incomes without borrowing from their relatives or bank loans, a source which is hard to access due to the high interest rate barrier.

According to CBRE, despite the fact that apartment prices have been on the declines for the last three years, the ratio between sales and unsold inventories has also constantly slumped since the first quarter of 2010.

Selling [apartments] has become a nightmare for investors, since consumers have lost confidence in the real estate market, the report said.

Figures recorded last year show that 5,000 apartments were marketed in the first quarter, but less than a half of them were consumed. Similarly, 4,900 new apartments were put on sale in the second quarter, but investors only managed to sell 1,400 apartments.

CBRE said the high-class apartment projects in the city’s downtown can still find customers, while other projects to be implemented in the future will target average-income earners, with prices expected to be less than VND21 million a square meter.

VN, France accelerate transportation projects

Vietnamese Minister of Transport Dinh La Thang and French Minister of Ecology, Sustainable Development, Transport and Housing Thierry Mariani reached consensus on speeding up cooperative transportation projects during their talks in Hanoi.

At the talks, Minister Thang thanked the French Government for the assistance it has offered to Vietnam ’s transport sector, particularly in the development of railway, aviation and urban transportation.

The two ministers discussed measures to remove difficulties for several French- funded projects. The upgrading of the Yen Vien – Lao Cai railway route, modernisation of railway signal system of Hanoi- Vinh route and the building of a tunnel underneath Ca mountain pass as well as a staff training programme are facing obstacles caused by mechanism, policies and capital, thus lagging behind schedule.

Apart from underway projects, other cooperative contents between the two countries in the future were also preliminarily agreed such as infrastructure development with France’s assistance in the public- private partnership form, further promoting cooperation in aviation, official signing aviation agreements, supplementing the new air route chart, and expanding training programmes for Vietnamese transport staff.

Automakers anticipate further sales decline

Many auto firms are worried the auto sales decline that began in 2011 will continue and even worsen this year.

The latest report of the Vietnam Automobile Manufacturers Association (VAMA) showed a slight drop of 1 percent in auto sales last year compared to 2010, with some 110,900 vehicles sold by VAMA members.

According to local automakers, given last year’s economic woes along with monetary tightening policy, high forex and interest rates, the domestic auto market should have tumbled sharply but for the strong demand for sedans.

In particular, some 40,850 sedans produced by VAMA members were consumed, rising 22.1 percent year-on-year, while commercial cars witnessed a drop of 15 percent in sales volume with over 46,200 units sold and sales of multi-purpose vehicles (MPV) dwindled by 6 percent with nearly 23,000 units consumed.

Auto traders said the demand for automobiles was still high, with the drastic sales growth of personal vehicles against commercial cars regardless of market difficulties. On the other hand, analysts attributed the strong consumption of sedans to the new policies of local authorities.

Specifically, Circular 20 of the Ministry of Industry and Trade issued early last year has helped eliminate unauthorized auto importers, causing numerous sales agents to fold up their businesses or switch to other fields.

Consumers were afraid of auto price spike as these businesses went bust, thus rushing to buy cars, leading to the continual growth in the sedan market segment.

Following Circular 20, the decision on adjusting up registration fees and license plate fees applicable to vehicles with fewer than 10 seats in HCMC and Hanoi has taken effect since this year’s beginning.

Those who wanted to evade the higher registration fees and the increased license plate fees have bought cars before the effective date.

Particularly, in the final month of 2011, the total sales volume of VAMA members only reached some 10,940 units, ebbing 12 percent over the same period of 2010 due to the sales slump of commercial cars and MVP at 33 percent and 16 percent respectively.

In the meantime, sedan consumption recorded a rise of 9 percent.

At present, local automakers are concerned that higher car registration fees and license plate fees in Hanoi and HCMC would affect the domestic auto market, which is heavily dependent on these two big cities, and accordingly leave an adverse impact on auto businesses.

Gaurav Gupta, managing director of GM Vietnam, said given the rise in registration fees, consumers must spend an additional sum to own vehicles.

GM Vietnam predicted there would be a temporary decline in sales volume of the local auto industry.

Sharing this view, Akito Tachibana, general director of Toyota Motor Vietnam, said the increased fees would push up the total costs to own a car, thus dragging down the market demand.

“We will definitely reconsider the production plan for 2012,” said Tachibana.

In addition to the difficulties with registration fees, the tightened financial market makes it difficult for consumers to access banking loans to buy cars, said Gupta.

Besides, the wider gap between Vietnam dong and U.S. dollar rates also has a major impact on Vietnam’s auto industry.

Meanwhile, Tachibana forecast 2012 would be a tough year for auto businesses given the Government’s target to sacrifice economic growth to curb inflation and slash public investment.

He predicted the sales of VAMA members might drop 20 percent.

Furthermore, the excise tax on automobiles may be raised to restrict personal vehicle consumption.

Holding a more optimistic view, a representative of Ford Vietnam said the new policy on vehicle registration fees and license plate fees, though unfavorable to businesses, would not impact the demand for cars.

Since auto prices in Vietnam are already high, customers will not easily cancel their purchase even when higher fees are imposed, the executive said.

Big banks record profits despite general slump

Major lenders such as Vietcombank, VietinBank, Sacombank and Eximbank reaped impressive profits last year despite the economic downturn.

Vietcombank said its consolidated profits in 2011 reached VND5.7 trillion, up 4 percent year-on-year. The bank also achieved positive growth rates with other important operation indicators, including returns on equity (ROE) amounting to nearly 17.5 percent and return on assets (ROA) reaching some 1.3 percent.

Nguyen Thu Ha, deputy general director of Vietcombank, said despite economic hardship, the bank’s mobilization growth rate remained high at over 17 percent compared to 2010, at roughly VND242.3 trillion.

This figure consists of deposits from the public of approximately VND122 trillion, a sharp rise of more than 23 percent compared to a year earlier.

Total outstanding loans at Vietcombank climbed to VND210 trillion but the annual credit growth rate was still under control at 18.5 percent, and bad debts at 2.1 percent.

As of the end of 2011, Vietcombank’s total assets were over VND369.2 trillion, a yearly increase of 20.3 percent, while its equity capital stood at around VND29.2 trillion, surging more than VND8.5 trillion from a year earlier.

Vietnam Bank for Industry and Trade, or VietinBank, stood out for business excellence, earning pre-tax profits of up to VND8.105 trillion, up 76 percent year-on-year, with ROE at 25.4 percent and ROA, at 1.96 percent respectively.

Similarly, the Vietnam Export Import Commercial Joint-Stock Bank, or Eximbank, had a successful year in 2011.

Truong Van Phuoc, general director of the bank, said the bank obtained VND4.065 trillion in pre-tax profits, a year-on-year surge of 71 percent. The lender’s total assets as of late last year were VND183 trillion and its equity capital was VND13.5 trillion.

Saigon Thuong Tin Commercial Bank (Sacombank) is estimated to enjoy nearly VND2.73 trillion in pre-tax profits for the whole year of 2011, with equity capital worth VND15.1 trillion, total assets VND144 trillion and bad debts at 0.6 percent.

Meanwhile, most medium and small-sized lenders have yet to release their business results last year and some lenders have reported modest results compared to the large banks’ performance.

A representative from Vietnam Prosperity Bank (VP Bank) said that his bank’s pre-tax profits were about VND1.06 trillion for the whole year of 2011. Besides, Ocean Commercial Bank (OceanBank) got VND640 billion in consolidated pre-tax profits last year.

Official warns about liquidity shortage in 2012

Liquidity shortage of the banking system will remain the biggest challenge for Vietnam’s macro-economy in 2012, said Vice Chairman Le Xuan Nghia of the National Commission for Financial Supervision.

Speaking at the seminar on Vietnam’s economic outlook in 2012-2013 held in Hanoi on Monday, Nghia said several banks had recently pushed up their deposit interest rates to 19 percent – 20 percent, or even 21 percent, regardless of the regulatory ceiling of 14 percent.

This shows liquidity shortage at these banks, he said.

In addition, the liquidity situation is tense in the primary market, as the banks are boosting internal lending, Nghia said. Lenders are opening both loan and deposit accounts that are worth as much as VND500 trillion.

“The monetary and banking market will continue to face difficulties in liquidity and bad debts in the first months of 2012. Liquidity is the greatest challenge for the banking system,” he said.

He said the banking system should draw lessons from the South American countries which had failed to curb inflation after two years of the global economic crisis.

In these countries, people lose confidence and hesitate to deposit money, switching to investment in gold and foreign currencies. Lenders are unwilling to give out loans while borrowers are discouraged by high interest rates.

The commission’s report shows there are more potential risks in the banking system’s liquidity, given recent upheavals in the inter-bank market. For the first time in history, mortgages are required for inter-bank borrowing, while the bad debt ratio continues to rise.

According to Nghia, the system’s asset quality is worsened by high credit growth while risk management is still limited and shortcomings remain in operating monetary and interest rate policies.

In particular, bad debts of the entire banking system have risen to the current level of VND85 trillion from VND71.6 trillion as of last year’s second quarter.

The average growth of bad debts in the first half of 2011 is 7.3 percent, twice as much as the monthly average of 2010.

The ratio of bad debts on total outstanding loans has surged to 2.88 percent as of end-June 2011, and recently jumped to 3.39 percent.

However, the increases in provisions for credit risks and bad debts don’t match. The ratio of risk provisions over bad debts is on the downtrend, falling from 81.1 percent in late 2010 to 67.1 peercent as of end-June 2011.

Also, the capital adequacy ratio (CAR) tends to drop strongly, with more banks failing to satisfy the regulated CAR. As of end-June last year, 2 out of 47 banks failed to meet the regulated CAR, but at the end of the third quarter, the figure rose to 17 out of 42 banks.

Gov’t aims to balance trade

Vietnam is trying to achieve a trade balance by 2020, Minister of Industry and Trade Vu Huy Hoang told the public via the Government web portal chinhphu.vn.

“It will require great efforts from both the Government and businesses to translate that goal in reality,” Hoang has said.

Last year, the Balance of Trade improved considerably, with the trade deficit dropping from 30 percent in 2007 to nearly 10percent, or around US$9.9 billion, Hoang said.

“The trade deficit cannot be reduced overnight as Vietnam mainly imports machinery, equipment and materials that account for up to 80 percent of the total import bill.”

Non-essential and consumer goods make up only 7 percent of all imports.

Since the domestic mechanical engineering industry is not strong enough and supporting industries have not developed, the trade deficit certainly remains an issue that cannot be solved any time soon.

The minister said it would be impossible to strike a balance between imports and exports by 2015 as Vietnam is still boosting investments to ratchet up its manufacturing capacity and has to continue import equipment, machinery and materials.

The competitiveness of Vietnamese products in the local market is still low.

Therefore, tariff reductions in line with the World Trade Organization (WTO) and free trade agreements (FTA) the country will sign in the future will cause import demand to surge, which may become a major barrier to a Balance of Trade improvement.

“A balance between imports and exports may be achieved in 2019-2020,” Hoang said. However, he expected the target could be attained sooner.

Vietnam’s export revenue amounted to $96.3 billion last year, up 33 percent from the previous year, with $54.5 billion coming from the foreign-invested sector.

The export figure for this year is projected to reach US$108 billion, and to achieve this, the ministry will take measures to shore up exports, he said.

The measures include helping the corporate sector cope with current woes, gain easier access to capital, boost trade promotions, and expand markets.

Vietnam to be listed top economies by 2050: HSBC

Within the next 40 years or so, Vietnam will make it into the world’s top 50 largest economies, a recent report by an economist from the British HSBC has forecast.

"The World in 2050," a report by HSBC economist Karen Ward, forecasts that by 2050, Vietnam will surpass its Southeast Asian counterpart Singapore in term of gross domestic product (GDP).

Particularly, the country will be ranked 41st, with GDP topping US$451 billion (with exchange rate for the US dollar recorded in 2000), and income per capita standing at $4,335.

“Vietnam, like many of its rapid growing neighbors, will see strong economic expansion during the coming 40 years, with GDP growth expected to top 5 percent per annum,” the report said.

Vietnam will be followed by Singapore, which is foreseen to post $441-billion in GDP.

However, the income per capita of Singapore is expected to “swell to the second highest among top 50 nations,” standing at $84,405 by 2025, far higher than that of Vietnam.

Interestingly, in "The World in 2050," Vietnam is predicted to even surpass Portugal (ranked 50), Czech Republic (49), and Norway (48).

Other Southeast Asian countries expected to take high ranks in the list include Malaysia ($1.2 trillion in GDP, ranked 21), Indonesia ($1.5 trillion, 17), and the Philippines ($1.7 trillion, 16).

The report also forecasts many major power shifts in the top 10 most powerful economies, with Italy expected to be no longer in the top ten and China to replace the US as number one.

According to the report, the world’s top ten leading economies will be China, the US, India, Japan, Germany, the UK, Brazil, Mexico, France, and Canada.