The governor of the State Bank of Vietnam, Nguyen Thi Hong, has proposed revising up the charter capital of the State-run Vietnam Bank for Agriculture and Rural Development (Agribank) by VND17.1 trillion to more than VND51.4 trillion in the 2021-2023 period.
Hong made the proposal at the ongoing sitting of the National Assembly (NA) in Hanoi. According to the NA Economic Committee, this capital injection would bolster Agribank’s financial strength and capital adequacy ratio (CAR) as required by law.
Agribank’s charter capital was VND34,330 billion by the end of 2022. If the proposal is passed, its charter capital would rise to VND51,430 billion.
The governor of the central bank suggested that VND5,753 billion be sourced from the State budget this year to increase the bank’s charter capital while the remainder will be allocated from the State budget in 2024.
The NA Economic Committee agreed to hike Agribank’s charter capital, saying this would ensure operational safety and improve its credit ratings.
By the end of 2021, Agribank’s CAR had stood at 7%, lower than other banks such as Vietcombank with 9.98%, VietinBank with 8.54% and BIDV with 8.4%.
Demand for construction steel remains low
Despite falling prices, sales of made-in-Vietnam construction steel posted a double-digit slump in April, the second lowest since 2022.
Data from the Vietnam Steel Association showed that construction steel sales in April dropped 17% versus March and 15% against the same period last year, at 735,000 tons.
Weak demand drove down production, causing steel output in the month to plunge 22% over March and 37% from a year earlier to some 710,000 tons.
The industry’s bleak prospect hammered Hoa Phat Group (HPG), the biggest steelmaker which dominates more than one-third of the construction steel market in Vietnam.
HPG produced over 214,000 tons of construction steel in the month, down 28% year-over-year. Its construction steel sales plummeted 34% year-on-year between January and April, with just more than one million tons of the products sold in the period, according to a company official.
He attributed the cause to weak demand in the domestic and international markets.
Flagging demand prompted makers to repeatedly revise steel prices. On May 19, HPG reduced the price of rebar CB300 D10 by VND200,000 to VND15.09 million per ton, while other steel manufacturers such as Viet Y, Viet Duc, Thep Mien Nam, Viet Nhat, Pomina, Tung Ho revised down from VND150,000-250,000.
Steel prices have decreased for the sixth time since April, with the current prices for the most popular steel products, rebar CB300 D10 and rolled steel CB240, being at around VND15 million per ton.
These prices are at the same level as they were in October of last year when demand for steel nosedived.
Commodity market helps increase Viet Nam's position on global stage
The initial success of Viet Nam's commodity market has improved the country's position on the international stage, according to an official from the Ministry of Industry and Trade (MOIT).
Director of the MOIT's domestic market department Tran Duy Dong stated that large commodity exchanges in the world highly evaluate the potential of the Vietnamese market and hope to cooperate with Viet Nam to make the Vietnamese commodity market the largest in the region.
Dong was speaking at a conference jointly held on May 17 by the Mercantile Exchange of Viet Nam (MXV) and CME Group on the prospects of Viet Nam's commodity market in 2023.
Last year, Viet Nam was the largest exporter of Robusta coffee, the third largest exporter of rubber, the sixth largest importer of corn and the third largest importer of soya beans in the world.
Therefore, any change in Viet Nam's supply and demand will affect commodity prices listed in commodity exchanges around the world, emphasised experts from CME Group.
Since being connected to the world, Viet Nam's commodity market has seen significant development, with the total trading volume at the MXV in 2022 soaring by 36% from the previous year.
Currently, the MXV has been connected with most major exchanges in the world, such as the Chicago Mercantile Exchange, the London Metal Exchange, the Intercontinental Exchange, the Singapore Exchange, the Osaka Exchange and Bursa Malaysia Derivatives.
Rubber firms face mounting hardships
Rubber firms are facing mounting hardships driven by a lack of orders, high borrowing costs, and large tax refunds having yet to be paid to them.
Huynh Van Bao, deputy chairman of Vietnam Rubber Association, has noted that rubber production and trading units are encountering difficulties on all sides. Amid global headwinds the demand for rubber has sunk, leading to a supply and demand imbalance.
This has caused both the rubber price and order intake to diminish, creating market pressures as most Vietnamese rubber is bound for export, while domestic consumption just accounts for 15 per cent of the total production output.
This has also entailed difficulties associated with human resources working at businesses producing items from rubber latex.
Sinking finance has been preventing firms from offering their labourers better wages. Such workers earn around $230 per month on average versus tough working conditions, leaving many labourers to quit their jobs and shift to other works.
The biggest difficulty to rubber firms at present is depleting capital sources, putting businesses in a ‘dilemma’.
In addition, many natural rubber export firms report having yet to receive tax refunds despite having sent many proposals.
The VAT tax refund of these firms is approximately $10.8 million.
Hoa Thuan Trading Co., Ltd. is one of Vietnam’s leading natural rubber producers and exporters.
The company, however, has recently cut jobs and temporarily ceased production.
According to director Dinh Thi Thanh Tam, for a couple of months now, the company’s order intake has decreased gradually, and they have had to temporarily halt production.
In 2022, Hoa Thuan saw its revenue take a 94 per cent dip, and it has yet to receive its $2.1 million tax refund, leaving the company in ‘dire straits’.
Meanwhile, the company still incurred diverse expenses, such as corporate income tax, bank interest, and payment for workers.
Hoa Thuan has sent dispatches asking for help to diverse management agencies, yet a reasonable response or supportive policies to help the firm have not been forthcoming.
Similarly, Tan Quang Huy, managing director at Huy Brothers Co., Ltd. said, “Rubber is a raw material, so despite order shortfalls, businesses might maintain operations waiting for the market to move. However, not having the tax refund, means businesses are struggling for oxygen and can hardly sustain operations."
Apart from Hoa Thuan and Huy Brothers, many other rubber firms have temporarily halted operation due to failure to sustain pressure from high interest rates and unpaid tax refunds, such as Huynh Hai Nam Import and Export Trading JSC, Viet Phu Thinh Rubber JSC, and Nam Phat Rubber Mechanical Co., Ltd.
Short-term policy support complementing 2025 targets
The government is set to offer more favourable policies to many enterprises that require critical support.
Under a draft report submitted to the National Assembly (NA) Standing Committee, the government has suggested that more new fiscal policies, especially on taxes and fees, be soon designed and enacted to assist enterprises and labourers, therefrom helping to ensure macroeconomic stability and social security. The report will be discussed by the NA over the next few weeks before specific solutions are crafted.
Under Resolution 58, the government requested the Ministry of Finance (MoF) to continue implementing in the short-term tax administration reform for individual business households, and report to the prime minister this quarter.
At the same time, the government has directed the General Department of Vietnam Customs to coordinate with authorities at all levels in simplifying the current administrative processes or consider applying priority import and export processes to help businesses optimise time and costs, as well as speed up the import process and procedures for essential commodities, and accelerate the export of agricultural products and key export commodity groups.
Deputy Minister of Planning and Investment Tran Quoc Phuong last month said that his ministry has advised the government to order all provinces and cities in the country to establish local-level taskforces in charge of helping business projects which are now facing difficulties.
It is expected that the government will issue a new related resolution, with a focus to be laid on continued reductions and exemptions of some types of taxes and fees compiled by the State Bank of Vietnam.
The government last week agreed on a draft NA resolution on VAT reduction until the end of 2023 from 10 to 8 per cent for all types of goods and services. The government will submit the draft resolution for issuance in May or June under simplified procedures.
Specifically, the VAT reduction policy will help businesses reduce 20 per cent of the percentage for tax calculation when issuing value-added invoices, for goods and services currently subject to the 10 per cent tax rate. With this proposal, the MoF estimates, the budget will reduce revenue by $252.2 million per month and $1.52 billion in the second half of 2023.
With the orientation to stimulate economic demand, as well as increase production and business to promote economic development, the MoF also proposed many other support policies, such as lowering the collection rate of 35 fees and charges in the second half of the year equivalent to a decrease in revenue of $30.4 million.
This is the second time Vietnam has introduced a policy to reduce VAT from 10 to 8 per cent. In 2022, Vietnam also applied the policy, but for only some types of goods and services.
Last month, the government promulgated Decree No.12/2023/ND-CP on extending the deadline for paying VAT, corporate income tax (CIT), personal income tax, and land rental in 2023.
The decree stipulates a six-month extension for VAT amounts from March-May and Q1 of 2023; five months’ extension for VAT in June and Q2 of 2023; four months’ extension for July; and a three-month extension for August.
When it comes to the CIT, the decree stipulated that payment would be extended for the temporarily paid sum for Q1 and Q2 of the tax calculation period in 2023. Specifically, the time for payment extension will be three months as from the date of ending the CIT payment time under the tax management law. It is estimated that the value of the CIT payment extension will be around $1.9 billion.
Furthermore, according to Decree 12, the government is applying a six-month extension for paying half of the land rental in 2023 for those renting land from the state. This scheme lasts from May 31 to the end of November.
The General Department of Taxation has required provincial and municipal tax departments to disseminate information to taxpayers in their localities to promptly implement the deadline for paying tax and land rental.
In January, the government also enacted Resolution No.07/NQ-CP on reducing land and water surface rentals for 2022 for those hit by the recent pandemic.
The resolution stipulates a 30 per cent reduction in land and water surface rentals in 2022 for organisations, units, businesses, households, and individuals that were directly leasing land from the state under a decision, or contract, or certificate on land use rights ownership of houses and other land-attached assets of authorised agencies, in the form of land rental featuring an annual payment.
Seafood sector feeling the bite amid high inflation
Seafood businesses saw a plunge in their first quarter (Q1) business results amid weakening global demand, after reaching a peak in Q2 of last year.
Statistics from the five major listed seafood firms, Vinh Hoan Corporation (VHC), Nam Viet JSC (ANV), International Development and Investment JSC (IDI), Minh Phu Seafood Corporation (MPC), and Sao Ta Foods JSC (FMC), show that in the first quarter of this year these firms saw 23.4 per cent drop in revenue, and an 80.4 per cent plunge in profit, on average compared to Q1/2022.
MPC, Vietnam’s largest shrimp producer, saw its revenue drop by almost half last quarter to $92.28 million, and after-tax losses of $4.27 million, compared to a $3.96 million profit for the same period last year. This is the first quarter that MPC has reported a loss since the company went public in 2017.
Vietnam’s largest exporter of basa fish, VHC, posted $96.5 million in revenue, down 32 per cent on-year, and a $9.5 million profit, a dip of 60 per cent, with the gross profit margin ratio falling sharply from 23.8 per cent to 17.3 per cent.
Seafood exporters are under mounting pressure in the face of reduced consumption in the export market and a sharp fall in prices.
At IDI, Q1 revenue fell 5.9 per cent on-year to $76.6 million, but its profit tumbled 91.3 per cent to just $761,300, and its gross profit margin ratio slid from 16.3 per cent to 8.2 per cent.
Figures from the Vietnam Association of Seafood Producers and Exporters show that in April, seafood exports dropped sharply by 28 per cent on-year to just $810 million.
Seafood exporters are under mounting pressure in the face of reduced consumption in the export market and a sharp fall in prices, meanwhile firms are incurring escalating production costs in the domestic market.
By the end of April, the total value of Vietnam's seafood exports for the year so far exceeded $2.6 billion, down 31 per cent on-year. Exports to the US market were down 57 per cent to $418 million, and Chinese exports fell by 37 per cent to $435 million. Other major markets such as South Korea and Japan all saw negative growth compared to a year ago.
The situation is not expected to improve over the next few months, but Viet Dragon Securities' forecast suggests the demand for basa fish in the US market will resume in Q3 after the current inventory sells out.
The weakening demand from almost all of Vietnam’s major seafood export markets comes from inflation pressures, meanwhile, local seafood firms had been pinning their hopes on the gradual reopening of the Chinese market since the start of the year. However, the latest figures from the first four months of 2023 seem to reflect continued weakening demand from China.
Industrial developers eye the effects of upcoming tax regime
Industrial real estate developers must be more proactive in responding to the upcoming global minimum tax policy by improving the quality of industrial zone infrastructure and providing more utilities for their tenants.
As an investor in industrial zone infrastructure, Nguyen Thanh Phuong, general director of Sao Do Group, shared that improving infrastructure and diversifying facilities are the most important issues right now.
He confirmed that when applying the global minimum tax (GMT), due in many nations from next year, the competitiveness in overseas funding attraction will be seriously impacted.
When the GMT is introduced, competition in attracting foreign investment will depend increasingly on the quality and services provided, since the main attraction factors of Vietnam are tax incentives and cheap labour are increasingly fading.
The GMT is an agreement reached by G7 countries in 2021 to combat tax evasion by multinational corporations. The minimum applied level is 15 per cent, for businesses multinational enterprises with total consolidated revenue of €750 million (equivalent to $816 million) or more in two of the last four consecutive years.
Meanwhile, Agustin Redonda from the Switzerland-based Economic Policy Council said that tax incentives are one of the main policy instruments by governments worldwide to beckon investment.
One of the expected outcomes of the new deal is that tax competition among countries will decline. But attracting foreign investors will remain paramount to countries’ prosperity.
It is expected that the GMT policy will be applied in Vietnam from fiscal year 2024, in order to limit the fact that many large companies plan to minimise taxes by transferring profits to other tax havens, or transnational digital business activities without a physical presence.
In response to this new challenge, the government established a special working group on the GMT last August to research and propose solutions to the issue.
Clock ticks to shape response to global corporate tax policy
The global minimum tax will have a bearing on the draw of new foreign-led initiatives in Vietnam.
Starting in 2024, when the South Korean government will impose the global minimum corporate income tax (GMT), Samsung estimates that it will be required to pay an additional $400 million in taxes to South Korea. Taking into account the tax incentive period in Vietnam, the total tax difference this group must pay is estimated to be $6.5 billion, according to data released by Samsung Vietnam last month.
Companies like Samsung are believed to be anxious that the enactment of GMT next year will exacerbate the company’s obstacles, as profits are declining and competition for semiconductor technology is intensifying.
According to the Ministry of Finance, Vietnam has approximately 335 projects with registered capital exceeding $100 million, with a focus on the high-tech industry, including Samsung, Intel, LG, Bosch, Sharp, Panasonic, Foxconn, and Pegatron.
The total registered investment for these categories of initiatives accounts for approximately 30 per cent of the total foreign direct investment (FDI) in Vietnam (approximately $131.3 billion).
As per analysts, the implementation of the GMT in 2024 will have an instantaneous impact on Vietnam’s business climate and system of preferential policies. However, there is the potential to collect at least $512 million annually if this tax is legislated. The average income tax rate on multinational corporations is currently approximately 12.3 per cent.
Le Thi Huyen Trang, director of Research and Consulting at JLL Vietnam, said the GMT policy does not impact the production plans of existing foreign-led projects; it only affects decisions regarding new and expanded investment in Vietnam.
According to Trang, Vietnam still has time to find solutions to this levy. She believes that Vietnam’s strategic location provides it with certain advantages and that the country’s labour and demographic indicators are still balanced.
She cited research from Fulbright University to assert that there will be only a 3-5 year deficit in education if the government does not increase its efforts.
Improving labour capacity is a way for Vietnam to attract FDI without using low-cost labour and tax incentives, Trang explained. According to JLL, Vietnam’s prices are currently more competitive than China’s, but investors also consider Vietnam’s production capacity in addition to labour costs.
Michele Wee, CEO of Standard Chartered Bank (Vietnam), remarked that the government has continuously implemented policies that are transparent and open to criticism, continually fostering FDI in the nation, and this remains unchanged.
All of these indicate that the authorities are going to promote all FDI that advances these national strategies.
Wee added that government policies must be highly adaptable and strategic in order to accommodate emerging market trends.
Samsung to launch Innovation Campus in Da Nang
South Korean electronics giant Samsung will begin educational programmes and training courses for lecturers and students at the central city’s Duy Tan private university in 2023-24 following the Memorandum of Understanding (MoU) on the establishment of Samsung Innovation Campus (SIC) signed on Tuesday.
The MoU, which was signed by Samsung Viet Nam, Duy Tan University and Junior Achievement Viet Nam, will provide an educational programme on Big Data for 25 students at the university before expanding courses in Internet of Things (IoT), Artificial Intelligence (AI), and Coding and Programming in the 2023-24 curriculum.
Samsung will provide electronic equipment and labs to implement the SIC at the university and central Viet Nam.
Students of the University will have a chance to practise at Samsung R&D Centre after completion of SIC training courses and join regular scientific conferences, innovation tech challenges and technology sharing events.
Samsung’s SIC – a global information technology and communications educational programme for ages 14-24 – has involved 6,000 lecturers and students in Viet Nam since its debut in 2019.
Duy Tan University, the first and largest private university in the central region, has educated more than 100,000 students and post-graduate learners to supply high-quality human resources in economics, technology, foreign language, medicine and health, hospitality and international education for the central and Central Highlands regions since 1994.
In a meeting with the General Director of Samsung Viet Nam last year, the central city of Da Nang’s Party Secretary Nguyen Van Quang promised to offer the most favourable conditions for Samsung to expand cooperation and investment in the city and central Viet Nam.
Local telecommunication developer Viettel, in cooperation with Samsung Viet Nam, launched a pilot 5G network project in Da Nang in 2021 – a base for building Da Nang into a ‘smart’ city by 2025.
Da Nang has been calling for investment in information and communications technology (ICT) from South Korea – one of the top five foreign investors in the city – with 233 projects worth US$378 million.
VBA sets out key programmes for 2023
The Viet Nam Blockchain Association (VBA) has announced their four key programmes in 2023 on the occasion of its one-year anniversary of establishment held in HCM City last week.
Phan Duc Trung, VBA’s Standing Vice President, said: “Four action programmes in 2023 include VBA standards, Regtech applications, fundraising support and textbooks. These programmes will concretise the six initial goals set forth by VBA."
Especially, the Chaintracer anti-phishing and SwitchUp business support projects would be given special attention under these programmes. Accordingly, the application of Regulation Technology (Regtech) would be enhanced through the Chaintracer project. This is a blockchain transaction tracing project to promote anti-money laundering (AML) and counter-terrorist financing (CTF) activities.
Regtech are technologies applied to support businesses in legal compliance, which is also one of the six approaches from a FinTech perspective.
Hieu Ngo, a member of VBA’s Information Security Committee, said that common forms of scams are rug pull (developer withdraws money from projects), the announcement of fake ICO/IDO/IEO (issuing shares in the form of tokens), or using malicious code to attack the victim.
As a result, Chaintracer will identify and warn users about such attacks. The Chaintracer platform is committed to investor protection by reviewing on-chain transaction activity and referencing them to known scam models to assess whether a project is a scam. This platform will also analyse market behaviour to identify inflation, and provide analysis of ICO, IDO, and IEO projects for investors to rely on to determine if the project is fraudulent or not.
Supporting businesses is also an orientation VBA is interested in 2023. VBA co-operates with business incubators to focus on start-up activities, speeding up capital raising, and cross-border fundraising through blockchain.
At the event, the association also announced the start-up accelerator programme "SwitchUp" focusing on supporting the development of Blockchain/Web3 projects.
Eric Hung Nguyen, a member of the VBA’s Investment Promotion Board, said this is the leading enterprise support platform for blockchain projects, supporting projects from fundraising, product development and completion to community building.
The SwitchUp programme will coordinate with the National University to promote entrepreneurship in the university environment, co-operate with international universities to conduct student exchange, provide training support, and materials in the fundraising process.
After a year of establishment and development, Viet Nam Blockchain Association has gradually affirmed its position as a connecting organisation sharing values through a series of community events and domestic and international cooperation, promoting standards-setting and data security. The event welcomed 300 guests from ministries, businesses, funds and KOL.
Vietnam becomes RoK’s fourth largest rubber supplier
Vietnam ranked fourth among the Republic of Korea (RoK)’s five largest suppliers of rubber, according to the Import-Export Department under the Ministry of Industry and Trade.
The department cited the General Administration of Vietnam Customs indicating that in the January - April period the country exported 12,470 tonnes of rubber to the RoK for US$18.92 million, up 5.6% in volume but down 15% in value year on year.
The average export price to the market reached US$1,517 per tonne, a drop of 19.5% compared to the same period in 2022.
In the reviewed period, Vietnam mostly exported to the RoK natural rubbers of various types; including SVR 10, SVR CV60 and SVR 3L, making up 28.05%, 24.53% and 14.44% of the total export volume respectively.
The market share of Vietnamese rubber in the RoK market stood at just 5.88%, a sharp decline from 8.36% recorded in the same period last year. Meanwhile, an upturn was seen in its market share in Indonesia, China, the Philippines, Cambodia, and Germany.
Door wide open for Vietnamese lychee to enter overseas markets
Vietnam is putting the finishing touches to the export of its lychee, one of the country’s key fruits for export, to overseas markets, hoping to make a huge profit this year.
The lychee harvesting crop for this year is anticipated to record good growth in terms of both output and export prices.
This year sees Bac Giang province, which is dubbed the capital of Vietnamese lychee, have 29,700 ha of land under lychee cultivation, an increase of 1,600ha compared to last year. It is expected to yield between 180,000 and 200,000 tonnes of the fruit.
Of the total, 15,682ha of land is used for growing lychees according to VietGAP and GlobalGAP standards, with an estimated output of over 100,000 tonnes.
Bac Giang is poised to export 96,000 tonnes, making up 53% of the total output and representing an increase of 15% year on year. So far, more than 200 Chinese dealers have registered to enter and purchase the juicy fruit in the locality.
Currently, the province has been granted dozens of planting area codes for lychee export to China, Thailand, Australia. Japan, and the United States.
Meanwhile, Hai Duong province, which is also one of the country’s main lychee producers, is expected to yield 40,000 tonnes grown according to VietGAP and GlobalGAP standards.
Along with local consumption, Hai Duong is ramping up trade promotion as it seeks to export lychee to traditional markets such as China, the United States, the EU, Australia, and Japan, and to expand into new and potential markets in South America and Africa.
So far, more than 100 planting area codes have been given to export Hai Duong’s lychee to China, Australia, Japan, the US, and Thailand.
Sorting out lychee for local consumption and export.
According to the Import-Export Department under the Ministry of Industry and Trade, Vietnamese lychees are mainly exported to China some EU countries, the US, Australia, the Republic of Korea, Singapore, Thailand, and the Middle East.
Ngo Thi Thu Hong, general director of Ameii Vietnam Joint Stock Company that specialises in exporting agricultural products to highly demanding markets, says there are positive signs ahead for lychee sales overseas this year.
In order to ensure sufficient output as well as quality, Hong says that Ameii has signed consumption contracts with co-operatives and farmers in Hai Duong, with the purchase price about 20% higher than the market price.
For China, To Ngoc Son, deputy director of the Asia-Africa Market Department under the Ministry of Industry and Trade, points out that although the export market signal remains very favourable, the Chinese market is increasingly demanding strict standards and directions towards high-quality products. He therefore suggests that lychee farmers focus on producing quality products in a bid to meet this market’s demands.
Indian firms seek investment opportunities in southern Vietnam
Seventeen Indian businesses have arrived in Ho Chi Minh City in order to seek greater investment opportunities across multiple fields in southern provinces of Vietnam.
They aim to enhance cooperation opportunities with Vietnamese enterprises in the fields of agriculture, garments and textiles, education, fisheries, food processing, railway infrastructure, health, and energy.
At a recent trade exchange held to learn more about the Vietnamese market, Madan Mohan Sethi, consul general of India in Ho Chi Minh City, pointed out that India is currently the country’s seventh largest trading partner, with key areas including agricultural and aquatic products and pharmaceuticals.
The Indian diplomat expressed a keen desire to act as a bridge for future ties between the two countries to promote trade, investment, healthcare, and tourism cooperation.
With regard to the potential for further investment attraction, Nguyen Thi Diem Quynh, deputy director of the Long An provincial Department of Planning and Investment, revealed that as many as 1,200 FDI projects capitalised at about US$10.3 billion have been implementing in the province. Of the total, seven projects valued at US$215 million are invested by Indian firms specializing in food processing, agricultural products, animal feed, garments and textiles.
Long An will prioritise attracting more investment in supporting industries, processing and manufacturing, automation, manufacturing components - electronic equipment and software, industrial semiconductor, artificial intelligence, and urban development, said Quynh.
A representative of the southern province of Dong Nai stressed that there remains plenty of room for further co-operation opportunities between the two countries moving forward.
In fact, import and export turnover between Dong Nai and the Indian market has witnessed a trade surplus over recent years with the province’s key export items to India including plastic raw materials, curtain fabrics, technical fabrics, machinery, equipment, tools and spare parts, fibers, and textile yarns of all kinds.
Meanwhile, Indian businesses also boast strengths in fields such as information technology, biotechnology, education, and health, all of which are areas of interest for the southern province.
Experts suggest caution regarding investments in realty stocks
Given the recent strong gains of many real estate stocks, experts said that there is still room for rallies, but investors need to carefully consider before taking new long positions.
NDN shares of Danang Housing Investment Development and TIG of Thang Long Investment Group soared more than 20 per cent in a month, while in the past two months, ITC shares of Investment and Trading of Real Estate, DIG of DIC Group, API shares of PEC Investment, and IDJ of IDJ Investment climbed by 40-80 per cent.
In the second half of 2022, the real estate stock group tumbled due to declining liquidity, tight credit capital, bond funds and mobilised funds from customers.
The rally waves of realty stocks usually come at the end of the economic cycle or at the end of the stock market’s bullish cycle, Bui Van Huy, director of HCM City Branch at DSC Securities Corporation, told tinnhanhchungkhoan.vn.
Real estate stocks have currently entered the medium-term recovery wave in the long-term downtrend, but the wave usually lasts three to six months, according to Huy.
As the recent wave started in early March, it may last until the beginning of the third quarter. However, investors who open new long positions should consider them carefully because business results are unlikely to improve.
If investors want to invest in real estate equities at this time, they should select companies based on financial status, product sector, project development ability, and land fund.
Meanwhile, Le Duc Khanh, director of the Investment Capacity Development Department of VPS Securities Company, recommended that investors focus on stocks whose basic values are assessed and choose typical stocks to invest in.
In fact, the market contains speculative elements, so there are times when cash flows are injected without reflecting the fundamentals, according to Khanh.
Therefore, investors need to carefully scrutinise to be able to decide when to trade short-term, medium-term, or long-term.
According to WiGroup's statistics, in the first quarter of 2023, the residential real estate industry recorded a net profit growth of 72.7 per cent year-on-year.
However, the growth driver of the whole industry only came from Vinhomes (VHM), which accounted for nearly 90 per cent of the industry's profit. If excluding VHM, the total profit of enterprises is only VND718 billion (US$30.6 million), down 72.3 per cent over last year.
In addition, during the period, the total value of inventory and construction in progress of residential real estate businesses decreased by only 3.8 per cent, the prepayment of buyers decreased by about 6 per cent over the previous quarter.
Therefore, the real estate stock group’s recent rally waves are most likely thanks to the pushing up of speculative cash flows, based on information such as cooling interest rates, some policies to support the real estate market, and a technical recovery after the previous strong correction.
The reversal trend in stocks has not been based on a change in the nature of the industry, so investors need to recognise this to avoid unrealistic expectations.
Trinh Thanh Can, CEO of Kafi Securities Company, said that the realty stocks group would continue to attract cash flows in the near term, with the expectation of benefiting from the policies to remove legal difficulties, support the bond market, or moves of the State Bank to lower operating interest rates.
However, according to Kafi Securities, interest rates and credit are the great risks of the industry. The change in interest rates and difficulties in accessing capital may affect investment and development of real estate projects.
Property developers are expected to have difficulty raising finance and collaborating with banks. On the demand side, rising interest rates make homebuying difficult owing to higher capital costs and decreased financial capability. This has an impact on the profitability of commercial real estate firms.
Support policies must be practical for firms
Experts have said that the support policies must be practical to ensure accessibility for enterprises.
Several support measures introduced recently have proven not as effective as expected.
Recently, the State Bank of Viet Nam proposed the undisbursed part of the 2 per cent interest rate support package, worth up to VND40 trillion, to be transferred into other forms of support.
Statistics showed that only around VND256 billion of the package was disbursed to 1,784 customers as of the end of February. It was forecast that about VND2.57 trillion would be disbursed by the end of this year when the package expired. This would mean that only six per cent of the package was disbursed, leaving a huge sum of more than VND37.4 trillion unspent.
Ha Thu Giang, Director of the Credit Department under the central bank, said that enterprises needed support such as capital sources or tax reduction rather than interest rate support.
The central bank sent the evaluation of the support package to the Ministry of Planning and Investment for consideration of using the undisbursed sum for other forms of support which were more feasible.
Previously, a survey of the Viet Nam Chamber of Commerce and Industry in 2022 found that 29.5 per cent of enterprises heard about the support package but only two per cent received loans from the 2 per cent interest rate support package. More than 56 per cent of enterprises said they faced difficulties when accessing the loans.
Nguyen Xuan Thong, Deputy General Secretary of the Ha Noi Association of Small and Medium-Sized Enterprises, said that the conditions of the loans from the support package presented a significant difficulty to enterprises.
Regarding the proposal of the central bank to transfer the undisbursed sum of the 2 per cent interest rate support package into other forms of support, many experts said this should be the way to go and must be implemented as early as possible.
Pham Xuan Hoe, former Director of Banking Strategy Institute, said it was difficult for enterprises to meet the requirements for the loans, especially in the context that property assets were going down.
The support package should be transformed into funds to provide trust-based guarantees for small and medium-sized enterprises, he said.
Cao Viet Sinh, former Deputy Minister of Planning and Investment, said that the resource from the 2 per cent interest rate support should be used to provide other forms of support such as tax and fee reductions or to accelerate public investment.
Nguyen Quoc Viet, Deputy Director of the Viet Nam Institute for Economic and Policy Research, said if the package could not be changed immediately, it was pressing to remove obstacles which required banks and customers to sit down together to find out problems and solutions, so that the credit flow could be improved.
Another opinion was that the support package should be provided for the development of social housing projects or housing projects for workers, a focus of credit policy to ensure social security.
Statistics showed that Viet Nam would need around VND849.5 trillion to develop more than 1 million apartments for low-income earners by 2030.
Ha Noi supports industrial development
In order to achieve the target of industrial development to reach 7-7.5 per cent this year, the capital city of Ha Noi has been implementing a series of solutions to support industrial enterprises in the locality.
Data from the Ha Noi Statistics Office showed that the industrial production index (IIP) is estimated to grow by 3.3 per cent last month over the previous month and by 3.6 per cent over the same period last year.
The index in the first four months of this year rose by 1.6 per cent over the same period last year.
The labour utilisation index of industrial enterprises in the first four months of the year fell by 3.6 per cent over the same period last year.
The city had 2,900 newly-registered enterprises last month, a year-on-year increase of 15 per cent.
The city had 10,300 newly-registered enterprises in the first four months, up 13 per cent year-on-year.
Talking about the 1.6 per cent growth of industrial production, Tran Thi Phuong Lan, acting director of Ha Noi Department of Industry and Trade, said that the reason was due to the city’s socioeconomic situation, which takes place in a complicated global context.
Facing common difficulties, the capital city had directed its Department of Industry and Trade and other departments in the area to implement synchronous and drastic solutions to promote economic recovery and development.
Therefore, the macroeconomic situation remained stable, inflation was controlled, and social security was ensured.
The municipal Party Committee, People's Council and City People's Committee had focused on directing all levels, branches and localities to promote economic growth, speeding up socio-economic recovery and industrial production from the beginning of the year.
In particular, Ha Noi would develop plans to organise fairs and exhibitions, connect businesses in supporting and key industries, so that companies could meet domestic and foreign partners to exchange, deploy and apply scientific and technical advances, connect consumption of machinery products, industrial equipment and proceed to export.
Besides organising specialised fairs of supporting industry products and key industrial products, most recently, the city has also organised a fair of industrial products, machinery and equipment and automation with the participation of domestic and foreign supporting industry enterprises from South Korea, Japan, Taiwan (China), Hong Kong (China), and Thailand.
Through fairs and exhibitions, enterprises manufacturing and trading supporting industrial products, machinery and equipment of Ha Noi in particular and the whole country, in general, could introduce and promote products, and connect production between enterprises in the supply chain, said Lan.
It would help raise standards of quality and competitiveness of products, meeting customers' needs.
Besides the support of the authorities, now businesses in the capital were also trying to maintain and develop production, said Lan.
Notably, the industrial production index of enterprises in Ha Noi last year grew significantly more than in the first quarter of this year, showing that industrial enterprises in the city had gradually stabilised, she added.
Businesses were actively seeking orders in the industrial field. Companies are also searching for new markets while maintaining and keeping the traditional markets.
Besides organising fairs, exhibitions, and trade promotion programmes to promote industrial development, Lan said that the Ha Noi Department of Industry and Trade would continue to carefully monitor and grasp the difficulties and problems of enterprises to propose to the competent authorities and especially the Ha Noi People's Committee to solve them promptly.
In addition, the city would support businesses in the fields of capital, science and technology, and trade promotion so that companies could continue to promote development and retain labourers.