Vietnam

After a long silence on Vietnam since three years ago, I am turning positive again on it. Couple of my friends just came back from tour of duty and their ground feeling is that Vietnam remains a land of opportunity with rising middle class from a large population base of 85 million – the 15th most populous country in the world. The rising affluence of the middle class is apparent judging by the strong take up rate for Berjaya Land and SP Setia launches and the sprouting of more luxury brands such as Gucci, LV, Bally and more vehicles on the road.

There are now five 100% owned foreign banks namely HSBC, ANZ, Standard Chartered, Hong Leong and Shinhan Bank, Korea and credit card growth appears to be very fast developing service with Vietnam being predominantly a cash economy. But banks need applicants to deposit 120% of the maximum limit in saving accounts, while housing loans are increasing with tenures up to 10 years and loan amount of 70% of total purchase price.

Property market activity continued to remain robust. Rapid middle class, urbanization and improvement in transportation system in HCMC with metro lines, more highways and sky trains will boost property prices further. There seems to be strong preference for well-planned, mid-end township developments, judging by Phu My Hung in HCMC and Ciputra in Hanoi. According to a property developer, there will be an increase in residential launches in 2Q10 and likely to be skewed towards high rise developments. The affordable housing markets – US$1,000 to US$1,600 sq meter and below, have the most potential. District 2 and 7 are the more popular township residential areas. There are still very tight restrictions on foreign ownership of property. Only very high ranking foreigners are allowed to own property and this is limited to condominiums.

More investments are flowing in. There is increasing interest from the Spanish and Korean governments while China investments are more concentrated in Hanoi. Japan is more focused in the industrial sector.

Consumer spending, which constitutes 65% of GDP is the anchor of the economy. The number of credit card users has hit 20% versus 7% when Parkson first opened. Levis brand during peak periods can rake in US$70,000 per month.

Dong is likely to hold steadily with mild risk of more devaluation this year. The State Bank of Vietnam has devalued the Dong by a total of 9% since end-2009, which has helped the trade deficit. Since then, the government has implemented a series of fiscal and monetary tightening measures that were effective in stabilizing the currency. Reserve requirements were raised from 5% to 11% and the State Bank of Vietnam increased the policy base rate to 14%.