Read and follow the top economic indicators for Vietnam, M&A activity, and major developments in finance, banking, and legal. Published Monthly with contribution from LNT & Partners Law Firm.

1. > Investment Digest
Vietnam
COLLIERS INTERNATIONAL
November | 2013
Market Indicators
30-Day
Trend
Indicator
Overview
October
September
Date
The
macroeconomic
stability of
Vietnam
continues to make gains. GDP growth continues
10 year bond yield
9.15%
8.84%
10/30
Credit Market
+7.18% ytd
+6.48%
11/1
Deposit Rate
7% - 9%
7%
10/30
Deposits
+13% - 16%
+11.74% - 13.78% ytd
10/28
Enery Prices
unchanged
unchanged
10/30
Exp/Imp
+13.4% / +17.6% yoy
+15.7% / +15.5% yoy
10/29
posting high gains in Aug and Sept. The official
FDI
+65.5% yoy to $19.2b
+36% yoy to $15b
10/30
exchange rate continues to remain stable at
FDI Disbursement
+6.4% yoy to $9.6b
+6.4% yoy
10/30
21000. Forex reserves continue to grow at
Fitch
B+
B+
11/2
$32b, provisioning against 12 weeks-worth of
GDP
+5.5% Q3, +5.2% ytd
+5.14% ytd
10/21
imports.
Inflation
+5.14% ytd, 6.74% yoy
+4.63% ytd, 7.5% yoy
10/24
Lending Rate
7-9% short, 9-11% long 7-9% short, 9-11% long
Moody’s
B2
B2
Overnight Rate
3.71%
2.77%
PMI
51.5
49.4
11/1
Refinance Rate
7%
7%
10/30
Repurchase Rate
5.5%
5.5%
10/30
Retail Sales
12.6% yoy
+13.7% yoy
11/1
restructuring and consolidation continue to take
Standard & Poors
BB-
BB-
11/2
steps as smaller banks merge such as HD Bank
VND-USD
21,098
21,117
11/1
and Dai A Bank and PetroVietnam Finance Corp
VN-Index
497.41, +18.9% ytd
492.63, +17.7% ytd
10/26
11/2
10/29
10/31
to accelerate quarter over quarter posting 5.5%
growth in Q3.
Inflation has slowed in October to 0.49% after
Exports continue their torrid growth, primarily
fueled by FDI operations. Credit growth of
6.48%, while unlikely to reach 12% by EOY, has
been strong in recent months after contraction
in the first couple of months of the year. Banking
and Western Bank in September.
*Arrows indicate monthly trends
**Data is accurate as reported by the source on the indicated date
1
Vietnam Investment Digest | November 2013 | Market Indicators
COLLIERS INTERNATIONAL

2. Investment Manager’s Letter
Early numbers indicate a continued strengthening of the
5.14% GDP growth in the first three quarters over the same
investment environment from both a macro and micro view.
period in 2012. However, Vietnam’s growth is dwarfed by
Key indicators have continued their upward trend from Q2 into
neighboring countries such as the Philippines (>7%) and
the end of the year as displayed on page 1. There are three
China (>7%). As you will see, domestic industrial output, retail
things to watch as you consider investing in Vietnam.
growth, and credit growth are showing slow gains. To make
the most of the current FDI interest, Vietnam must focus on
In the banking and finance sector, continue to watch Vietnam
areas of talent transfer, support industries, and oversight to
Asset Management Company (VAMC) and State Bank of
bring domestic industry up to world standard.
Vietnam’s (SBV) handling of non-performing loans (NPL).
The current mechanism serves only to add near-term liquidity
On the whole, 2013 has shown much progress over the
to a sector that is already awash with capital and continues
year before, but there is much work yet to be done. In this
to struggle to lend in a market void of demand. Without a debt
environment, “distressed” assets are not yet internationally
trading market or other similar market mechanism, these
accessible for most. I believe the opportunities lie in investing
NPLs will remain out of reach.
with an eye on 2016-2020 in the mid-end residential and
commercial office space. Once domestic demand kicks in
Secondly, keep an eye on the SBV’s handling of the currency.
early-to-mid next year, the limited office space in Vietnam
According to various industry insiders and others looking
will fill quickly and flip the market to a seller’s orientation. In
in, the VND is still over-valued and will be a source of
the industrial and manufacturing space the government, with
additional volatility. While Vietnam’s forex reserves are now
support from FDI operations, has been making a strong push
approximately $32 billion, a quick devaluation can still wipe
to incentivize support industries and increase localization.
this out. Additionally, Vietnam is looking to increase its fiscal
Many opportunities abound in Vietnam and can be uncovered
deficit to pay for an increase in public spending in target
with the right focus.
sectors and infrastructure to stimulate domestic demand.
Finally, pay attention to the lackluster growth of domestic
demand. The tremendous growth and health of the FDI sector
KYNAM DOAN
Investment Manager
While Vietnam is by no means struggling, as indicated by a
kynam.doan@colliers.com
+84 1223 128 032
2
COLLIERS INTERNATIONAL
has overshadowed a troubling stagnation of domestic demand.
Vietnam Investment Digest | November 2013 | Investment Manager’s Letter

3. VIETNAM INVESTMENT DIGEST | NOVEMBER 2013
Investment News
VAMC
CURRENCY
The VAMC has purchased VND 11.1 trillion of bad debts from 14
banks by the end of October according to VAMC’s VP Mr. Nguyen
Quoc Hung. Approximately 67% of these bad debts are secured by
real estate and 22% are in manufacturing. The VAMC purchases
these debts with special 5-year, zero-coupon bonds and require the
Following the 1% devaluation of the VND in June, the SBV plans
to further devalue the currency by 2% before the end of the year,
seller to provision 20% of the value of the debt annually.
according to PM Nguyen Tan Dung.
Several forces may be depressing the value of the VND including the
strengthening economy of economies that have traditionally invested
heavily in Vietnam like Japan, America, Australia, Singapore, and
However, as mentioned previously, the current mechanism only
serves to buy lenders a little time while further locking up the
underlying asset. Currently, there is no clear procedure or legal
framework for the VAMC and other lenders to list their bad debts
and for investors to find, assess, and bid for these assets. Until a
mechanism that can approximate a debt trading market is set up,
member-states of Europe.
these bad debts will remain out of reach.
INDUSTRIAL GROWTH
Additionally, while banks can refinance up to 70% of the value of
these bonds, no banks have yet done so – indicating healthy liquidity
among Vietnam’s lenders.
RETAIL
Low interest rates coupled with double-digit deposit growth and the
imperative to increase credit by 12% in FY13 may lead to higherthan-expected inflation once domestic demand returns, which would
then depress the dong further.
Industrial production has seen significant progress in the third
quarter of this year compared to the two previous quarters. These
achievements resulted from the development of the processing and
manufacturing sector with high manufacturing and consumption of
export products.
Industrial Production index year to date has increased 5.4% year over
year. Of the ten months’ 5.4% general growth rate, the manufacturing
contributed 4.9%.
Among the highest growth in manufacturing are textile industry with
the year to date increase of 19.9% year over year, leather and related
products with the increase of 16.3% year over year, prefabricated
metal products and motored vehicles with the rise of 13.7% year over
year and 12.9% year over year.
Vietnam’s total retail sales and service revenues were estimated to
have increased by 12.6% year over year to VND 2,159 trillion ($100.21
billion) in the first 10 months of 2013, the General Statistics Office
(GSO) said on its website.
The trade sector contributed 76.8% of the country’s total retail sales
and service turnovers with VND 1,657.8 trillion, increasing 12.1%
year over year. Hotel, restaurant sector accounted for 12.1% of the
country's total with VND260.2 trillion, rising 14.9% year over year.
Service sector accounted for 10.2% with VND 220.2 trillion, rising
14.8% year over year. Tourism sector contributed 0.9% or VND 20.3
trillion, up 3.1% year over year.
However, If price hike is excluded, the retail growth rate would be
5.5% which is lower than the rise by 6.8% (price hike excluded) in
the same period last year. This slow recovery is troubling and casts
Industrial investment is focused on Ho Chi Minh City, Dong Nai, Ba
Ria-Vung Tau, Hanoi, Binh Duong and Bac Ninh. These six localities
are making up nearly 70 percent of total industrial production value
of the country.
WORLD BANK – VIETNAM RANKS 99TH IN
EASE OF DOING BUSINES
While Vietnam has improved its business environment slightly, it still
dropped 1 spot to 99th from 98th. The marginal improvement of 69
basis points to 61.13% in 2014 over 2013 lags behind the region.
The subcategory, “Protecting Investors,” gained the most, jumping
12 spots to 157 (out of 189) and “Paying Taxes” lost the most, falling
4 spots to 149. Vietnam has increased employers’ social security
contribution rate, contributing to the 4-spot drop in that category.
a shadow over much of the other positive growth data.
3
Vietnam Investment Digest | November 2013 | Investment News
COLLIERS INTERNATIONAL

4. VIETNAM INVESTMENT DIGEST | NOVEMBER 2013
Investment News
RESIDENTIAL REAL ESTATE INVENTORY AT
$4.85 BILLION, DOWN 20% FROM APRIL
According to the Ministry of Construction, the value of real estate
inventory fell $200 million to $4.85 billion in September from Aug (a
4% drop) and $1.23 billion from April (a 20% drop) with low-income
housing leading the way. Inventories in the two largest markets, Ho
Chi Minh City and Hanoi, have dropped by 16.1% and 15% to $1.05
billion and $0.69 billion respectively in September compared to
August.
Four major factors are thawing the residential sector:
1. Real demand is returning and home buyer sentiment has improved.
It is consensus that residential prices are near or at the bottom
with certain products returning to the level of seven years ago.
2. The government has additionally helped push the affordable market
with preferential 6% loans to both home buyers and developers.
3. Developers have reduced prices sufficiently to meet market
demand. Prices have fallen 10%-30% across the industry and
even as much as 50% in the case of Novaland’s Sunrise City.
4. Developers have also added flexibility and other incentives, such
as Osaka Garden’s offer of free foundations for land lot purchases,
Estella’s extended payment terms of 50% down and zerointerest payments over two years, and Vingroup’s offer of free
management service in Royal City, Times City, and Vincom Village.
OCTOBER’S PMI OF 51.5 POINTS MEETS
EXPECTATION
HSBC’s Vietnam Manufacturing Purchasing Managers’ Index (PMI)
has risen two months in a row to 51.5 after four months of decline
earlier this year and is the best reading since April 2011, the first
month PMI was recorded. According to HSBC, this is a strong
indication that demand has returned and the manufacturing sector
has returned to output growth. Payrolls have continued to expand
and companies are anticipating further production growth.
New work has increased for the second month in a row and has led
to a rise in production. Additionally, faced with increasing average
input costs, manufacturers have increased their charges for the first
time since March.
M&A
»» Seafood companies Hung Vuong Corp and Minh Phu – Hau Giang
Seafood Processing Company have sold $42.3 million and $12.5
million in shares to foreign partners.
»» Viettel purchased 70% of Cam Pha Cement, worth approximately
$6.7 million.
»» REE Corp increased their investment in Pha Lai Heat and Thu Duc
Water of $1.9 million and $1.2 million.
»» Thien Minh Group acquired 89% of Hai Au Airline for approximately
$2.5 million
OTHER NOTES
»» Metro line 1 is being further delayed because nearly 100
households in Thu Duc and Di An have yet to hand over their sites.
This will cost the city up to USD$119,000 (VND 2.5b) per day. Line
No. 1 was initially estimated to cost USD$1.09 billion, but has now
ballooned to USD$2.07 billion.
»» In the January-September period, tax collection from the State
sector was 2% lower year on year, while tax payments from the
foreign direct investment sector rose 30%, and that from the local,
non-State sector increased 18%.
»» PM Dung signed Decision 61/2003/QD-TTg on October 25
approving the release of 6 types of national data needed to rate
the country’s credit.
»» Vietnam’s Ho Chi Minh City Stock Exchange (HOSE) became an
official member of the World Federation of Exchanges on October
29.
»» China’s Manufacturing PMI (CPMINDX) climbs to 51.4, NonReceive this and other reports by joining our group:
http://bit.ly/investVN
Manufacturing PMI (CPMINMAN) jumps to 56.3 and continues its
steep climb from Aug (53.9) and Oct (55.4). South Korea’s PMI
Increased to 50.2 in Oct from a local min of 47.2 in July. Taiwan’s
PMI increased to 53 in Oct from 52 and Japan’s PMI Increased to
54.2 in Oct from 52.5.
4
Vietnam Investment Digest | November 2013 | Investment News
COLLIERS INTERNATIONAL

5. VIETNAM INVESTMENT DIGEST | NOVEMBER 2013
Major Economic Indicators
FDI
TRADE
FDI has been accelerating quickly over Q3 and into Q4. Total FDI
stands at $19.2 billion, a rise of 65.5%, while disbursed FDI stands at
$9.6 billion, a rise of 6.4%. This total far outstrips the government’s
target of $13-$14 billion.
Exports have reached $107.97 billion and imports, $108.16 billion. Both
represent an increase of 15.2% over the same period last year. While
overall exports continue to grow strongly, domestic-based exports
increased only 3% to $35.9 billion – underperforming inflation.
Korea and Singapore lead all other countries with pledged investments
of $3.6 billion and $2.7 billion respectively. Manufacturing and
processing lead all categories with $14.9 billion, or 78% of the total
pledged.
In October, there were two major investments of $2 billion by China
Southern Power Grid Company and China Power International
Holdings in a 1,200MW thermal power plant and $1.2 billion by
Samsung.
INFLATION
Industrial production has seen significant progress in the third
Inflation in October slowed to an estimated 0.49% month-overmonth after increasing sharply in September by 1.06% and August
by 0.83% according to the GSO. In the first 10 months of the year,
inflation is 5.14%, well within range of the target of 7.05%. Topping
gains were food by 0.91%, education by 0.53% and housing and
construction materials by 0.50%.
VN-INDEX
October ended the month at 497.41, up slightly from September’s
close of 492.63. Foreigners continued to be net buyers two months
in a row propping the index near 500 due to indications that the US
will continue its quantitative easing due to lackluster employment
data.
GDP
10M/2013 GDP stands at 5.14%, higher than last year’s 5.1%. GDP
grew 5.54% in Q3, 5% in Q2, and 4.76% in Q1. Analysts expect a
GDP growth of approximately 5.6%-5.7% in Q4, increasing 2013’s
growth to 5.2%-5.3%. The manufacturing sector is leading the way,
improving 8.6% yoy in Q3.
CREDIT GROWTH TARGET OF 12% OUT OF REACH
Lenders are awash in capital, but are struggling to maintain lending
standards while attempting to attain year-end credit growth goals.
Because of the lack of credit demand by domestic business, banks
would have to significantly lower their risk standards to reach 12%
by year end.
BUDGET DEFICIT CAP TO 5.3%
The National Assembly is also preparing to vote on raising the budget
deficit cap to 5.3% by issuing $8.1 billion in bonds. They are hoping
to raise capital to further invest in infrastructure.
FOREX RESERVES
Vietnam’s foreign exchange reserves are estimated at $32 billion, or
12 weeks of imports. This figure is 60% higher than the $20 billion in
reserves at the end of December 2012. SBVs focus on shoring up the
forex reserves will help mitigate inflationary pressures and foreign
withdrawal when the US begins to slow its quantitative easing of $85
billion per month. The Fed has indicated that they would continue
with this level of QE given recent lackluster employment numbers
and GDP growth.
5
Vietnam Investment Digest | November 2013 | Investment News
COLLIERS INTERNATIONAL

6. VIETNAM INVESTMENT DIGEST | NOVEMBER 2013
Legal Brief
CIRCULAR NO. 141/2013/TT-BTC
A new circular by the Minister of Finance guiding Decree No.
92/2013/ND-CP, which guided the Law on Corporate Income Tax
and Law on Value-added Tax amendments, was issued on 16 October
2013 and will take effect from 30 November 2013. Accordingly, from
1 July 2013, the VAT rate applied for the sale, lease, hire or purchase
of social houses will only be 5%. Notably, from 1 July 2013 until
30 June 2014, the sale, lease or lease for purchase of commercial
houses with a floor area of under 70m2 and a sale price of less than
VND 15 million/m2 will attract a 50% reduced rate of VAT to 10%.
DECREE NO. 121/2013/ND-CP
From 30 November 2013, Decree No. 121/2013/ND-CP will take effect
and replace Decree No. 23/2009/ND-CP on administrative sanctions
in the activities of construction, real estate business, exploiting,
manufacturing and trading of building materials, infrastructure
management, development and management of houses and offices.
In these fields, the maximum level of fines is VND 300,000,000.
Furthermore, the statute of limitations for handling administrative
violations on real estate business, manufacturing and trading of
building materials and infrastructure management is 1 year.
FOREIGN INVESTORS MAY HAVE THE RIGHT
TO SUB-LEASE REAL ESTATE
The abovementioned is referred to in the draft amendments to
the Law on Real Estate Business, which will be submitted to the
Government. The proposed law, if passed, will expand the rights of
foreign investors to sub-lease real estate. This will be a significant
improvement from the current law, which permits foreign investors
to only invest in new projects for sale or leasing.
COLLIERS INTERNATIONAL VN
General Director
Peter.Dinning@colliers.com
Investment Manager | HCMC
KyNam.Doan@colliers.com
Investment Manager | Hanoi
Tung.Nguyen@colliers.com
+
+
Reach out to the Vietnamese
investment community. To contribute
to Colliers’ Investment Digest,
contact kynam.doan@colliers.com
MONTHLY INVESTMENT DIGEST
This brief is published monthly by Colliers Vietnam Investment Services, led by
Peter Dinning and KyNam Doan, with the assistance of our legal partner, LNTPartners. We advise an asset portfolio that focuses on appropriate returns to
match diverse risk-return profiles. Our portfolio tracks a wide range of assets
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Vietnam with offices in Ho Chi Minh City, Hanoi, Hong Kong, and San Francisco.
multinational and domestic clients, including Fortune Global 500 companies as
well as well-known Vietnamese listed companies on a variety of business and
investment matters.
6
Vietnam Investment Digest | November 2013 | Legal Brief

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PETER DINNING
General Director
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+84 903 322 344
KYNAM DOAN
Investment Manager
kynam.doan@colliers.com
+84 1223 128 032
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