Source : Straits Times - 15 Jul 2008
KEPPEL Land (KepLand) remains bullish about the Vietnamese market despite the country’s widening trade deficit and soaring inflation.
Singapore’s third-largest developer said Vietnam’s economic woes had sparked fears of a possible devaluation of the dong.
However, this would be unlikely to have a major impact on KepLand’s projects there as its rental income and residential sales are priced in US dollars, KepLand said in one of its regular investor updates yesterday which it posted on the Singapore Exchange website.
Vietnam is facing some of its biggest economic challenges. Annual inflation has been in the double digits for seven straight months - soaring to 25.2 per cent in May.
Rising prices have outpaced wage increases and have fuelled labour unrest, with factories hit by 295 strikes in the first three months of this year.
KepLand said first-half economic data was slightly more encouraging. A total of US$31.6 billion (S$42.8 billion) in foreign direct investment had been pledged in the first half, up 3.7 times year on year.
It also believes that the challenging conditions have had some positive impact, with speculative buyers retreating and smaller, non-reputable developers being forced out of the market due to the liquidity crunch.
‘There are opportunities for land banking for developers with strong balance sheets and cashflow.’
KepLand currently has $360 million of assets in Vietnam which accounted for 6.5 per cent of the group’s total assets in the first quarter of the year.
It said that the short-term impact of the current financial difficulties on its Vietnam ventures will not be significant as the bulk of its joint ventures there are with reputable and strong local partners in deals which minimise KepLand’s cash outlays.
And with a critical mass of projects which allow for cost-savings as well as strategic partnerships with key contractors and suppliers ensuring competitive rates, KepLand said it is able to enjoy economies of scale which mitigate rising construction costs.
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