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Banks finally begin to trim interest rates

Update: April, 16/2012 - 10:13

by Thuy Anh

Four weeks after the deposit interest rate ceiling was cut to 13 per cent from 14 per cent, it was cut by another percentage point last Wednesday to 12 per cent.

Just like last time, banks have started to announce cuts in lending rates too. The Bank for Investment and Development cut then by 1.5-2.5 per cent to 14.5 per cent for short-term loans and 13 – 14 per cent for priority sectors like agriculture and exports.

The HSBC reduced mortgage rates by a percentage point, with the floor rate falling to 17 per cent.

Eximbank Viet Nam has earmarked VND6 trillion (US$290 million) for priority customers such as exporters, manufacturers, small- and medium-sized enterprises, household businesses, and low-income earners to buy houses at an interest rate of 16.5 per cent.

Techcombank will lend VND4 trillion ($192.3 million) to such customers at 15 per cent.

However, rates generally remain high since the cheaper loans are limited either by the amounts allocated or categories of customers.

Sacombank for example earmarked VND1 trillion for loans of up to 12 months for the farming, fishing and forestry sectors at a mere 12 per cent in the first month of the term, then the rates could go up to 19.5 per cent.

A local newspaper quoted Tran Quoc Manh, vice chairman of the HCM City Handicraft and Wood Industry Association, as saying that the one percentage point cut was of little benefit in the context that tens of thousands of enterprises were going bankrupt because of the high interest rates.

There are mutters that banks are the only beneficiaries of the interest rate regime. But it is a fact that a number of banks still illegally offer deposit interest rates of more than the regulated 12 per cent, which pushes up their cost.

There are suggestions that the State Bank of Viet Nam should also cap lending interest rates to ensure that not only banks but also customers benefit.

On their part, banks face a major risk of bad debts since too many businesses are floundering while they have large volumes of products in stock.

City property market stalls

There are growing signs of a stalemate in HCM City's residential market, with prices in the primary market seeing little change in the first quarter.

"What we are seeing is a face-off between developers and buyers," said Marc Townsend, managing director of CBRE Viet Nam.

"Residential buyers will not buy property if they think prices will go down in the future.

"They simply expect prices to be lower next quarter and thus will not re-enter the market, while developers are attempting to show, in some cases, there is little more to give for, for over a year, they have offered discounts, gifts and lucky draws, and that has not turned the residential market around."

Adam Bury, CBRE's research and consulting senior manager, says with the economy now appearing more stable, calmer inflation, lower interest rates, and a rising stock market, developers, a couple of whom have had reasonable sales in March, may now feel the market is approaching the bottom.

If all this is true, buyers may have the confidence to reengage the market in the next two to three quarters, he adds.

But secondary prices continued to fall in the first quarter. The rate of decline also increased, with luxury, high-end and affordable flats recording a larger decline than the previous seven quarters.

The average asking price was $3,960 per square meter for luxury apartments, a 4 per cent q-o-q fall and 9.4 per cent y-o-y. It was $1,763 for high-end units, $902 at the mid-end, and $702 for affordable units, all falling by various degrees.

"Clearly there is still distress in the residential market, with owners finding it beneficial to reduce their prices in order to sell their units," Townsend says.

The affordable segment dominated the new completions in the first quarter, with 862 units in five projects hitting the market. They accounted for 65.5 per cent of all completions.

The segment has a larger target market than luxury projects, and in that respect it is not surprising that these projects were completed despite the continuing slump.

Michael Piro, country director for Viet Nam Sotheby's International Realty, says it is now the right time for buying luxury residences since prices have already declined, and buyers can have a look at properties already built rather than just on paper.

Women shatter glass ceiling

More and more women are climbing to senior management positions, with the number rising to 27 per cent now from 24 per cent a year ago.

It gives Viet Nam the 17th place on a list of 40 countries surveyed, according to a report by the auditing and consulting firm Grant Thornton.

But in Southeast Asia, other places like Thailand, the Philippines, Malaysia and Hong Kong are seeing the number of senior women managers gradually falling.

"The Government has been encouraging a programme of gender equality in the work-place," says Nguyen Thi Vinh Ha, deputy general director of Grant Thornton Viet Nam.

"The effort, together with an increase in the standard of education, has helped move the figures in the right direction."

The proportion of women holding senior management roles in Europe is also steadily increasing – despite rising unemployment – going up from 17 per cent in 2004 to 24 per cent in 2012.

But with the reverse being true in emerging markets, the global average remains at 21 per cent, barely higher than the 2004 level. — VNS

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