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Are banks reviving love affair with property?

Update: November, 30/2015 - 10:28
HSBC VN has signed a deal with Singapore-based CapitaLand to fund luxury apartment project Seasons Avenue in Ha Noi. — File Photo

by Thien Ly

The HCMC Development Commercial Bank (HDBank) has signed an agreement with the Saigon Real Estate Joint Stock Company (SAIGONRES) to provide credit and financial guarantees.

It will lend VND1.09 trillion ($48.63 million) to SAIGONRES at 6.8 per cent interest for the SAIGONRES PLAZA residential project.

The bank will also lend VND1 trillion ($45.84 million) to the G5 Real Estate Company to develop a housing project.

The Orient Commercial Joint Stock Bank has provided guarantees for Western Dragon, Topaz City and Diamond Lotus housing projects.

Some foreign banks are also keen to back property developments.

HSBC VN has signed a deal with Singapore-based CapitaLand to fund luxury apartment project Seasons Avenue in Ha Noi.

The State Bank of Vietnam reported in early September that loans outstanding to the property sector grew 13 per cent this year and accounted for 8 per cent of the total figure.

Its HCM City branch said that this year growth in lending to the property sector in the city was up 4.5 per cent to VND20 trillion (nearly $888.9 million) out of banks' total loans estimated at VND146 trillion (nearly $6.49 billion).

Many analysts see the banks' further capital injection into the real estate sector as a good sign.

Lenders are trying to expand their share of the property market since it is recovering strongly after a prolonged slowdown.

Others attribute banks' increasing lending to the property sector to their desire to increase credit growth so that their future credit growth quotas will be increased.

But many also fear that increasing credit could again cause a bubble.

The pumping in funds by banks has been a major contributor to the recent housing recovery, but they need to ensure transparency and the effectiveness of their investments to avoid a market collapse, according to analysts.

Risk is rising in the market, including because of banks' lending and guarantees.

Recognising that many banks are now ready to underwrite property projects, some developers try to con buyers by spreading rumours that their projects are guaranteed even when they are not.

Analysts have warned buyers not to be carried away by the exuberance in the market and to be careful because many housing projects stall or have their licences revoked due to various reasons, one of which is tardy construction progress.

According the HCMC Department of Construction, the city has to date had 41 per cent or 502 out of 1,219 residential projects that were forced to stop construction or unable to start construction. As many as 189 projects have investment licences revoked because of a lack of legal procedures.

Airlines join in a new race

At the Dubai Air Show in early November, budget carrier VietJet signed an agreement with Airbus to buy 30 A321 aircraft worth $3.6 billion at list prices.

The deal is for nine A321 ceo and 21 A321neo aircraft.

Last year at the Singapore Airshow VietJet had signed a contract to buy and lease 100 aircrafts from Airbus.

In July this year Vietnam Airlines signed a $1.55 billion deal to buy eight Boeing Dreamliner aircraft.

According to VNA, the carrier has so far this year spent more than VND21.2 trillion to upgrade its fleet.

Jestar Pacific said it had already bought two more Airbus A320s, increasing its fleet size to 11.

Independent observers consider the huge investments by the airlines as a good sign indicating that the aviation industry is developing robustly.

Despite competition that is becoming fiercer, the market still holds great potential, particularly for private investors, since it is expected to grow by 7.3 per cent per year in the next 20 years, the highest in the Asia Pacific region, according to the International Air Transport Association (IATA).

Being aware of this potential, airlines have in recent years actively sought ways to expand market share.

Most have given priority to upgrading fleets with new modern aircraft and improving the skills of their air crews.

Carriers are also busy expanding into new sectors.

Jestar Pacific this year started operating on three new domestic routes. VietJet recently launched three new routes. In November Vietnam Airlines began flying on the Hai Phong-Nha Trang sector.

Besides upgrading their technical infrastructure, airlines are also focusing on improving the quality of their services and offering reasonable prices.

Vietnam Airlines has tried to burnish its image by changing its crews' uniforms, repainting aircraft and trying to improve its employees' attitudes towards passengers.

It has set itself an ambitious goal of achieving SkyTrax's four- or five-star rating.

It has also tried to lower ticket prices, bringing down the ceiling price of tickets by 4 per cent from earlier.

VietJet's fares have come down by 27 per cent since June-July and the airline has been actively trying to improve the quality of services like ticketing.

Since May Jetstar Pacific has been implementing a programme to provide satisfactory services to customers.

The airlines' efforts seem to be paying off. In the first 10 months of this year Vietnam Airlines saw passenger numbers increase by 9.3 per cent to 14.6 million. Jetstar Pacific reported a 54.5 per cent rise to 3.2 million and VietJet Air, a 66 per cent rise to 7.4 million.

The fourth carrier, Vasco, registered an increase of 44 per cent.

But analysts point to domestic airlines' failure to address the cargo market as a result of which none of them have fleets specialising in carrying cargo, a highly lucrative segment, estimated at US$2 billion by the Vietnam Logistics Association.

Fishery mergers

Recently the fisheries sector has seen an increasing number of mergers and acquisitions though business is not great.

Minh Phu Seafood Joint Stock Company (MPC), for instance, saw net revenues and gross profit slide in the first nine months by 23 per cent and 47 per cent year-on-year and inventories shot up by 26 per cent to nearly VND5.64 trillion ($250.67 million).

Yet, the company increased its stakes in Minh Phu Hau Giang Port Company to 50 per cent. In July it also signed a deal with the Gemadept Logistics Company for the VND670 billion ($33,778) Mekong Logistics Company.

Hung Vuong SeaFood Joint Stock Company saw net profit decrease by 81.2 per cent to VND64.4 billion ($28.62 million) despite a healthy rise in sales due to a sharp increase in costs.

The company only expects to achieve 20.1 per cent of the pre-tax profit target for the year.

But, seemingly unworried, HVG increased its stakes in many companies like Viet Thang Feed Joint Stock Company, Sao Ta Food Joint Stock Company, and An Giang Fisheries Import and Export Company. It now owns respectively 90 per cent, 53.5 per cent, and 79.5 per cent of these companies.

Analysts explained the trend by saying that the companies wanted to expand their areas of operation and to create a closed value chain to increase profits for shareholders.

They appreciated the M&A deals of the fishery companies, considering them to be active actions, but they have also expressed their concerns about a possibility of big financial risks.

Indeed, to realise its M&A plans HVG has had to increase its short-term loans from VND5.44 trillion early this year to VND11.08 trillion in late September, thus making its financial costs to rise to VND350 billion.

Because of this, the fishery companies are suggested to carefully think before deciding investments into the other sectors. — VNS

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