Vietnam - News and Regulations

FOREIGN INVESTMENT - Foreign capital still flowing into Vietnam

By the end of last week, total net buying of foreign investors in the HCM City Stock Exchange (Hose) in 20 consecutive days touched 1.482 trillion dong and many signs showed that they have not yet stopped buying.

In fact, in some trading sessions, transactions of foreign investors became the lead of the market and domestic investors followed. Amidst the context of weak domestic demand, such a move gave an impetus to the market to increase.

In January, in Hose, 152 out of 199 share codes (76.4 percent) were bought or sold by foreign investors, of which total net buying was 93 codes.

The highest net buying of foreign investors stopped at less than 150 billion dong and the lowest was several billion dong. Overall, the buying and selling difference of foreign investors was 567 billion dong.

In terms of value, foreign investors accounted for 7.3 percent of total buying volume and 5.6 percent of total selling volume. This demonstrated that although foreign investors reported net buying, domestic investors were really leading the market.

In February, the trading scope of foreign investors unexpectedly increased with total net buying of 706 billion dong/5 sessions. Particularly, the central attention was the mid-week session when foreign investors reported net buying at 231.6 billion dong, accounting for more than 20 percent of total order matching volume.

The trading moves of foreign investors were much observed by many securities companies.

Among the funds investing into Vietnam, there are two familiar faces, Dragon Capital and VinaCapital. However, over the last time, activities of the two funds have been relatively quiet because of modest amount of cash.

The report of Dragon Capital released on 21 January showed that two funds, VEIL and VGL, reported cash amount at only 2 - 4 percent compared with more or less than 10 percent several months ago. This rate at VOF Fund of VinaCapital over the last half of the year fluctuated around 13 - 14 percent. In fact, both Dragon Capital and VinaCapital are planning to establish new funds and call for more capital.

Funds that specialise in investing into emerging markets and regional funds do not make continuous investments into Vietnam's stock market over the last two years. However, in recent months, there have been some positive movements.

Firstly, a small fund established by the financial giant George Soros evinced his interest into Vietnam's stock market. Facing up the strong net buying trend of foreign investors in some sessions, people rumoured that the fund participated into the market with total capital of hundreds of millions of US dollars. In fact, in the middle of November last year, the fund's representative had a meeting with a big securities company and then met with many leading listed companies. The general director of the securities company where the fund intended to open an account said that up to this time, the fund has not applied for the trading code.

Some exchange trades funds (ETF) appeared in Vietnam in the last six months. The special features of ETF are creating an investment portfolio including a basket of shares representing VN Index or a group of some sector. Among such funds includes The Market Vector Vietnam ETF (coded VNM) established by Van Eck Global.

VNM listed in the US's stock exchange in mid-august, 2009, has invested into a portfolio of 28 listed companies in Vietnam's stock market. However, the initial capital of VNM was only $ 14 million, which is relatively low to cause impacts on the market.

A director of a securities company said that an ETF fund focused on portfolios of food sector which were disbursed several days ago. Another regional fund, after selling out investment portfolio at the end of 2008, returned to the market. Additionally, a member fund coming from EU attracted new capital and has just increased capital ownership ratios in some listed companies.

Global investment banks have promoted their operations in Vietnam's stock market since the end of 2006 when Vietnam entered into WTO. They have issued investment participating certificates (P-notes), which allow foreign investors to participate into the market without having to register transaction codes or directly put foothold in Vietnam's stock market.

Commenting on the net buying trend of foreign investors when the market is experiencing a quiet time, Johan Nyvene, general director of HSC Securities Co, said that there are two reasons for foreign investors to have such a move. Firstly, some long-term investors looked at basic factors, changes of the macro-economy in the upcoming months. Secondly, their capital scope is very large while liquidity of Vietnam's stock market is relatively changeable, so, foreign investors buy when the market goes down and sell when the market goes up.DTCHK

TRADE – WTO - Anti-dumping duties on footwear creating divisions among EU members

Strategic Forecasting, Inc. (STRATFOR) said that EU continued levying dumping duties on footwear imported from China and Vietnam for additional 15 months is creating divisions among EU members.

EU said that levying duties is an anti-dumping measure, which was the same reason cited in order to limit garment products imported from China that was well known as the underwear war in 2005. However, this time, EU finds it hard to say that the Chinese government's support for the footwear industry brings more benefits to China in the EU market than low labour costs do. This is a good reason for China to submit WTO a petition against EU.

Nevertheless, amidst the current recession context of EU, particularly, Spain, Portugal and Italy, the above move of EU seemed to come from the political factor. For example, in Spain, due to the crisis, the unemployment rate climbed up to nearly 20 percent. If the unemployment rate increases, particularly due to the competition from China, this would lead to negative responses from Spanish people.

The footwear industry is a relatively big industry in Spain, Portugal and Italy as well as new member of EU Rumania. According to the statistics in 2007, Italy had more than 10,000 footwear production companies, Spain over 4,000 and Portugal nearly 3.000. Footwear producers of these three countries employ about 350.000 labourers. However, this industry has gone down in recent decades due to competition from low-price footwear producers such as China. Since 1995, due to international competition, Italy lost about 5,000 footwear production companies.

EU made its decision without agreement from its members. Footwear import countries had primarily denied the proposal. However, the EU Commission persuaded that making such decision was to help producers have an opportunity during the crisis and EU members should work together to fight against non-member countries.

However, there was another impetus behind both the footwear war and the underwear war. The footwear and apparel production requires fewer skills but use large number of labourers and often is the first step toward modern industrialisation.

Thus, it seemed to be abnormal when EU economies, especially such developing countries as Italy, were so hard in protecting employment in the footwear sector. (In 2006, wages of the footwear industry in Spain accounted for only 0.8 percent of total wages of the production sector, Italy 1.7 percent and Portugal 3.6 percent).

EU economies, especially Italy, the hardest country in continuing levying duties, in fact were worried over intellectual property issue. In China, many manufacturers specialise imitating luxurious fashion products of EU, sometimes publicly. Thus, EU sent a message to China that if China fails to seriously prevent intellectual property violations, EU would continue levying duties against low-cost products.

The argument of EU also raises various questions for Vietnam that exported some $3.2 billion worth of footwear in the first three quarters of 2009, which, though, reducing by 14 percent against a year earlier. The Vietnamese economy is fast growing based on low cost, intensive labour and export. Although having small scope, Vietnam still produces more leather footwear than all other countries, including India and Brazil.

Vietnam, which is also a member of WTO, would also benefit if China's lawsuit succeeds. Currently, China is levied a duty rate of 16.5 percent while Vietnam is entitled to a duty rate of 9.7 percent. If WTO cancels all these duties, the playing field would be fairer and Vietnam would directly compete with China. Before EU decided to apply this duty, Vietnam's footwear industry estimated total revenue to increase by 15-20 percent in 2010. Furthermore, Vietnam's fast growth rate shows that Vietnam could find its own path in the global trade.CHINPHU

RENEWABLE ENERGIES - Vietnam considering large wind farm project

Vietnam is to carry out a feasibility study for the country's largest-ever wind energy project, a government official said Wednesday. Prime minister Nguyen Tan Dung has asked the Ministry of Trade and Industry to complete a study of the project by May, said Ta Van Huong, head of the ministry's energy department.

The size of the project, slated for the central coastal province of Ninh Thuan, was not entirely clear.

Huong referred to a capacity of 120 megawatts, but Tran Viet Ngai, head of the Vietnam Energy Association, said the study would look at a project totalling 400 megawatts. The lead company would be the state-owned electric monopoly Electricity of Vietnam Group (EVN), but private companies could be involved.

Danish development assistance is to help finance the project, the official Vietnam News reported.

Ninh Thuan's provincial government has approved five private wind power projects already, but none have begun construction.

One of Ninh Thuan's projects, financed by the German wind-power company EAB Projektmanagement GmbH, suffered a blow in December when its Vietnamese chief executive was arrested for fraud.

Nguyen Xuan Thuy, head of EAB Vietwind Ltd, told police he had lied about having a doctorate in science and had fraudulently induced European investors to back the company.

Only one wind farm, in the south-central province of Binh Thuan, is currently functioning in Vietnam. Renewable Energy Vietnam JSC operates five turbines with a capacity of 7.5 megawatts and is scheduled to expand to 18 turbines and 18 megawatts by the end of the year.

Vietnam's 3,000 kilometres of coastline afford substantial wind power potential, and 8.6 percent of the country enjoys high-velocity winds.

But Ngai said wind power projects were being held back by low electricity prices. He estimated wind power costs about 12 cents per kilowatt hour to produce while price controls limit EVN to paying 4.5 cents per kilowatt hour on average.

Huong said his ministry would submit a draft decree on incentives for wind power to the government soon.DPA

RESOURCES - PVT to transport over 5.5m tonnes of crude oil for Dung Quat refinery

Up to now, Dung Quat oil refinery received over 2.4 million tonnes of crude oil, refined 2.3 million tonnes of petroleum types, and exported 1.6 million tonnes of petroleum products to the market.

From now until February 18, three crude oil tanker vessels of PV Trans (coded PVT) will transport 240,000 tonnes of crude oil from Viet Thanh Gulf to Dung Quat refinery.

2.3 million tonnes of refined petroleum products include 681,000 tonnes of A92, 600,000 tonnes of DO, 120,000 tonnes of LPG, 65,000 tonnes of A95, 60,000 tonnes of FO and 20,000 tonnes of Polypropylene.

As planned, in 2010, PV Trans will transport over 5.5 million tonnes of crude oil to Dung Quat refinery for processing.VNS

AVIATION - Foreign airlines to add flights to HCM City

Malaysia Airlines and All Nippon Airways (ANA) have conned the augmentation of their flights to HCM City from late March to cash in on a recovery of global air traffic demand this year.

Zuraidi Saisi, area manager of Malaysia Airlines in Vietnam, said this carrier in Malaysia would increase frequency on the Kuala Lumpur-HCM C route to 20 from the current flights a week.

We will fly thrice a day a day except Sunday between Kuala Lumpur and HCM City from March 29;' Saisi told the Daily on the phone yesterday, crediting the increase to expectations of a rebound in business and leisure air ~el between the two cities.

Malaysia Airlines also has daily vices between Kuala Lumpur in Hanoi, but Saisi said the carrier would add flights to HCM City only in, summer schedule as it saw more demand for air travel here than in the capital city of Vietnam.

Having recognised the untapped potential of this southern economic hub of Vietnam, ANA has decided to fly daily between Tokyo and HCM City in the summer schedule, or two more flights than the Japanese airline's current frequency.

ANA is planning to operate the two additional flights on Mondays and Thursdays to offer passengers more options to travel with the carrier between Narita and Tan' Son Nhat airports any day of the week.

ANA now uses Boeing B767-300 aircraft configured with more than 210 seats for the Tokyo-HCM City run, and sells the return fare valid within two weeks for this route from $509 including tax.

The airline announced the number of flights to HCM City as part of its international network expansion in anticipation of increased air travel. ANA said in a statement that 2010 would be a year of expansion for the carrier.

"Factors such as anticipated capacity increase at Tokyo's Haneda and Narita airports, the scheduled delivery of Boeing 787s, as well as Open Skies between Japan and the United States agreed in December 2009 will bring important business opportunities for ANA to expand;' the statement says.

ANA disclosed the increased frequency of flights to HCM City and other markets in the world after Japan Airlines filed for bankruptcy protection. Japan Airlines had to suspend its direct flight between Hanoi and Osaka on January 12 because of its restructuring plan to cope with financial woes.

Vietnam Airlines began to operate direct service between Hanoi and the Japanese city of Osaka on January 13 to replace the struggling Japan Airlines on the route and in a move to expand its network in the northeast Asian market.

Vietnam Airlines operates flights on Mondays, Wednesdays, Thursdays, Saturdays and Sundays on the new route, on which it previously had a code-share deal with the Japanese partner.

Hanoi-Osaka is the fourth direct route serviced by Vietnam Airlines from Hanoi to Japan and the seventh route by this national flag air carrier between Vietnam and Japan.

Vietnam Airlines operates more than 30 flights from Hanoi and HCM City to Japan each week, including 11 a week to Tokyo, 12 to Osaka, four to Nagoya and four to Fukuoka.SGTD

REAL ESTATE - Office for lease market to welcome new supply

Finding and selecting advantageous and good locations with professional services for setting up working offices or headquarters are always one of the most important tasks of companies.

In recent years, many foreign groups as well as newly established firms decided to join Vietnamese market and a line-up of businesses want to expand offices so the demand for bigger office area is increasing dramatically, which has promoted the continuous development of office-for-lease market. Customers have many options to select offices graded A, B or C. In 2007, the Grade A office rental reached $60 per sqm a month. Between 2008 and 2009, the office market saw a gloomy sale because many enterprises were propelled to narrow business and production scope or go under bankruptcy.

Average rental of all offices was common at $29/sqm/month, up about 4.5 percent quarter on quarter. However, the rental of offices Grade A and B slumped to the lowest level in last five quarters. Against 2009 early, the office rental in last months recovered slightly.

The office-for-lease market prospect in 2010 seems to be more optimistic thanks to Vietnam's economic growth reached 5.32 percent in 2009. Foreign firms are coming back to Vietnam while domestic companies are expanding business. High class office buildings are estimated to operate sustainably in some next years.

In next four years, extra 1.5 million sqm of offices from about 100 projects will be supplied to the market, including 170,000 sqm of new offices in 2010 alone.DDDN

TELECOM - Viettel plans to launch 3G next month

The military-run telecom company Viettel plans to launch third generation network services in March to be the third provider in the country after VinaPhone and MobiFone.

Tran Minh Huy, director of Vitter's HCM City branch, told the Daily yesterday that Viettel would commercialise 3G service after the trial of the service in over 20 provinces.

"The pilot runs smoothly and makes us confident to launch the service in March;' Huy said.

According to Huy, Viettel will offer video call, mobile broadband 3G, TV mobile and video on demand, online music and clip service at reasonable charges.

Huy did not reveal specific charges for 3G but said Viettel would offer a reasonable pricing policy to customers. To develop a 3G network covering the country, Viettel plans to build 100,000 3G base transceiver stations this year.

Last year, Viettel's total revenue reached 60 trillion dong, increasing by 80 percent compared to 2008.

Huy forecast the telecom market would be upbeat because of 3G launching which would bring more values to providers as well as customers.

"2010 will see strong growth in the telecom market when many providers offer 3G services. It is a driving force to create more added values to telecom companies;' he said.

Industry insiders say 3G is a new element to further develop in Vietnam's mobile market.

However, UK-based market monitor BMI recently said in its Vietnam telecom report for the first quarter of 2010 that it only saw a minimum contribution of 3G services to the local telecom market.

According to the market researcher, Vietnam has around 100,000 3G service subscribers. The small number is blamed on the early days of 3G commercialisation at the end of2009. The researcher explains that cost and availability of 3G compatible handsets are expected to be main obstacles to 3G growth in the early years. BMI predicts 4.5 million 3G customers by the end of 2013, equal to 2 percent of the total mobile user base.

Although BMI says the market contains unsustainable elements, telecom providers showed impressive turnover in 2009. At the end of 2009, the Ministry of Information and Communications reported that Vietnam's telecom market had reached 150 trillion dong, increasing 62 percent compared to 2008.SGTD