I just came back from a trip to Vietnam, Hanoi' such an amazing place. A thriving city in the midst of chaos. The food was amazing, especially 'Pho Bo' which is probably their national dish because you can find it literally everywhere. It will cost roughly 35,000 VND (Vietnamese Dong) for a bowl in the streets.
As i was chatting with my vietnamese friend, she informed me that current interest rates in Vietnam is around 9% and the exchange rate has remained costant for the past few years. I found it quite fascinating and decided to dig a little deeper on Vietnamese monetary devaluation. Find out if its safe to invest your money in Vietnam.
Vietnam actually devalued their currency to about 21,000 VND to the USD and 16,800 VND to the SGD. By the end of 2008, the exchange rate was around 17,000 to USD- thats almost 24% rise in the last 2 years. However the demand for USD is greater in the 'free markets', you could pay over 22,000 VND sell rate for USD. The rate makes it nearly 30% depreciation. Therefore its not a good idea to exchange VND to foreign currencies in Vietnam. The interest rates on Dong deposits are only about 15%, so it would seem safer to keep USD/SGD under your pillow than Dongs in the bank.
While most Asian countries are worried about excessive capital inflows and their currencies getting too strong to support exports, Vietnam is in an unenviable position of having almost run out of foreign exchange reserves. Inflation in 2011 was officially 1% per month and probably like 15-20% in 2010. But wait, isnt Vietnam a nation growing rapidly with a bright future?? Why all the disappointing numbers?
The ruling party in Vietnam has a policy of state enterprises having a leading role in development, which means they have monopoly power, cheap land, credits and government contracts. Nearly half of all enterprise capital increases since 2004 has gone to state enterprises but they only accounted for quarter of output growth. There is such a waste of capital flowing into dubious infrastructure projects: Unfinished bridges, vertically challenged buildings etc. Uncle Ho (Ho Chi Minh) would be most disappointed.
Recently, cost of apartments in city centre, Hanoi is around 40Million VND per sqm, which is pretty expensive if you ask me, even more expensive than some places in Singapore. Land is the preferred investment vehicle for 'black money' too, as it is not taxed after it is purchased and not centrally listed. It seems safer for Vietnamese people to buy land then keep their hard earned money in bank or a stock market that is extremely volatile and does not necessarily follow fundamentals. If you are interested in Vietnamese stocks, do look at Vinamilk (VNM), PetroLimex (largest petroleum products importer) or the biggest listed company by market value: Petro-Vietnam Gas Joint Stock Co.
Staying in Hanoi a couple of days gave me the impression that Vietnam has become a middle-income nation, it is getting less super-cheap. Eventhough my fellow travellers kept converting to SGD, making everything sound cheap in comparison to Singapore, i knew we were paying a premium (tourist) price on everything. But seriosly, inflation is very real in Vietnam, with a credit at 130% of GDP, the game is nearly up. Either credit grows only a little faster than real GDP or it creates inflation.
I have mixed feelings when it comes to investing in Vietnam, it is high risk, high reward situation. However i am positive about its stock exchanges, looking forward into 2013, the Vietnamese index (VNINDEX), Hanoi Exchange (HNX) will trade much higher. Either invest in the general index or in a reputable ETF that tracks your favourite stocks.
Disclaimer: I have plans to initiate several positions within the next 72 hrs but I highly recommend you do your own research to determine your own suitable entry and exit positions for ETFs or individual stocks.
As i was chatting with my vietnamese friend, she informed me that current interest rates in Vietnam is around 9% and the exchange rate has remained costant for the past few years. I found it quite fascinating and decided to dig a little deeper on Vietnamese monetary devaluation. Find out if its safe to invest your money in Vietnam.
Vietnam actually devalued their currency to about 21,000 VND to the USD and 16,800 VND to the SGD. By the end of 2008, the exchange rate was around 17,000 to USD- thats almost 24% rise in the last 2 years. However the demand for USD is greater in the 'free markets', you could pay over 22,000 VND sell rate for USD. The rate makes it nearly 30% depreciation. Therefore its not a good idea to exchange VND to foreign currencies in Vietnam. The interest rates on Dong deposits are only about 15%, so it would seem safer to keep USD/SGD under your pillow than Dongs in the bank.
While most Asian countries are worried about excessive capital inflows and their currencies getting too strong to support exports, Vietnam is in an unenviable position of having almost run out of foreign exchange reserves. Inflation in 2011 was officially 1% per month and probably like 15-20% in 2010. But wait, isnt Vietnam a nation growing rapidly with a bright future?? Why all the disappointing numbers?
The ruling party in Vietnam has a policy of state enterprises having a leading role in development, which means they have monopoly power, cheap land, credits and government contracts. Nearly half of all enterprise capital increases since 2004 has gone to state enterprises but they only accounted for quarter of output growth. There is such a waste of capital flowing into dubious infrastructure projects: Unfinished bridges, vertically challenged buildings etc. Uncle Ho (Ho Chi Minh) would be most disappointed.
Recently, cost of apartments in city centre, Hanoi is around 40Million VND per sqm, which is pretty expensive if you ask me, even more expensive than some places in Singapore. Land is the preferred investment vehicle for 'black money' too, as it is not taxed after it is purchased and not centrally listed. It seems safer for Vietnamese people to buy land then keep their hard earned money in bank or a stock market that is extremely volatile and does not necessarily follow fundamentals. If you are interested in Vietnamese stocks, do look at Vinamilk (VNM), PetroLimex (largest petroleum products importer) or the biggest listed company by market value: Petro-Vietnam Gas Joint Stock Co.
Staying in Hanoi a couple of days gave me the impression that Vietnam has become a middle-income nation, it is getting less super-cheap. Eventhough my fellow travellers kept converting to SGD, making everything sound cheap in comparison to Singapore, i knew we were paying a premium (tourist) price on everything. But seriosly, inflation is very real in Vietnam, with a credit at 130% of GDP, the game is nearly up. Either credit grows only a little faster than real GDP or it creates inflation.
I have mixed feelings when it comes to investing in Vietnam, it is high risk, high reward situation. However i am positive about its stock exchanges, looking forward into 2013, the Vietnamese index (VNINDEX), Hanoi Exchange (HNX) will trade much higher. Either invest in the general index or in a reputable ETF that tracks your favourite stocks.
Disclaimer: I have plans to initiate several positions within the next 72 hrs but I highly recommend you do your own research to determine your own suitable entry and exit positions for ETFs or individual stocks.
VND40million ($1900) per square meter is WAAAY too high! Maybe you're off by a couple digits? It's more like $30-40 per square meter for TOP properties. But, your ultimate point remains correct -- property remains unrealistically expensive in urban Vietnam. Maybe after banks' bad debts get cleaned up, people will have R/E prices that reflect the real value of the buildings.
ReplyDeleteHi Unknown,
ReplyDeleteYou are probably right about the reality on the ground(i.e. if you are living in Vietnam), there is too wide a range for property prices . I was only quoting figures from last years research by DTZ. I pasted their summary of price per sqm below.
According to DTZ Research:
Asking prices for affordable condominiums ranged from VND10.6 million (US$500) to VND20 million (US$950) per sq. m. in Q2 2012
For middle segment condominiums asking prices ranged from VND20 million (US$950) to VND35.9 million (US$1,700) per sq. m.
For high-end condominiums, asking prices were above VND35.9 million (US$1,700) per sq. m.
Investing a significant amount of money in the currency of a country that is showing nothing but a promising future is not as risky or foolish as some declare. Some experts are convinced that investing hard-earned dollars on the VND is equivalent to a huge payout in the future when it's exchange value improves. It i only to be expected and in time, the critics will be proven wrong.
ReplyDelete