Housing prices unlikely to drop despite pandemic: experts
Experts believe that the real estate market is unlikely to fall into a crisis and housing prices will remain stable because market demand remained high while supply is limited.
The COVID-19 pandemic is heavily weighing on a number of sectors, and property is no exception. The market saw a significant fall in transactions in the first quarter of this year.
Statistics from CBRE Viet Nam showed that only 1,600 apartments were put on sale in the first quarter, much lower than the quarterly average of 6,500 apartments recorded since 2012.
Despite fewer transactions, prices have not dropped off as expected. According to CBRE, average housing prices in the primary market rose by around four per cent during that time.
The Viet Nam Association of Realtors said market supply and successful transaction volume in the first quarter of this year were both at their lowest levels for the past four years, with no new developments launched.
The association said buyers were seemingly waiting for drops in housing prices to make purchasing decisions. Buyers tended to think that the property market would fall into a crisis and prices would drop due to the impacts of the COVID-19 pandemic.
However, experts said that a crisis was unlikely.
The situation appears to be different from the real estate crises in 1997-98 and 2007-08 when housing prices fell to rock-bottom levels. The crises were fuelled by easy credit for real estate which inflated housing prices, coupled with low-capacity developers in the market.
The market was quiet in the first quarter due to social distancing, real estate expert Dang Hung Vo said. The market still had high demand and limited supply, he added.
He said the COVID-19 pandemic would cause difficulties in the short term, but real estate was a long-term investment.
Vo said that that the number of new projects licenced in 2019 was equivalent to just 20 per cent of the previous year.
In the next three years, new supply would drop significantly, he said.
According to Pham Duc Toan, general director of EZ Real Estate, housing prices would remain stable in the medium and long terms because of limited supply.
The previous crises eliminated weak developers from the market, and now players mostly had good capacity and experience, which would help them overcome this difficult time.
Vu Cuong Quyet, general director of the Northern Green Land Real Estate and Services Joint Stock Company, said that instead of lowering prices, developers were offering other promotions to attract buyers, such as longer interest terms and free interior design packages.
CapitaLand secures $280 million in green loans to green out global portfolio by 2030
The loans extended to CapitaLand include SGD150 million ($105.46 million) four-year green loan provided by DBS Bank Ltd. (DBS) while the SGD250 million ($175.76 million) three-year multi-currency green loan is provided by HSBC’s Singapore Branch.
The proceeds from these green loans will be used towards the financing or refinancing of the development, investment, and acquisition of certified green buildings.
The green buildings must achieve or are expected to achieve minimally a Green Mark GoldPLUS certification by the Building and Construction Authority of Singapore (BCA) or a Leadership in Energy and Environmental Design (LEED) Gold rating by the United States Green Building Council.
According to Andrew Lim, CFO of CapitaLand Group, CapitaLand’s continued efforts in sustainable finance shows its strong dedication to responsible growth.
With the latest SGD400 million ($281 million) in green loans, CapitaLand and its real estate investment trusts have raised in excess of SGD1.32 billion ($928 million) through sustainable finance.
“The funds will further underpin our sustainability efforts, creating better environmental, social, and governance (ESG) outcomes for the communities we operate in,” he added.
CapitaLand’s corporate offices across three locations in Singapore will be 100 per cent powered by renewable energy by the end of 2020.
HCM City pushes ahead with key ventures
Ho Chi Minh City Department for Construction recently issued permission for three projects to sell their apartment units after passing enough conditions to provide to the market.
One of the three projects is Block H of Binh Chieu Residential Area in Thu Duc district with 214 units, invested in by Thu Duc House Development JSC.
Another example is Phu My Hung Development Corporation’s project that was approved to sell 193 units out of the total 242 units located in District 7.
At the end of March, some projects were announced to be launched in April. As such, Hung Thinh Corporation is going to introduce a new project located next to Thu Duc district. This project will offer more than 3,000 units to the market.
Meanwhile, other developers such as Van Phuc Group and Kien A Corporation are waiting for the time after the pandemic to launch their projects.
Furthermore, Ho Chi Minh City Department of Planning and Investment currently has a list of 46 projects which are considered to be pipelined, with many of those belonging to large-scale and foreign developers. Among those, Phu My Hung Development Corporation proposed to solve the land clearance and compensation in some of the precincts of its project. Meanwhile, Novaland requested to continue its 30-hectare project in District 2.
Hanwha Life Insurance also submitted a proposal to the city to acquire the SJC Building in District 1 while Sun Wah Properties has asked for permission to set up a pre-feasibility study for Hoa Lu Underground Car Park.
Meanwhile, the Singaporean developer Mapletree wants to participate in land auctions for the multifunctional complex in District 5 and District 1.
According to Eric Solberg, chairman and CEO of EXS Capital Group, foreign investors still remain positive when it comes to the prospects for high-end residences.
Over the past few years, EXS Capital Group invested around $200 million together with SonKim Land to build up a luxury real estate development in Ho Chi Minh City. More than half of the units of the group’s latest project named Metropole Thu Thiem located in District 2 have already been sold, with development and construction proceeding well.
“This project will be fine, even if sales are a bit slower this year. Obviously, the large, fun sales events for which SonKim Land is well known are currently postponed due to the social distancing measures. However, as soon as the pandemic has passed, I am sure the demand for these very high-quality units as well as most other forms of real estate will come back,” Solberg told VIR.
Meanwhile, Inoue Yoshitaka, business development manager of Creed Group, a Japanese real estate investment group with a primary focus on the Southeast and South Asian real estate markets, told VIR that Vietnam is very attractive to foreign investors, especially those from Japan. “Ho Chi Minh City’s population is growing by 3 per cent per year and the supply is not keeping up. I believe the real estate market will continue to grow due to the strong demand. Therefore, we think it is still a very attractive market for overseas investors. However, difficulties to understand legal revisions and licensing processes remain. As soon as these are clarified, I am sure Japanese investors would act more aggressively,” he said.
Since 2014, Creed Group has been involved in a comprehensive co-operation agreement with the domestic An Gia Corporation to build a number of projects in Ho Chi Minh City.
Accordingly, Creed would invest around $200 million into An Gia by buying stakes and transferring technology. After five years of co-operation, both partners have developed more than 10,000 units with a total of more than one million square metres.
Some experts have predicted that the real estate market will be back to normal from the end of the second quarter when many large scale projects are in preparation to launch into the market.
According to Duong Thuy Dung, senior director of CBRE Vietnam, there could be two scenarios in the real estate market this year. In the first, the pandemic will be contained by June, leaving the average marketwide selling price expected to increase by 5 per cent on-year, with mid-end and affordable segments forecasted to have a modest growth rate of 1-3 per cent due to a large competitive supply.
In this scenario, high-end segments could get a price increase by 5 per cent on-year. Many luxury projects are licensed in District 1 and District 3, and their selling price is expected to increase from 5-7 per cent. The sold units volume would drop by 3 per cent mostly attributed to decrease of transactions in the high-end and luxury segments.
In the second scenario, the pandemic will be contained by September, which would cause a significant drop in new launches in 2020. The supply decline would mainly concentrate in high-end and luxury segments. Primary selling prices could drop by 6 per cent on-year as the majority of the supply will be in the mid-end segment. Meanwhile, the transaction volume under this scenario could plummet due to the restrictions in public places.
CBRE forecasts that approximately 13,575 units could be sold within this year, meaning a decrease of 55 per cent compared to last year.
Ho Chi Minh City and Hanoi facing large-scale disruption in office for lease
According to Alex Crane, managing director of Cushman & Wakefield (C&W) Vietnam, like many other segments of the real estate market, office for lease has been impacted by the coronavirus.
Vietnam enters this period with a strong tailwind and growth in the wider economy – and this is reflected in the performance of the office markets in the country.
“Ho Chi Minh City enters into this with historically low vacancy and high rental rates, along with continued demand and limited future supply. Whereas pre-pandemic these factors would accelerate rent increases faster, we are of the belief that this will slow rental increases in the city, but the pandemic will not result in falling rents across the Ho Chi Minh City market,” said Crane.
He had further advised caution but does not expect pain in the Hanoi market.
At the end of 2019, C&W reviewed the supply forecast for Hanoi and as a result, felt that headline or asking rents would fall marginally through 2020 by approximately 10-15 per cent across the market.
Of course, this is broadly speaking across the three submarkets in Hanoi, and the underlying performance of each will be very difficult with Hoan Kiem district being the least affected, and the midtown area receiving more rent pressure as a result of new supply.
It is obvious that the COVID-19 outbreak will accelerate this trend as building construction will ultimately continue and as demand slightly reduces.
The net impact of this is that there will be a prolonged period of higher vacancy through 2020 and 2021, likely hovering at around 18 per cent, meaning that some landlords will need to be more competitive with their terms, thus having the effect of pulling down the average rent across the market.
Crane also mentions that Hanoi’s market may provide opportunities following the COVID-19 pandemic.
“With respect to occupiers and multinational companies post-pandemic, we anticipate that Vietnam’s tremendous performance in response to this crisis will encourage greater investment into the country, and we will also see an acceleration of manufacturing and service industries within the country, much of which will be driven by multinational foreign companies. Hanoi, in particular, will be an attractive destination for these businesses, given that it has a central regional location and fast-improving infrastructure to support manufacturing, urbanisation, and exports, which are all potential drivers for higher office demand and equally faster growth,” he added.
He forecast further transactions would be completed within the second quarter of 2020, thus supporting momentum through the COVID-19 period.
“Transactions that are earlier in the process are typically being deferred, and we expect these to speed up again once the position, with regard to COVID-19, is easier to assess. Vietnam remains a market that multinational companies forecast as having a positive future and growth despite COVID-19’s potential impact on GDP,” he added.
Empire City leaders vow to kick off 88-storey tower
According to Vo Sy Nhan, general director of Empire City – the joint venture backing the project – the company recently sent documents to competent bodies of the city to ask for the pushing ahead of legal procedures related to the project. Nhan had suggested five proposals to help the venture develop on a planned schedule.
Among those, Nhan suggested the local authorities to reissue the revised investment certificate after the joint venture had increased its contribution capital from $76 million to $240 million in 2018, and extension of the contribution progress from within 36 months from the day it received investment certificate in June 2015, to right after it receives the revised investment certificate.
The joint venture also suggested the local authorities issue land use right certificates for five land plots in the project, approving investment plan for the second phase of this project, granting the announcement of having enough condition to be sold residential units in land plots 2-16 and 2-17, and confirmation of a fund contribution of VND756 billion ($32.8 million) to be a part of the project’s contribution for land using rent.
According to Nhan, the company has finished the frame of the 30-storey apartment building of this project, and estimates handover to buyers in the first quarter of 2021. “We have so far disbursed around VND10 trillion ($434 million) into this project with thousands of labourers working at the site every day. We have been trying our best to complete this project on time,” Nhan said.
Ho Chi Minh City Department for Planning and Investment said that some of the above suggestions of Empire City were recently met. Nhan meanwhile committed that after all barriers are evaded, the company would start the underground basement for the 88 stories Observation Tower – the landmark construction of this project at the end of 2020.
The Thu Thiem Observation Tower complex was granted an investment certificate in 2015 with the total investment capital of $1.2 billion. The project is built in a 14.5 hectare land area in Thu Thiem New Urban Area.
Empire City consists of the two domestic companies of Tien Phuoc Real Estate JSC and Tran Thai Real Estate JSC, as well as two foreign investors – Corredance Pte., Ltd. of Singapore and Denver Power Ltd., of the British Virgin Islands.
According to the construction plan, the whole project is to be completed in 2022 and has been divided into four phases since 2016. Some of the buildings were erected in the second phase from 2017 to 2019, while the 88-storey tower complex itself is being built in the third phase to 2021, with the remainder to be built before 2022.
As per a representative from Ho Chi Minh City Department for Planning and Investment, the revised investment certificate (the first change) was issued to the investor at the end of last year to increase the contributed capital to implement the project from $76 million to $240 million and adjusting the capital contribution schedule to implement the venture. After adjustment, the contributed capital to implement the project is equivalent to $240 million, accounting for 20 per cent of total investment capital. The ratio was shared among the four sides with Tran Thai and Tien Phuoc in equal share of 15 per cent each, Denver Power with 30 per cent, and Corredance with the highest proportion at 40 per cent.
Right before Lunar New Year, Chairman of Ho Chi Minh City People’s Committee Nguyen Thanh Phong had assigned competent bodies of the city to actively solve the project’s outstanding issues in order to speed up the venture.
Vietnam Property Awards set golden real estate standards
Throughout the last six years, the Vietnam Property Awards have step by step improved to reflect the high values of the Vietnamese real estate market.
Under the pressure of the ongoing international health crisis, this year the organisers have conducted a thorough review and analysis of the current market to give the awards a fresh direction. Accordingly, the awards in 2020 have added further categories aimed at young designers and new developers associated with the trend of green architecture and sustainable development.
Typically, the number of categories has been increased and diversified each year to reflect new trends in the market. This year, the awards have a total of 50 categories. Those categories are reviewed and selected based on the evaluation of various factors in the current situation of the Vietnamese real estate market.
The careful selection of nominees and the evaluation of their projects will help developers and investors to showcase their potential, overcome the challenges imposed by global events.
Last year, the Vietnam Property Awards helped the domestic Kien A Group reach out to the international real estate market with the highest award The Best of The Best. This year, domestic Vietnam property developers hope to achieve the same, if not an even better, result.
To offer more space and comfort to participants and nominees, this year’s awards ceremony will be held at the GEM Convention Centre – one of the largest high-quality convention centres in Ho Chi Minh City.
Since 2015, the Vietnam Property Awards have been one of the most well-known awards for the Vietnamese real estate market, and are linking property markets in different countries throughout the world.As part of the Asia Property Awards, which this year had entered its 15th season and is held in many countries such as Thailand, Singapore, and Malaysia, the Vietnam Property Awards create meaningful and highly-respected impressions in the local real estate market.
With transparent and fair judgment supervised by Binder Dijker Otte (BDO), one of the world’s largest auditing and accountancy firms, the awards are considered to reflect the value and quality of real estate developers and their projects in both domestic and global markets.
Despite having a separate judging panel in each country, the Asia Property Awards share the same standing committee and the same evaluation process.
In addition to receiving the local awards, Vietnamese real estate developers can participate in the region’s finals in Thailand’s Bangkok city, where they could be not only honoured with yet another award but also increase international recognition.
The sixth season of the Awards has officially kicked off and is currently receiving nominations and registrations. Deadline for applications for all categories is June 12. All projects can be registered online at asiapropertyawards.com/nominations.
OYO extends support to embassies
The offer from the online booking group is in response to many requests on social media and elsewhere from non-governmental organisations for rooms, apartments, and homes for those affected by the travel restrictions and waiting to be repatriated.
Dushyant Dwibedy, country head at OYO Vietnam, said as a provider of essential services and a key stakeholder in the tourism and travel industry, OYO has an added responsibility to ensure those who are in need of clean affordable living spaces have access to just that.
He said, “We hope that by offering rooms at discounted prices, we can alleviate some of the burden shouldered by these guests and ensure they have ready access to clean affordable living spaces as they wait to return home to their respective countries.”
Dwibedy added that OYO continues to receive requests. “They come from our hotel partners in other cities and provinces wanting to be included in the list of hotels that have extended help to guests stranded in Vietnam.” The list will be updated regularly and the group urges all in need of rooms to call the OYO Careline for an updated list of hotels.
“Our effort reflects the organisation’s culture and values, which we hope would spur others in Vietnam to help our guests during this challenging and uncertain time,” Dwibedy said.
OYO will continue to accept reservations and check-ins from all guests during the entire period of social distancing in Vietnam. The group is also offering special long-stay rates for foreign guests who are stranded following the travel restrictions and need suitable living spaces during this period. These long-stay rates also apply to guests who want to practice self-quarantine at this time. At present, a great number of foreigners and other visitors staying in cities and provinces across the country cannot return to their hometowns due to the interruption of international flights. Particularly, in Ho Chi Minh City, more than 400 tourists from various nations including Japan, Germany, Russia, and France are staying in over 30 top-class hotels in the city.
Effective immediately, international guests can book rooms by contacting the OYO Careline on (+84) 924 970 366 or (+91) 9811 882 750 (WhatsApp) 24 hours a day, seven days a week. The properties involved are based in cities/provinces including Hanoi, Ho Chi Minh, Vung Tau, Nha Trang, and Phu Quoc Island.
For all other further guidance and assistance, please contact OYO’s partner support team via the Careline or on email at [email protected]
Vietnam’s second-home segment on the rise
Kenneth Atkinson, founder and senior board adviser at Grant Thornton Vietnam, shares with Bich Ngoc his opinion on the future for Vietnam’s second home market.
Vietnam has been one of the top-performing inbound tourism markets over the last few years. In January, the country received just under 2 million foreign visitors in one month alone. Much of this rapid increase in inbound tourists has come from China, South Korea, and Japan, who together have contributed more than 50 per cent to the inbound tourism market.
Tourism is a major contributor to national GDP with over 10 per cent and has contributed to the country becoming one of the fastest-growing economies in the world with GDP growth at over 7 per cent in the last two years.
Foreign direct investment (FDI) has also seen record highs. Among the top five investors, China has just taken the fifth position in 2019, right behind the four top investor markets South Korea, Hong Kong, Singapore, and Japan. The FDI stream from these Asian economies has also led to a significant increase in interest from property buyers.
Foreign homeowners can be a major factor contributing to the rate of returning visitors to a country, such as in the example of Thailand, where the return rate for visitors usually sits close to or above 70 per cent. Meanwhile, Vietnam has currently a rather low portion of returning visitors.
However, Vietnam to offer a lot when comes to the property market, such as attractive prices and stunning locations, particularly because of its coastline of over 1,900 kilometres and countless pristine beaches.
Although foreigners have been able to buy property in Vietnam since 2015, the regulations have not been very clear and the projects that are authorised to sell to foreigners have yet to be clearly nominated in most locations.
Also, foreign ownership is limited to 30 per cent of each development. However, this does not seem to have deterred Chinese and other Asian buyers who have been preparing to invest in property through long-term lease contracts rather than requiring actual title deeds.
Key drivers for the local property market are affordability and accessibility, particularly in the coastal resort areas such as Ha Long Bay, Haiphong, Danang, and Phu Quoc. All of these locations have international airports and a growing number of regional flights and casinos.
Home prices in Vietnam are starting at $2,500 per square metre for high-end apartments and go up to $6,000-10,000 per square metre for luxury property in Ho Chi Minh City, which is still considered relatively cheap for many Asian buyers.
Market experts also expect to see a rise in the number of branded residences as the interest from more affluent buyers remains high. Vietnam currently has the third-highest number of projects in the pipeline to meet their demand. Rental yields on city properties remain decent at 6-8 per cent in the better developments and many developers in the coastal resort areas have attracted buyers with high guaranteed returns of 8-10 per cent for 10 years, although it is expected that these will fall back on default values over the coming months, not only because of the impact of COVID-19.
In total, however, rental yields in Vietnam are significantly higher than say in Bangkok and other parts of Thailand, and Singapore.
The growing demand from the rapidly growing Vietnamese middle class, which is expected to grow from under 20 per cent to 40 per cent in the next seven to 10 years, will ensure a high level of local demand as well as increasing foreign demand to ensure returns on investment.
Recent significant improvements in infrastructure have been another key driver in the attraction of foreign investors, particularly so around Ho Chi Minh City with its links to the coast as well as Hanoi and its links to places like Ha Long Bay. The metro systems in both major cities will be operational from 2021 and this will open up some of the outlying city areas for further investment opportunities.
According to Baker Mckenzie, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came into force in January 2019, is expected to further benefit the real estate market in Vietnam.
Foreign investors will be protected through the Investor-State Dispute Settlement (ISDS) mechanism, which applies to cross-border investments in the property development and the CPTPP also enlarges the real estate services in which foreign investors can participate in, including the brokerage services, exchange floors, consulting services, and management services, with respect to both residential and commercial properties.
Because of its affordability, Vietnam is also a potential market for retirement homes, and a programme similar to Malaysia’s second home programme would be very attractive to a lot of retirees in the Asia Pacific region and some from Europe and North America.
Service apartment show stable development in the real estate market
This real estate segment targets foreign tenants living and working in Vietnam, including long-term employees and a few short-term tourists. Tenants of high-end serviced apartments often work in foreign-invested companies, embassies, industrial parks, international banks, and technology companies.
According to Savills Vietnam, as of the end of 2019, Ho Chi Minh City has had around 6,000 apartment units with an average net rental of $25 per square metre per month and an occupancy rate at 84 per cent.
Le Thi Quynh Le, associate director for residential sales of Savills Ho Chi Minh City, said that backed by strong foreign direct investment flows, the serviced apartment sector continues to perform well. This resilience will be tested in the face of increased completions of hotels and a wave of new apartment complexes.
In Ho Chi Minh City, latest grade A and B serviced apartment projects can be attributed to Mai House, D1Mension Residences, and Republic Plaza, which in total offer more than 300 new units to the market. Other big brand names in this segment are Ascott, Frasers Hospitality, and Pan Pacific. CapitaLand’s wholly-owned lodging business unit, The Ascott Limited Ascott, has been operating in Vietnam for 25 years.
Starting with its first project Somerset West Lake Hanoi, so far Ascott’s portfolio comprises of over 7,000 lodging units in 28 properties across nine cities and provinces, such as in Hanoi, Haiphong, and Ho Chi Minh City.
According to Lew Yen Ping, regional general manager for Ascott in Vietnam, Cambodia and Myanmar, the company continues to expand its presence in Vietnam with the openings of PentStudio West Lake Hanoi and Somerset D1Mension Ho Chi Minh City in 2019, as well as Citadines Pearl Hoi An and Citadines Marina Halong City in 2020.
“In addition, Ascott also will open a new brand with the Ascott Serviced Residences in 2021. Meanwhile, our first 5-star Vertu hotel in Cam Ranh under the portfolio of TAUZIA Hotels, which is slated to open in 2022, is Ascott’s first move into the lodging segment beyond its core business of serviced residences,” Lew said.
Elsewhere, Frasers Hospitality, a member of Frasers Property Group, has now a total of more than 670 units with two operating projects of Fraser Suites Hanoi and Capri by Frasers in Ho Chi Minh City. This company is opening its third project named Fraser Residence Hanoi this year.
Many other junior brands include names like Happy Homes, InterContinental Residences Saigon, Homestead Parkview, Merin City Suites, and Vinhomes Central Park Apartments.
The average rent for serviced apartment units now is ranging around $35 and $28 per square metre for grade A and B apartments respectively. By 2022, 1,500 new units will enter in response to the growing demand for long-term stays, which is mostly generated by increasingly favourable visa policies and an influx of foreign investment.
In Hanoi, by the end of 2019, there were approximately 4,600 apartment units with an occupancy rate of 82 per cent. An estimated 2,700 units from 22 projects will enter the Hanoian market this year, including three projects in the west of the city.
Different from Ho Chi Minh City, Hanoi’s serviced apartments are facing stiff competition by buy-to-let apartments. Those are located in Tay Ho, Long Bien, Ciputra, and the west of the city.
The South Korean community, leading the group of serviced apartment tenants, has changed its demand from renting serviced apartments at projects to apartments that are bought by the individual investors to rent. Many of them even decided to buy apartments or houses in Vietnam.
Apartment prices in Ho Chi Minh City down 15 per cent on-quarter
In its report released on March 31, JLL stated that the average price of apartments in the first quarter of 2020 was $2,453 per square metre, 15 per cent lower than in the last months of 2019.
This price, however, was still higher than in the same period last year. Currently, all projects in the market maintain price stability and are not affected by the COVID-19.
Accordingly, luxury apartments are quoted at an average price of $7,237 per square metre, while mid- and high-end apartments are priced at $2,206 and $3,551 per square metre and the affordable segment is at $1,204.
The absorption of high-end apartments has been slower due to the impacts of the COVID-19 which is hindering buyers from pouring large volumes of capital into property.
Along with the limited supply, the number of apartments sold in the first three months of 2020 was only slightly more than 1,980 units, half of the same period of 2019. The absorption rate was 54 per cent of the total number of available units launched to the market – the lowest rate recorded in the last two years.
Amid the COVID-19 outbreak, a number of projects were reported to delay construction and launches, resulting in fewer units launched than previously expected. About 1,200-2,000 units are expected to enter the market in 2020. However, this is subject to great uncertainty, depending on how long the outbreak will last.
Japanese bank Mizuho to stop lending to coal power plants
Mizuho – one of the three so-called megabanks of Japan – plans to reduce its outstanding balance of JPY300 billion ($2.8 billion) in loans to coal power plants by half by the 2030 fiscal year and reduce it to zero by 2050.
he bank will go to great lengths to de-carbonate as coal power plants emit massive amounts of CO2 – a major contributor to global warming, according to Asahi.
Newswire Reuters also cited the shareholder resolution sent to the Mizuho management last month requiring the bank to align with the Paris Agreement.
It was the first time a publicly-traded Japanese company has been sent a shareholder resolution on climate change. The resolution was sponsored by Kiko Network, a Japanese activist group that focuses on coal and also holds shares in Mizuho.
“Climate change is one of the most important global issues that can affect financial market stability,” Mizuho said in its recent statement. “Responding to the environment and climate change is a key issue in our business strategy.”
The revised guidelines are likely to take effect in June. Accordingly, Mizuho will not allow its borrowers to refinance their loans for these projects.
Experts warn that Japanese banks are among the few major lenders who have stuck to providing loans to coal projects, while other lenders such as JP Morgan have cut lending to the sector.
Data from Refinitiv SDC Platinum reveals that Mizuho is among the three largest lenders in the world pouring investment in coal power and mining over the last five years.
Japan’s two other biggest banks – Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group – are also in the top five.
However, Mitsubishi UFJ Financial Group Inc. confirmed last year that it would halt new investments and debts to coal power plants, in principle. Sumitomo Mitsui Financial Group Inc. is also slated to follow suit with a similar financing policy, Asahi reported.
A source at Sumitomo Mitsui told Reuters its banking unit would change its financing guidance to one of not lending to coal-fired power plants in principle.
Recently, Mizuho Financial Group has expressed interest in investing in medical startups through investment funds but has been facing difficulties in stepping up investment in the field. This stems from the significant amount of time and cost required to win pharmaceuticals’ approval.
The group has thus decided to establish a fund focusing on life sciences with high growth potential.
Last year, Singapore’s sovereign wealth fund GIC Private Limited has invested in Vietnamese lender Vietcombank through a joint deal with Mizuho Bank worth VND6.2 trillion ($269.57 million) demonstrating the strong interest in Vietnam’s financial sector.
PYN Elite fund looks back on multiple months of consecutive loss during COVID-19
Finland-headquartered fund PYN Elite, which is a shareholder of 70 Vietnamese listed firms – including high-profile names such as VietinBank, TPBank, and PAN Group – has reported its sixth consecutive month of loss. Last month saw VND2.451 trillion ($106.57 million) of the fund’s value evaporating. Its deep losses followed a rough patch for the VN-Index.
PYn Elite fund’s net asset value (NAV) per share tumbled by 29 per cent compared to the beginning of the year.
In March, local bourse VN-Index fell 25 per cent, which also led to PYN Elite plunging nearly 27 per cent.
PYN Elite’s representative said, “The crash in oil price, coupled with indiscriminate selloff, have been a brutal comeuppance for the equity market. Central banks across the globe have taken bold steps to ward off signs of an economic fallout.”
March was also the S&P 500’s most volatile month ever, as frenetic swings whipsawed the market from steep gains to even steeper losses, according to CNBC. Elsewhere, efforts to contain the virus have pushed European and Asian markets into further loss. Japan’s Nikkei ended the first quarter down 20.04 per cent – its worst quarter since the fourth quarter of 2008, while South Korea’s KOSPI lost 20.16 per cent. The VN-Index followed suit, tumbling 31 per cent year to date to reach 662.53 points as of March 31.
PYN Elite, though losing 29 per cent year-to-date, might have slightly better prospects, the representative explained.
In fact, the foreign fund has been rather bullish about the performance of the local stock market.
Petri Deryung, director of the fund, signalled that the fund would purchase more shares down the road in case of favourable conditions and attractive valuation.
“VN-Index has good prospects to reach 1,800 points,” the fund said previously.
Particularly, the fund approached the stock pullback with a positive outlook, saying it would go all in and pour all its money into the stock market – which is easier said than done.
PYN Elite Fund is no longer a major shareholder of DIC Investment and Trading JSC since its ownership was reduced to 2.04 per cent. Earlier in March, the fund also slashed its holdings in Tasco JSC and DIC Investment and Trading JSC, among others. Most recently, on April 9, PYN Elite also sold 1.36 million shares in large-cap firm Mobile World Group (MWG).
All in all, the fund has offloaded a total of 27 million shares in the Vietnamese stock market in recent months.
Banking sector – Striking while the iron is hot?
Last year, the State Bank of Vietnam asked financial institutions to gradually reduce the proportion of short-term capital for medium- and long-term loans from the current 40 to 30 per cent over the next three years. The SBV also demonstrated the central banks’ determination to tighten credit for risky sectors, such as real estate. High-risk borrowers such as BOT project investors would find it harder to access loans.
Since then, firms find less leverage, while holding much more cash.
Vietnam’s top 50 companies have a net debt-to-equity ratio of 32 per cent, which is lower than that of US and European counterparts. Smaller firms cannot get loans without collateral. In short, Vietnamese firms might be less risky for investors in case markets see a return of volatility.
On the other hand, just a few Vietnamese firms issue USD bonds since the domestic capital market has not completely opened up to foreign investors. Hence, external uncertainties have been limited in the past few months.
Taking a look at PYN Elite’s portfolios, the bank group still holds the majority of funds, such as TPBank (10.94 per cent), VietinBank (7.99 per cent), or HD Bank (7.49 per cent).
“Our invested firms can make it through the escalating tension whereas higher borrowing costs and weaker export demand. The average net debt-to-equity ratio for our core firms is 27 per cent. Furthermore, more than half of our invested firms have net cash position, and most of them focus on the domestic market, except FPT exporting its IT services,” said the fund.
However, at the end of last year, PYN Elite also talked highly of MWG’s growth prospect – before selling half of its shares in the firm.
Indonesia expects to see economic recovery in Q4
Indonesia’s economy is likely to begin recovering in the last quarter of 2020 before the growth accelerates in 2021 with an expected expansion of between 4.5 and 5.5 percent, according to Indonesian Finance Minister Sri Mulyani Indrawati.
Due to the COVID-19’s impacts, the country’s economy would be under extreme pressure in the second and third quarters of 2020 when it would likely grow by minus 2 percent, the minister said.
The government will focus efforts on raising the resilience of businesses and attracting investors to put their capital in Indonesia, according to the minister.
Indonesia would also join hands with other countries in efforts to deal with the economic meltdown due to the disease that has been spreading worldwide.
To help the government contain the national economic slowdown, the central bank, Bank Indonesia, has taken several measures including trying to maintain its foreign exchange reserves which are expected to be used for intervention in the financial market so as to prevent the rupiah from devaluating during this difficult time.
For the time being, only manufacturing industry receives tax incentives, but the government will give the same treatment to 11 more industries including transportation, hotel business and trade.
The Indonesian currency was up by 1.12 percent to 15,465 per one USD on April 17, compared to 15,640 rupiah against the greenback on the previous day./.
Travel firms ask for support to overcome impacts of COVID-19
The HCM City Department of Tourism said it has submitted to the State Bank of Vietnam a list of 31 travel and tourism firms that are seeking help to make it through the disruption caused by the COVID-19 pandemic.
They want new loans, cuts in their bank loan interest rates and more time for repayment so that they could remain in business and keep their employees.
The tourism industry is in urgent need of Government assistance to retain its workforce and recover as soon as the pandemic ends, Tran The Dung, deputy director of Young Generation Travel, said.
Nguyen Quoc Ky, general director of Vietravel, said the industry, which has been accounting for more than 10-11 percent of the city’s economy for the last few years, needs a relief package from the Government.
It is now difficult for travel firms to get loans from banks since most of them have no assets to mortgage, he said.
Nguyen Thi Khanh, deputy head of the city Tourism Association, said the pandemic has crippled businesses and caused the loss of thousands of jobs.
In the first quarter, 90 percent of more than 1,000 small and medium-sized travel businesses in the city suspended operations as the coronavirus brought tourism to a standstill.
Businesses in the city project losses of trillions of VND in the second quarter./.
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