The exit door?
When releasing the information about the state’s plan to buy some properties to use as public agencies’ offices, Nam emphasized that the State buys properties not to rescue any specific real estate firms. The State would still buy properties in normal economic conditions, when real estate firms make profit. However, it would be better to make purchase now, when the prices are low.
Nam went on to say that the prices of properties will be negotiable. The State will purchase properties after considering its demand, and enterprises have the right to refuse to sell their products to the State.
However, despite the statement, the information about the State’s plan to buy some properties still has rekindled the hope of real estate firms, the investors who are holding real estate firms’ shares, and those, who bought houses under the mode of capital contribution.
In fact, the plan to buy back some real estate projects is a part of the government’s Plan No. 254 on restructuring the credit institution system in 2011-2015. The government has assigned the Ministry of Construction to build up the criteria of the properties to be bought back by the State.
According to Nam, under the Plan No. 254, the real estate projects to be bought by the State would be the ones which are the collaterals for bank loans. These could be the projects to be completed soon, or the completed projects which have been unsold.
Analysts have commented that the State’s plan to buy back some properties would help revive the real estate market. The move would not only benefit real estate firms, because they can sell products, but also benefit commercial banks as well, because real estate firms, once getting money from the sale, would be able to pay bank debts. As such, the bad debt ratios of commercial banks would be decreasing, while this is one of the most important goals of the bank restructuring process.
The State Bank of Vietnam has released the decision to slash the dong deposit interest rate by one percent to 13 percent per annum, which is believed to force the lending interest rates, which are at 22-23 percent, down. However, the one percent interest rate reduction is not sharp enough to rescue real estate firms.
In the last months of 2011, the State Bank two times loosened the policies on funding real estate projects. With such good news, real estate firms seem to have partially recovered. However, the real estate market is believed to need more support from the government.
The performance in the stock market showed that investors have positive reactions to the information about the state’s purchases of properties. Real estate firms’ share prices have been on the rise, with many share items reaching the ceiling price levels.
However, most investors still keep cautious with real estate firms’ shares. Just in the last several months, they witnessed the collapse of many big firms which they thought had good business performances.
Hanic – SHN, is a typical example. Investors have been trying to bargain away the shares of the firm after the President of SHN publicly admitted the possibility of the firm going bankrupted. The figures in the finance report showed that the liquidity of the company is at alarming level.
By the end of 2011, SHN had had only 1.15 billion dong in cash and other properties. Meanwhile, the short term debts of the company had reached 401 billion dong.
Manh Ha
Business & Investment Opportunities
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