Professional Documents
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ISSN 1017-1371 A PUBLICATION OF MARC FABER LIMITED MARCH REPORT [MARCH 3, 2010]
“When you see that trading is done, not by consent, but by compulsion — when you see that
in order to produce, you need to obtain permission from men who produce nothing — when
you see that money is flowing to those who deal, not in goods, but in favors — when you see
that men get richer by graft and by pull than by work, and your laws don’t protect you against
them, but protect them against you — when you see corruption being rewarded and honesty
becoming a self-sacrifice — you may know that your society is doomed.”
Also, I need once again to remind our subscribers that the Gloom, Boom & Doom Report is copyright by Marc
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I apologise for boring my readers with this nonsense, but it has come to my attention that certain asset
management companies that subscribe to one copy of the Gloom, Boom & Doom Report are photocopying and
distributing the report — in some cases, to up to 35 different individuals. In other cases, the report is being
copied and sent to friends, relatives, etc. Often this is done without any devious intent to breach copyright. A
client of a financial advisory firm or bank may simply ask his portfolio manager to send him the GBD report, and
the portfolio manager complies with the request in order to please the client. However, these are usually people
who can perfectly well afford to subscribe to a report like the Gloom, Boom & Doom Report and, therefore, they
should be required to pay for it.
Vietnam’s “Residential Plus” Market
Peter Ryder and Rick Mayo-Smith, Indochina Capital/Indochina Land
Capital Place, Floor 10, 6 Thai Van Lung Street, District 1, Ho Chi Minh City, Vietnam
Tel: (848) 3910-4855; E-mail: peter@indcohinacapital.com or rick@indochinacapital.com;
Website: www.indochinaland.com
When we first wrote in Dr. Faber’s country’s emerging middle-class is on stabilizing macroeconomic
journal in August 2004, expounding approaching the size necessary to pressures by utilizing more
the merits of Vietnam as an attractive generate self-sustaining internal preventative measures, and it is clear
investment destination, we growth and demand in the property that policy changes are already
highlighted opportunities in the market, particularly the residential underway with the State Bank of
residential, retail, office, and and retail sectors. Vietnam increasing interest rates by
hospitality sectors and noted the 100 bps in November 2009 and
country’s comparable position vis-à- THE TIGER CUB CONTINUES consecutively devaluing the currency,
vis more mature property markets TO GROW first in November 2009 by 5.0% and
around Asia. At that time, we were most recently by 3.3% in February
raising funds for Indochina Land In the past decade, Vietnam, the 2010. As learned in previous bouts,
Holdings, Vietnam’s first real estate world’s 13th-largest country by the timely implementation of
fund, which launched the following population with nearly 90 million, monetary policies is necessary for
year. Five years on, investment has emerged as Southeast Asia’s avoiding boom and bust cycles, and
opportunities in Vietnam’s real estate greatest economic success story, as steady tightening of the monetary
market continue to appear and are evidenced by repeatedly strong GDP policy and careful control of the
even more appealing, as the country’s growth (average annual growth of foreign exchange regime will
growth trajectory has demonstrated 7.25% between 2000 and 2009) ultimately rebalance risks.
its resilience in the aftermath of the driven by rising export turnover, a
global financial crisis. rapidly expanding private sector, DOMESTIC CONSUMPTION
Today, Indochina Land manages robust domestic consumption, and GROWTH WAVE: VIETNAM
three private, closed-ended funds emerging service-based industries, RIDES THE CREST
with US$460 million of equity, including tourism.
which translates into approximately In the past year, the country has Collectively, Asia is projected to
US$2 billion of projects in operations performed exceptionally well generate more new demand in 2010
or under development in Vietnam. considering the global context and, (and onwards) than the United
(We focus exclusively on Vietnam, following China and India, has States — and new demand is the very
peeking occasionally at Cambodia outperformed all other Asian nations measure of economic growth. This
and Laos.) Our core strategy is in terms of economic growth, which demand is primarily driven by a rise
“residential plus” where we develop steadily increased throughout 2009. in domestic consumption and is the
stand-alone for-sale residential Rising from 3.1% in Q1 to 4.5% in impetus behind Asia’s sharp
projects or combine for-sale Q2, Vietnam’s GDP growth rate economic recovery.
residential with other property types accelerated further to 6.0% in Q3 In Vietnam, the rise in domestic
such as retail, office, hotels, and/or and finally to 6.9% in Q4, on the consumption is palpable. The
resorts. This strategy allows us to back of strong domestic demand and headline figure for growth in retail
capitalize on the significant the government’s stimulus program. sales of consumer goods and services
imbalance between quality supply Average GDP growth for the year of alone illustrates this trend, with a
and demand in Vietnam’s housing 2009 was 5.3%, and according to year-over-year increase of 18.6% in
market. It also enables us to limit prognosticators, economic 2009. Accounting for inflation, the
fund equity injections and enhance momentum will escalate to 6.5–8.0% jump was still in the double-digits at
our returns on equity through the in the Year of the Tiger, as global 11% year-over-year, amounting to
optimal use of proceeds from the off- trade recovers and domestic US$64.7 billion. Between 2005 and
plan sale of residences (what we like consumption continues to expand. 2008, growth in Vietnam’s retail sales
to call “equity financing”). Accompanying the economic rose in excess of 20% per annum.
Vietnam’s residential market is turnaround, the annualized inflation Vietnam’s retail sector is buoyed
underpinned by rapid urbanization, rate returned as a macroeconomic by the country’s young population
evolving socio-cultural preferences concern, rising to 6.88% by year end with increasing disposable incomes
related to housing, compelling in 2009, and the expanding domestic and evolving consumer preferences
demographics, consistently positive economy created an uptick in import favoring luxury items. While
macroeconomic growth, private growth, producing a trade deficit of mushrooming brand awareness has
sector wealth creation and socio- US$12.2 billion. Heading into 2010, fueled a rise in modern retail, the
political stability. Additionally, the the government’s agenda has focused most salient fundamentals supporting
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