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KUALA LUMPUR: The 9% devaluation of the Vietnamese dong last Friday may have caused a knee-jerk reaction in the market after it slid to record lows against the US dollar, but some Malaysian companies that have significant investments in the country are still positive on its prospects.
The Ho Chi Minh Stock Exchange ended trade 0.05% lower last Friday to close at 519.98 points.
According to a statement on the State Bank of Vietnam's website, the move was taken to increase liquidity in the market, thereby curbing the country's trade deficit and putting in place a more "active and flexible monetary policy".
The central bank had fixed the reference exchange rate to 20,693 dong per dollar from 18,932 effective Feb 11, while also narrowing the trading band to 1% from 3%.
In an email response to The Edge Financial Daily, S P Setia Bhd's president and CEO Tan Sri Liew Kee Sin said the company viewed Vietnam as a "long-term growth story".
"We have adopted a go-slow approach in Vietnam given the volatile economic conditions as well as its undeveloped mortgage and financing markets," he said.
Liew said S P Setia was minimally impacted by the devaluation of the currency, which according to Bloomberg has been devalued four times in 15 months.
"Because of the high financing rates, we are taking it slow. We borrow in dong, get paid in dong for our properties to ensure that the value of the US dollar is more or less maintained, while also paying our contractors in the currency," he said.
Hence, Liew said that any devaluation loss was "purely academic" and did not impact the company materially.
S P Setia has three projects in Vietnam, namely the EcoXanh at Saigon Hi-Tech Park in Ho Chi Minh City as well as EcoLakes at My Phuoc, and EcoXuan at Lai Thieu in the Binh Duong province.
The view was echoed by Berjaya Land Bhd (BLand) CEO Datuk Francis Ng, who added that the property market in Vietnam appeared to be facing a slight slowdown.
BLand has a 600ha mixed development project known as Nhon Trach New City, which is estimated to have a gross development value of RM21.8 billion, as well as a number of hotel and resort operations.
According to its 2010 annual report, BLand has a total of 118,578 sq m of properties in various provinces in Vietnam.
Other Malaysian property companies that have ventured into Vietnam include Gamuda Bhd and Ireka Corporation Bhd.
Gamuda is slated to launch its RM6 billion Celadon City development in Ho Chi Minh City, while Ireka last week announced its maiden construction foray into Vietnam.
Ireka's contract is worth an estimated US$9.06 million (RM27.6 million) from Hoa Lam-Shangri-La Healthcare Ltd Liability (HLSH) for structural works of a general hospital at the International Hi-Tech Healthcare Park (IHHP), also in Ho Chi Minh City.
An analyst with a local research house said the impact of the devaluation of the dong would be minimal and mostly limited to impairments on the companies' balance sheets as cost and sales were usually done in the local currency.
It has been reported that Vietnam expects growth of 7% to 7.5% this year despite rising inflation, large trade and fiscal deficits, a currency under pressure and low foreign exchange rates.
According to the International Monetary Fund, Vietnam had reserves of US$14.1 billion as at September 2010.
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