Inflation in Vietnam will not have any impact on Keppel Land’s projects

Inflation is soaring in Vietnam, and that’s driving up overall business costs there. Despite this, Keppel Land said it will not have any impact on its property projects in the country in the short term.

In a filing with the Singapore Exchange, the property developer said its joint ventures with strong local partners in Vietnam is helping the company to manage its cash flows.

It is also forming partnerships with local contractors to mitigate against rising construction costs.

But analysts Channel NewsAsia spoke to said short term risks still remain for Vietnam’s economy and this would impact on the country’s property market going forward.

Donald Han, Managing Director, Cushman & Wakefield, said: “It is most likely that the Vietnamese government will react to countering the high inflation numbers by devaluing the currency, which is the dong, and that might take 20-30 per cent off from the current values. When the currency is devalued, it reduces the capital value of real estate assets.”

Analysts also said foreign investors will remain cautious, even as the residential property market opens up to foreign ownership in January next year.

Mr Han continued: “Foreign investors will keep an eye on in terms of the regulators and the economic considerations. And I think in order for investors to put their money in, they’ll look into how well the Vietnamese government would tackle the economic challenges of higher interest rates as well as higher inflationary pressures that’s enveloping the country currently.”

Keppel Land has some S$360 million worth of properties in Vietnam or about seven per cent of the group’s total assets. -CNA/vm

Source : Channel NewsAsia – 14 Jul 2008

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