Vietnam property, stock market revival needed now: experts

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The construction site of a residential apartment project in Hanoi. Vietnam's property market has stalled this year, beset by soaring inflation, high interest rates.

A recovery in the housing and stock markets will help stimulate the economy next year, several experts say, calling for an easing of monetary policy.

Le Xuan Nghia, vice chairman of the National Financial Supervisory Committee, said the restructuring of the economy next year needs to include measures to warm up the real estate and stock markets.

Irrespective of their size, the markets are proof of economic health, giving either good or bad signals about the macroeconomy, Nghia said. For the banking sector in particular, the performance of the two markets plays even a more important role, he added.

Nghia made the comments at a conference in Ho Chi Minh City late last week where economists and business executives gathered to discuss economic prospects for 2012.

Nguyen Cao Tri, general director of Ben Thanh Group, a housing developer, said over the past three years the property sector continued to be shaken by problem after problem.

This year, the credit squeeze imposed on the sector has created a lot of difficulties for property companies, with some having to lower their profit targets by up to 95 percent, he said.

Nghia said credit has been tightened too much as loans expanded by only around 10 percent this year compared to 30 percent in previous years. It was like trying to stop somebody from breathing, he said.

"The policies need to be revised and made more flexible," he said.

The State Bank of Vietnam last month decided to loosen its grip on real estate loans. Restrictions have been lifted on home loans, but for wage earners only. Developers can also apply for bank loans if they are building low-income housing projects or if their projects can be put into use by January 1.

The government last week asked the central bank to review credit for other housing projects that can be completed and sold in 2012. The order came after Prime Minister Nguyen Tan Dung told legislators in November that there would be measures to boost both the stock and real estate markets.

Like the property market, the stock market is going through one of its toughest times yet. The benchmark VN-Index plunged to the lowest level since May 2009 this week. The index stood at 364.48 on Thursday.

Hoang Thach Lan, head of the brokerage unit at HCMC-based MHB Securities Co., told Bloomberg that the stock market may go down further to below 300 by the Lunar New Year holiday in late January.

"Investors are quite negative about corporate earnings this year and in doubt about the possibility of economic improvement next year," Lan said. "˜"˜However, both stocks and properties will rebound if the government makes any move to support the markets, since there are many investors who still have money but just don't know where and when to invest.''

Viet Capital Securities said in a note last week that hopes of a government stimulus package that would spur a liquidity-driven rally before the year-end have all but faded as tight monetary policies are likely to continue.

The company noted that market participants are also confused about the government's stance regarding fighting inflation and pursuing growth.

The question of whether monetary policy should be sustained to control inflation has in fact lingered over the economy for months.

While some economists and mostly the business community have urged the government to ease monetary policies and add liquidity to the economy, many others have argued that the tightening needs to continue.

The International Monetary Fund and the World Bank have both warned that the country, which made a major shift from pursuing growth to maintaining economic stability this year, could jeopardize the gains already made if it loosens policies.

Economist Le Dang Doanh believes pumping more money into the economy would not be a good move. Even if credit is eased, struggling businesses without assets will not be able to take out loans, he said.

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Truong Dinh Tuyen, a government consultant, said bringing down interest rates will be a practical way to help businesses next year.

"A rate cut of 2 percentage points will be even more meaningful than corporate tax breaks," he said.

Tuyen also said Vietnam should let the private sector pull more weight. Capital flows need to be steered to business fields that are performing well to ensure the economic growth target can be reached, he said.

Vietnam's economic growth forecast for 2012 has been set at between 6 and 6.5 percent, with an inflation target of below 10 percent. Experts have said the inflation target would be hard to achieve.

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