Deal with HK firm a sign of Vietnam property woes
04-SEP-2008 Intellasia | Reuters
Sep 4, 2008 - 7:00:00 AM
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Hong Kong's Luks Group has clinched control of a HCM City property project, in a sign that Vietnamese firms are heeding government edicts to scale back investment in an overheated economy.
Trading company Trans-Asia Viet Corp, one of many Vietnamese joint-stock and state enterprises that has dabbled in the hot property market, had been the sole developer of the 200,000 sq m project.
But with banks clamping down on lending for construction and the government telling state firms to cut investment, the company sold a 75% stake in the project for HK$475.4 million.
"Given the large-scale and fast-pace development and urbanisation now undergoing in HCM City...the Group believes that the land has huge potential for re-development into residential and commercial properties," Luks' chair Luk King Tin said in a statement on Tuesday.
"The Project presents an excellent opportunity for the Group to expand its presence in the property development business in HCM City," he added.
As Vietnam's economy boomed, thanks to an inflow of foreign direct investment, property prices in some areas of HCM City and Hanoi have trebled in the last couple of years.
But prices have dropped about 25% this year as the government struggled to cool the economy to narrow its current account deficit and contain inflation, which is approaching 30% thanks to soaring food, fuel and raw material prices.
With lending rates hiked to as much as 22% in the last year from about 10%, analysts believe Vietnamese companies will struggle when they refinance loans and will need to sell assets or cancel investment projects.
Shares in Luks Group eased 0.28% to HK$3.52 in late trade on Tuesday.
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