Restricted trading
Many real estate stocks gained 30 percent to 50 percent in the last few trading sessions. Thu Duc Housing Development Joint Stock Company (TDH) increased continuously since 24 May to the surprise of many investors, from VND 3,000 per share to more than VND 4,500 per share, which is equivalent to an increase of 50 percent. TDH leaders believe that the stock increased due to the supply and demand in the stock market and that the decision of buying and selling by investors is beyond the control of their business. TDH leaders explained that the ceiling increase in five consecutive sessions did not have any impact on the stock trading price in the market.
Adding to this explanation, TDH leaders also said that after nearly two years of restricted trading, the fact that TDH was trading back to normal was also the reason why the stock saw an increase in cash flow. However, the explanation of TDH did not mention the production and business situation of the enterprise. In the first quarter, TDH made a net loss of VND 10.7 bln while in the same period last year, it showed a profit of VND 59.4 bln. The main reason is that financial and management costs have reduced profits, and as of 31 March, TDH's cash balance was even below VND 5 bln.
During the real estate wave at the end of May, code LDG also recorded an impressive price increase. On 29 May, LDG showed an increase of nearly 5 percent to reach VND 4,700 per share. However, in the next session, LDG sold off massively, after information that the Dong Nai Provincial Police Department of Investigation had taken a decision to proceed with a criminal case of abuse of position and power. An official investigation would be taken to clarify the mistakes in the process of implementing the Tan Thinh project invested in by LDG. The fact that LDG was reduced to the trading floor on 30 May shows that the risk in investing in real estate stocks is very high. Earlier the controversy about the Tan Thinh project had pushed LDG stocks down from VND 25,000 per share to VND 4,000 per share. The deep drop in the stock price is also the reason why the securities company sold off millions of LDG shares of the company Chairman Lê Khánh Hưng.
Fourth quarter expectation
According to analysts, the fact that a group of real estate stocks has continuously created waves recently stems from several factors. The first is related to interest rates and bond maturity when the State Bank of Vietnam took steps to ease the pressure. Accordingly, the State Bank of Vietnam allowed the restructuring of the repayment term and kept the debt group unchanged for difficult customers under Circular 02; also allowed commercial banks to buy back sold corporate bonds within 12 months under Circular 03; and used the upcoming draft circular to reduce the risk coefficient for some loans to finance industrial real estate projects, such as loans for social housing under a draft amendment to Circular 41/2016.
The second factor is the refinancing rate adjusted to 5.5 percent, the ceiling interest rate on deposits in Vietnam dong for terms from 1 month to less than 6 months reduced to 5.5 percent, and the lending rate ceiling for short-term loans in some areas reduced to 4.5 percent. The last factor is related to the Ministry of Natural Resources and Environment sending Document No. 3054/BTNMT-QHPTTND to the People's Committees of provinces to remove some legal issues.
According to analysts, the above factors cannot help the real estate market to thaw soon because the monetary policy has a lag, and disbursement progress for real estate projects depends a lot on resolving outstanding legal issues. Although highly appreciating the efforts of the State Bank of Vietnam and the Ministry of Natural Resources and Environment in solving important issues, especially legal issues to support the real estate market, according to Viet Dragon Securities Company (VDSC) we cannot expect much of a miracle as yet.
The market only recovers clearly when the projects are eligible for sale, along with the provisions of law and a clear approval process, and the buyers have enough financial capacity to buy the products from the investor. Therefore, VDSC expects any recovery to take place only from the end of the fourth quarter when the revised Land Law takes effect and related decrees are finalized. Next is the improvement of economic factors and the State Bank of Vietnam having a lot of room to reduce operating interest rates.
Big businesses cautious
Besides analysts, big businesses are also cautious when judging the market. This caution is partly reflected in the sales plan for 2023. For instance, Nam Long Joint Stock Company (NLG) is expected to have a sales value of VND 9,430 bln in 2023 mainly from projects, such as VND 2,645 bln from Flora products at Akari project, VND 3,496 bln from the Southgate project in Long An, VND 809 bln from Ehome products, VND 835 bln from EhomeS social housing project in Can Tho, and VND 1,275 bln from Mizuki Park project. Similarly, Khang Dien House Joint Stock Company (KDH) plans to open sales of Privia and Emeria & Clarita projects in the second half of 2023. Projects such as Privia and Le Minh Xuan Industrial Park have not yet planned to open for sale and now they are having a negative effect on KDH.
