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Rosier outlook for most sectors in 2010: SSI study   2009-12-13 - Thanh Nien, Dau Tu Chung Khoan

Investors study companies’ stock market performance in Ho Chi Minh City.  
Producers of raw material like shrimp and rubber for processing industries will do well next year as will exporters on the rising dollar and higher prices.


Makers of and traders in consumer goods and dollar debtors, meanwhile, will find the going tough, says the Dau Tu Chung Khoan newspaper, basing its report on several financial reports and a study done by Vietnam’s largest brokerage Saigon Securities Inc. (SSI).

The seafood industry will perform better than expected, recording double-digit growth, SSI analysts and consultants said.

Seafood products have been a strategic export item and are expected to continue receiving government support in 2010.

As of the end of October, leading exporters like the Minh Phu Seafood Joint Stock Co. (MPC), Vietnam’s biggest listed seafood company, and Vinh Hoan Corp. (VHC), the second, were among the firms with the highest export turnover nationwide, according to the Vietnam Association of Seafood Exporters and Producers.

Rubber and steel

Sales of raw latex are also forecast to improve next year, the SSI study has found.

Also listed among the country’s strategic exports, rubber will also benefit from government support and the rise of the dollar. The State Bank of Vietnam on November 25 cut the reference rate for the dong against the dollar by 5.44 percent.

Rubber producers are also strong financially. They have borrowed little from banks and thus will not be affected by another policy issued early this month, raising the key interest rate from 7 percent to 8 percent.

The SSI study also finds banks earning higher incomes next year thanks to the raised rates while coal and other minerals will also enjoy the benefits of an uptrend seen in raw materials.

Steel makers will benefit from robust demand next year as the government targets improved infrastructure development. Many constructions in Hanoi are supposed to be completed before the city celebrates its 1,000th anniversary in October.

Other sectors cited by the study as experiencing better times next year include cultivation and husbandry, which are expected to gain 20 percent next year; and real estate developers who can cater to middle-income earners looking to buy houses.

Dollar debt pains

Although analysts said central bank policies regarding the dong and key interest rate were “generally” the right moves, they also noted that those holding large debts in the greenback or other foreign currencies stronger than the dollar will be hurt.

Such victims would include the PetroVietnam Drilling & Well Services Joint Stock Co. (PVD), the country’s biggest listed oilfield service provider, which will owe US$230 million in dollars by year end. The company would have to pay an additional VND95 billion for every $100 million owed. This situation will persist through 2010, the study found.

The Pha Lai Thermal Power Joint Stock Co. (PPC) based in the northern Hai Duong Province, PetroVietnam Transportation (PVT), Vinashin Petroleum Investment and Transport Joint Stock Co. (VSP) and several major cement producers like Ha Tien 1 (HT1) will also be affected by the dollar debt.

However, not all of these companies will report losses from the exchange rate this year as a recent decree by the Finance Ministry gives them five years to announce the loss.

Power, fuel price hikes to hurt

As power and coal prices rise next year and the minimum wage goes up in May, consumer goods makers and traders will be under pressure to add the cost to their selling prices.

Dairy maker Vinamilk (VNM), North Kinh Do Food Joint Stock Co. (NKD) – one of Vietnam’s leading confectionary makers, Tuong An Vegetable Oil Joint Stock Co. (TAC) and Hau Giang Pharmaceutical Joint Stock Co. (DHG) – a leading drug maker will face the pressure to increase prices.

Other factors seen as affecting the economy in 2010 are higher inflation and the withdrawal of the interest rate subsidy offered by the government this year following the economic downturn.

The Finance Ministry early this month said Vietnam’s inflation will likely accelerate until February due to stronger consumer and industrial demand. The International Monetary Fund also said the current figure 4.35 percent, the highest since May, is likely to rise to “double digits” by next year.

In the face of interest subsidy cuts, many companies have announced they would raise their capital by issuing shares, bonds and convertible bonds. The money is expected to be invested in the following years in fixed assets and financial activities including mergers and acquisitions.

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