Launched for the market

In the last week before the Lunar New Year, the number of customers to supermarkets shopping for fresh foods, cattle meat, poultry meat, processed foods, sweetmeats, vegetables, and fruits for the Tet holidays continued to spike. At some supermarkets, such as MM Mega Market An Phu, Big C An Phu, and E Mart, the situation that customers had to wait in long lines for checkout continuously happened. By the morning of the last day in the lunar calendar, the footfall started to decrease gradually. Concurrently, the shelves of fresh meat, such as chicken, pork, and beef, were almost empty, because supermarkets stopped receiving new goods.

Thanks to careful preparation, high-quality branded goods, stable pricing policy, along with promotions and discounts on many items, supermarkets attracted a large number of customers. Earlier, supermarkets had offered a discount of 10-50 percent on thousands of items. Many supermarkets had also extended their opening hours by 4-5 hours per day during the Tet holidays to meet the shopping needs of consumers.

At the end of the peak business season, according to many enterprises and supermarkets, the purchasing power increased by 10-15 percent over the same period with the purchasing power of modern distribution networks, including supermarkets and convenience stores, increasing by 20-30 percent. Many enterprises said that amid such a difficult economic context, they were satisfied with these results. As for traditional markets, during the days before Tet, the number of customers shopping at markets was quite high, prompting the purchasing power to climb 30-40 percent compared to normal days.

In general, the prices of goods during the Tet holidays in Ho Chi Minh City were fairly stable. Especially, in the group of essential food items, such as cattle meat, poultry meat and poultry eggs, and processed foods, the selling prices tended to decrease slightly, due to the influence caused by goods in the market stabilization program, as well as abundant supply. For pork, during the peak period before Tet, the prices of pork cuts and live pigs were steady, but the price of pork at wholesale and retail markets inched up slightly by VND1,000-VND5,000 per kilogram. The supply of pork to the market was plentiful and diverse instead of being short as some previous forecasts.

Fresh flowers were almost sold out

In the group of fresh flowers, the selling prices were relatively stable and only a little bit higher than normal days. Even for some types of flowers like lily, the selling price was only VND250,000 per dozen, merely half of that in the previous year; that of gladiolus was VND120,000 per dozen. The prices of flowers brought from Da Lat City, such as moth orchids, chrysanthemums cuttings, and lilies, were stable, with supply meeting demand.

However, because the purchasing power of flowers remained slow during the days near Tet, the Department of Industry and Trade of HCMC coordinated with news agencies, radio, and TV stations to simultaneously call on the people’s support to increase the purchase of Tet flowers, contributing to sharing the difficulties with flower trading households and flower farmers. Some specialized flower trading areas, namely Binh Dien and Thu Duc wholesale markets, and Dam Sen fresh flower market had reportedly consumed 100 percent of the flower supply.

Other markets, such as the Gia Dinh Park flower market, consumed 90 percent. By the afternoon of the Lunar New Year’s Eve, many flower shops specializing in moth orchids in Hoang Van Thu and Pham Van Dong streets, saw high footfall, but beautiful pots of moth orchids were all sold out. The owner of a flower shop said that the purchasing power of flowers was very good, and the selling price of moth orchids was equal to that last year at VND200,000-VND250,000 per plant.

As for the typical Tet flowers of the North and the South – peach blossom and Mai flower (Ochna integerrima), due to unfavorable weather and heavy rain during the days near Tet, many pots of Ochna integerrima blossom bloomed earlier than expected, leading to slow purchasing power. Meanwhile, peach blossoms were very attractive to customers because flower shops did not overcharge while peach flowers bloomed beautifully. As a result, by the afternoon of the 29th day of the last month in the lunar calendar, this item was already sold out.

In the fruit group, Hoa Loc mango, mandarin orange, honey mandarin, and custard apple, the selling prices were the same as last year. However, the prices of dragon fruit and pomelo of all kinds decreased to only half of those in last year. For instance, green-skinned pomelo was priced at VND45,000-VND50,000 per kilogram, and dragon fruit VND25,000-VND30,000 per kilogram.

From the second day to the fifth day of the first month in the lunar calendar, it was recorded that the selling prices of many kinds of goods at supermarkets at the beginning of the year did not increase over the same period and were equivalent to the normal selling prices. Specifically, at some supermarkets and food stores, the prices of all kinds of beef fluctuated from VND250,000 to VND300,000 per kilogram, chicken meat from VND120,000 to VND140,000 per kilogram, and all kinds of fish from VND30,000 to VND120,000 per kilogram. Products in the market stabilization program still offered better prices than the market. On the opening day in the new year, supermarkets also launched many promotional programs, in which, fresh food products saw an average decrease of 10-20 percent, and non-food goods decreased by 5-49 percent.

The Hanoitimes – Vietnam’s stock market has been the platform to help firms like Vietcombank, Vinamilk and Vingroup, expand to regional and global stages.

Prime Minister Nguyen Xuan Phuc has urged Vietnam’s stock market authorities to work out measures so that the market can be upgraded to the emerging market status in a near future.

Prime Minister Nguyen Xuan Phuc addresses a ceremony to celebrate the 20th anniversary of the establishment of the local stock market. Photo: VGP.

Such a move would play a significant part in turning Vietnam into a modernized and industrialized country in the next 15 – 20 years, Phuc said at a ceremony marking the 20th anniversary of the establishment of the Ho Chi Minh City Stock Exchange (HoSE) (July 20, 2000 – July 20, 2020) on July 20.

Vietnam is currently in the Frontier Market group, and was added to the FTSE Russell’s watchlist for possible upgrade to Secondary Emerging Market in September 2018. However, after one year of review, Vietnam only met seven out of nine criteria of FTSE.

After 20 years of operation, the local stock market is expected to make breakthroughs to better meet the economy’s demand for mid- and long-term capital, Phuc said.

The stock market, along with the banking system, should be key channels for capital mobilization and supporting the development of the business community, Phuc added.

From two public firms at the inception, the country’s stock market now has over 1,600 enterprises listed on two stock exchanges namely the Hanoi Stock Exchange (HNX) and the HoSE with a combined market capitalization of VND4,000 trillion (US$173 billion) or 65% of the GDP.

Meanwhile, the HoSE, home to the majority of large-caps, makes up nearly 80% of the total market capitalization.

According to Phuc, the government bond market, equalling 20% of GDP, has been essential in mobilizing funds for the state budget and is considered one of the fastest growing bond markets in the region, not to mention the huge potential of the derivatives market launched two years ago.

Phuc expressed his delight that Vietnam’s stock market, despite its relatively young age, has overcome difficulties and challenges arising from major crises at regional and global levels, with the latest being the Covid-19 pandemic.

The stock market has been among a handful with a strong rebound in the region, Phuc added.

Over the last 10 years, total capital mobilized from the stock market reached over VND2,400 trillion (US$103.77 billion), or 14% of total social investment capital. Notably, it has been the platform to help many local enterprises expand to regional and global stages, such as Vietcombank, Vinamilk, or Vingroup, among others.

The Hanoitimes – The reality is largely attributed to Covid-19 impacts.

The vacancy rate of Hanoi’s office market in the first nine months this year hit a three-year low, according to JLL, a leading professional services firm that specializes in real estate and investment management.

Vacancy of Hanoi’s office between January and September hits record low

The new launch and the weak take-up during the quarter brought up the market average vacancy rate to 14.9% in the third quarter this year (3Q20), the highest vacancy rate since 2017, JLL has said in a recent report.

Three projects started operation in Hanoi in 3Q20, providing more than 122,000 square meters (sqm) of space, 75% of which came from Capital Place, a high-quality Grade A building.

Three new projects are scheduled for completion in the fourth quarter this year, bringing the total stock up to 2.2 million sqm by end-2020.

This is likely to drive up market vacancy, resulting in landlords more willing to negotiate with tenants. As tenants are likely to tighten their budgets until the pandemic is globally contained, market rents are expected to stabilize or even decrease in the near term, JLL predicted.

Office total stock and office average rents in Hanoi. Source: JLL Research

Note: [1] Rent refers to average net rent of Grade A and B office markets, excluding VAT and service charges. [2] CBD area consists of Hoan Kiem (core CBD), Dong Da, Ba Dinh and Hai Ba Trung. Non-CBD area refers to the rest of the city.

Demand continues to weaken

Demand for office in Hanoi in Q3 remained weak across the market. Most of the existing buildings recorded negative net absorption as tenants continued to either relocate to the buildings with lower rents or scale down their sizes.

During the period, three new completions were less than 20% occupied with notably low pre-commitment rate. This phenomenon has not been seen for a while with most new buildings during 2018-2019 period managing to record pre-commitment of more than 46% on average at the opening date.

Net absorption returned to positive territory in Q3, at around 19,500 sqm, which was mainly contributed by the take-ups in the new completions.

Rental rates remain unchanged

The average net rent of Grade A increased by 5.8% on-quarter to US$26.9 per sqm per month in 3Q20, which was due to the completion of the high-quality Capital Place project with higher-than-average rent.

Meanwhile, most buildings in the segment kept their asking rents constant yet with more flexible leasing terms to support the tenants.

Rental growth in Grade B has also slowed to almost a standstill since the first outbreak of Covid-19, given the softening occupier demand as they turned cautious amid uncertain situation. Rents therefore were kept unchanged at around US$14.5/sqm/month in 3Q20.

Generally, although the demand softened, landlords were not ready to reduce rents to a large extent yet as the average occupancy rate, albeit lower than before, remained at a fair level of more than 85%.

The Hanoitimes – Vietnam has attracted the majority of those who wanted to diversify their manufacturing portfolio beyond China.

Vietnam remains a promising market since the trend of factory relocation out of China began due to the Covid-19 pandemic, sending land prices soaring in the northern industrial market, JLL has said in a report.

Long-term potential in Vietnam’s industrial segment. Photo: Becamex IDC

Although the Covid-19 pandemic was currently causing difficulties for investment decisions or relocation activities, industrial park developers remained confident of increasing land prices as they were well aware of long-term potential in Vietnam’s industrial segment, explained the leading professional services firm that specializes in real estate and investment management.

With relatively developed infrastructure and proximity to China, Vietnam has attracted the majority of those who wanted to diversify their manufacturing portfolio outside China, JLL pointed out.

Therefore, the average land prices in the first quarter (Q1) of this year reached US$99 per square meter (sq.m) per lease term, up 6.5% on year. Ready-built factories (RBF), the favorite preference of SMEs kept the rent stable, ranging from US$3.5-5.0 per sq.m per month in Q1 and have been fully occupied.

General, demand for industrial land remained strong in Q1 thanks to Vietnam’s good industrial fundamentals. However, since February 2020 when the Covid-19 pandemic began spreading, all traffic flow has been suspended, making it difficult for investors – especially foreigners – to either implement site inspection or directly work with industrial park (IP) developers.

Multiple transactions were postponed, and most successful transactions recorded this quarter had taken place before the outbreak.

Stocks and land prices in northern industrial market. Source: JLL Research

The average occupancy rate, therefore, increased relatively at roughly 200 basis points (bps) compared to Q4/2019 and reached 72% in Q1/2020.

During the quarter, no new IP was launched into the market. Bac Ninh and Haiphong – with their mass supply – were still the leading industrial markets in the North. With strong industrial fundamentals, new IPs and expansion phases will continue to come on stream in these localities, JLL said.

In the long run, the postponement of ongoing leasing negotiations and new requirements will be more apparent if the situation does not improve soon, JLL said. However, the market is likely to recover and grow rapidly after the epidemic is well under control, it added.

The disruption in the global supply chain caused by the pandemic is urging businesses to diversify manufacturing portfolios, as they are too dependent on one country. Covid-19 is just catalyzing the process of shifting production, which has taken place since the trade tension last year.

Therefore, on the bright side, Southeast Asia, and Vietnam particularly, is benefiting and affirms its position as the promising destination in the future, according to JLL.