Gamuda leads falls

SHARES of property developers with key investments in Vietnam fell yesterday, led by Gamuda Bhd, on fears that the weakening macro-economic outlook for that country would affect property sales.

"We are turning more cautious on Gamuda's property venture in Vietnam," Citigroup said in a report on Thursday, telling investors to sell the shares.

House buyers in Vietnam face higher borrowing cost after its central bank raised the key interest rate to 12 per cent this month.

The Vietnamese dong, bond and stock markets are all under pressure, with investors starting to cash out, worried by the outlook for the country's currency and its trade and current account deficits.

Some analysts, including from Wall Street bank Morgan Stanley, are afraid that Vietnam may be heading for a currency crisis because its central bank has kept the dong too strong as inflation soars.

"If anything, the focus of the potential impact will be on Malaysian firms with substantial exposure in Vietnam," Affin Investment Bank said in a report yesterday.

Earnings of these companies may be eroded, and they may have to provide for diminution in investments, it added.

Shares of Gamuda were the worst-hit on Bursa Malaysia yesterday among the Malaysian builders who have ventured into Vietnam.

Gamuda tumbled 18 per cent in its steepest decline in a decade to close at RM2.45, although it is Berjaya Land Bhd, which has bigger-scale projects and higher share of earnings pinned on Vietnam, which could be the one most affected by a weaker property demand there.

Berjaya Land shares dropped 3.8 per cent to RM5.10, while SP Setia Bhd, which also ventured into Vietnam recently, was down 5.7 per cent to RM3.96.

"Gamuda fell the most because it has the biggest foreign shareholding. Most of the selling in Gamuda yesterday was done by the foreign funds," said Phillip Capital Management Sdn Bhd chief investment officer Ang Kok Heng.

Ang believes that some investors may have overreacted.

"Investors were too bullish when Gamuda first went into Vietnam, and now they are overly bearish," he said.

Other builders with relatively smaller exposure to Vietnam also fell. WCT Engineering Bhd declined 6.3 per cent to RM3.26, while Ireka Corp Bhd was 3.7 per cent lower at RM1.05.

By New Straits Times (by Chong Pooi Koon)