A rough year for Vietnam's real estate sector has seen developers miss interest payments on debt, amid a credit crunch spurred by ill-timed government measures, although spillover risk has been limited.
That capped two years of turmoil in developers' shares that spread last year to corporate bonds, hitting project development and leaving ghost blocks of high-end property.is the largest listed developer to face problems, with its shares down more than 80% in a year, after missing interest payment deadlines on domestic and foreign bonds that triggered a standoff with some international creditors.
Buildings stand empty with interiors unfinished in developer Sun Group's "Mediterranean town" on the southern island of Phu Quoc, while the skeletons of incomplete high-rises flank shiny towers in Hanoi built by another developer, Sunshine. Jean Xavier of S&P Global said there was "no risk of massive contagion", but warned about a slowdown in key consumer sectors and the negative impact on areas closely linked to real estate, such as construction and building products.The banking system's exposure to the property sector amounts to about 25% of total loans, says S&P Global, mostly through mortgages, which are not viewed as risky, however, thanks to robust employment.
The arrest followed tougher rules on transparency and private placement of corporate bonds adopted that September, and coinciding with an economic slowdown, so that authorities were forced to suspend them a few months later, as the market froze.
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