Last year, Vietnam's Ministry of Public Security arrested Zhang Meilan, the chairperson of the board of directors of Wanshengfa, along with other senior executives of the company, on charges of fraudulently acquiring assets. These executives were also believed to have ties to the Saigon Commercial Bank, leading to a brief run on the bank.
Wanshengfa, a non-listed company, owns prime real estate in Ho Chi Minh City, including the landmark Saigon Times Square building, and has also ventured into the financial sector. Many of the company's projects have been delayed and remain unstarted.
In addition to Wanshengfa, Vu Thi Thuy, chairperson of another Vietnamese real estate giant, Nhat Nam Real Estate Trading Investment JSC, was arrested last month on charges of embezzlement. According to the police, between 2020 and 2022, the company illegally raised about 9 trillion Vietnamese dong from approximately 20,000 investors using over 45,000 business contracts.
Furthermore, in the 14th month of this year, another real estate entity, Xin Huangming, faced a major scandal, leading to the arrest of its executives. The company allegedly set up shell subsidiaries to take on its own bonds, repackaging them as high-yield investment contracts to deceive retail investors, with plans to abscond once the funds were secured.
Data indicates that from 2014 to 2019, Vietnam's real estate prices surged between 50% and 300%. The average price in Hanoi reached $2,000 per square meter, attracting a plethora of investors, including Li Ka-shing. As of August this year, foreign investment in Vietnam's real estate sector reached $66.4 billion, accounting for 15% of the country's total foreign investment.
In the first quarter of 2022, the total issuance volume of Vietnam's bond market grew by nearly 19%, with a significant portion being real estate bonds. The scale of unpaid bonds in the real estate sector has reached 414 trillion Vietnamese dong, with the majority being junk bonds.
The Xin Huangming scandal has finally triggered a crisis in the real estate sector. Currently, Vietnamese regulators are grappling with the real estate debt crisis, as frequent scandals among real estate giants have put pressure on the Vietnamese economy. According to Moody's, the crisis in Vietnam's real estate sector has increased risks for banks due to their declining debt repayment capacity.
The State Bank of Vietnam, acting as the central bank, has taken steps to restore the operations of the Saigon Commercial Bank, replacing its board of directors and assuring depositors of the safety of their funds. Phan Dinh Dien, a former director of the Vietnam Bank for Agriculture and Rural Development, was appointed as the new chairperson of the Saigon Commercial Bank on September 22.
Additionally, the police stated that they are investigating Zhang Meilan's involvement in bond issuance and trading scandals with several companies. These companies are accused of misappropriating tens of trillions of Vietnamese dong between 2018 and 2019.
According to a government announcement, Vietnam's Ministry of Public Security is seeking assistance from victimized investors for the investigation. Nguyen Phu Trong, the General Secretary of the Communist Party of Vietnam, has urged regulatory agencies to conclude investigations into several scandal-hit real estate companies by the end of this year.
