Vietnam: Call to punish speculators who unsettle domestic stock markets

Last update 04/12/2010 02:49:49 PM (GMT+7)


Call to punish speculators who unsettle domestic stock markets
VietNamNet Bridge – Strict punishment was necessary to stop speculation, illegal price rises and to prevent deliberate rumours having a negative impact on domestic markets.

This was one of the suggestions made at an online meeting yesterday, Dec 3, chaired by the deputy Prime Minister, Hoang Trung Hai.

According to ministries and agencies, gold and dollar price hikes are often attributed to the increased efforts by domestic speculators.

Hai required the Ministries of Industry and Trade , and Finance to review and supplement regulations to handle any acts of speculation, price increase and trade fraud.

Inspections were also needed to deal with any unusual phenomenon on the share and gold markets.
Hai said the media should help disseminate State policies on trading to help prevent rumours.

Plenty of supply


According to the Ministry of Industry and Trade, from now to the end of January there should be plenty of essential commodities.

In Ha Noi and HCM City, a series of price stabilisation programmes have been conducted with financial support from the State.

Deputy Minister of Agriculture and Rural Development Bui Ba Bong said there would be no pressure on the supply of rice as harvest time was near and businesses had plenty of reserves.

* Buyers continue to gain confidence

Positive entiment caused investors to pump money into the stock market pushing 300 shares to their ceilings in both HCM City and Ha Noi yesterday, Dec 3.

The VN Index continued its rise, up 1.51 per cent to close at 464.35 yesterday.

The trading volume was 71.9 million shares valued at VND1.55 trillion (US$77.5 million).

"The 460-466 mark offered strong resistance during the past four months and a mid-term uptrend is likely if the VN-index surpasses it because trading volumes have increased strongly against last month's average," said FPT Securities Co analyst Nguyen Minh Quan.

Volume ranged from 45-70 million shares during the past four days against about 30-35 million last month.
Among the 233 advancers, securities, property and rubber shares were hottest.

They included Sai Gon Securities Incorporate (SSI), HCM City Securities (HCM), Tan Tao Industrial Zone (ITA), Investment Construction (DIC), Kinh Bac Urban Development (KBC), Da Nang Rubber (DRC) and Sao Vang Rubber (SRC).

In Ha Noi, the HN-Index volume climbed to 61.6 million and a total value of VND1.18 trillion.

The index rose strongly by 4.2 per cent to close at 116.6. Securities and property shares were the hottest.

Nguyen Quang Minh, a research analyst for vietstock.vn, said investors seemed to have remembered the lesson of 2008 that when interest rates increased sharply the stock market fell to the bottom.

The market's gain reflected the activities of bottom catchers. When the stock market dropped strongly, foreign investors bought shares to bail out the market, partly helping stabilise the sentiments of domestic investors, he said.

VietNamNet/Viet Nam News

http://english.vietnamnet.vn/en/business/2303/call-to-punish-speculators-who-unsettle-domestic-stock-markets.html

Foreign firms eager to invest in Vietnam

Last update 03/12/2010 05:30:11 PM (GMT+7)


Foreign firms eager to invest in VN
International enterprises are more confident about doing business in Viet Nam and are planning to expand is the message the Viet Nam Business Forum in Ha Noi delivered to the Government yesterday.

But their representatives expect a concerted effort to tackle major macro-economic obstacles.

"Viet Nam's success in attracting foreign investment has largely been built on the expectation of economic and political stability," American Chamber of Commerce, Amcham, chairman Hank Tomlinson told the forum - a prelude to the yearly donor Consultative Group meeting.

Unfortunately, the Government's approach to economic and monetary policy had also raised concern, he said.

Amcham, together with other investor representatives, is worried about the falling value of the dong and a perceived lack of an effective policy to control inflation.

Street vendors traded the US dollar at between VND21,400-21,450 yesterday, up VND100 against late last week.

The nominal depreciation of the currency through five deprecations since December 2008 is 11 per cent.

Fall

But the dong has fallen 36.8 per cent in value during the past three years when measured against the consumer price index.

"Monetary policy has helped boost economic growth and control inflation," Deputy Minister of Planning and Investment Dang Huy Dong assured the forum.

And while he recognised potential risk, he reminded the forum that GDP growth in Quarter 1 had been 5.8 per cent; 6.4 per cent in Quarter 2; 7.16 per cent in Quarter 3 and 6.7 per cent in Quarter 4. GDP for the year was estimated at 6.7 per cent against an initial target of 6.5 per cent.

Planning and Investment Minister Vo Hong Phuc said fighting inflation and maintaining stability would be next year's economic priorities.

Inflation of 7 per cent was expected while the target for economic growth was 7.5 per cent.

International Monetary Fund Viet Nam representative Benedict Bingham told Viet Nam News the Government should make macro-economic stability - rather than frequently shift between growth and stability - its first priority.

The change would ensure economic growth, he said.

International Finance Corporation Regional Manager Simon Andrews said Viet Nam could not forever rely on its natural resources, favourable location, relatively low-cost labour for economic growth work.

Quality

Improving the quality of growth was a major challenge, he said.

Eurocham chairman Alain Cany warned that Viet Nam's ability to maintain high economic growth was dependent on the Government's action in infrastructure and its encouragement of innovation.

"Without this, Viet Nam risks falling into the middle-income trap," he said. The trap was an economy based on cheap labour and low-technology manufacturing against value-added knowledge-intensive and innovation-based manufacturing for domestic consumption and export.

The forum listed a variety of worries for international enterprises including:

An inefficient State-owned system;

Corruption and a conflict of interest in the State-owned sector;

Inadequate infrastructures;

A lack of transparency and inadequate governance; and

Bureaucratic investment licensing procedures and the protection of intellectual and property rights.

Vietnamese Government representatives said the contribution of the international enterprises was highly appreciated and their proposals to improve the efficiency of doing business in Viet Nam would be considered.
Source: VNS

http://english.vietnamnet.vn/en/business/2264/foreign-firms-eager-to-invest-in-vn.html

Vietnamese Stock market: are there any opportunities for long term investments?

Last update 22/11/2010 09:34:09 PM (GMT+7)


Stock market: are there any opportunities for long term investments?
VietNamNet Bridge – The sickly stock market has been testing stock investors’ patience for many months. Other stock markets have recovered but when will Vietnam’s stock market bounce back?

PVGas could only sell 64 percent of the volume of shares it offered at the IPO (initial public offering) on November 17. The IPO average price of PVGas’ share was 31,000 dong per share.

Becoming shareholders of the enterprise which is leading Vietnam’s gas industry, the key industry in Vietnam’s national economy which decides the development of other industries such as power, fertilizer and steel, is really the dream of many investors. Andy Ho, Investment Director of VinaCapital, said that becoming the “owners” of state-owned general corporations is a golden opportunity which does not come regularly.

However, contrary to previous thoughts, the shares were not selling like hot cakes. Of the 1057 investors who successfully bought the stakes, 12 institutions and 1045 individuals bought 4.244 million stakes out of nearly 61 million of stakes sold.

Money exhausted

A lot of companies reported they could sell only 6-10 percent of the volume of stakes offered. At a recent auction of 7.32 million stakes of a LPG firm in the north, only five individual investors registered to buy 0.6 percent of the volume of shares.

According to Huynh Anh Tuan, General Director of SJC, as money is becoming scarcer investors are becoming more cautious with their investment decisions.

Cash is not flowing into the stock market because of many reasons. Tuan said that there are not many expectations on medium term investments, because the market is still awaiting macroeconomic problems to be solved, including the gold and dollar price fever, and it is still awaiting information about the consumer price index (CPI) in November. The increasing bank interest rates have been creating difficulties for enterprises while investors dare not borrow money and mortgage their shares for the loans.

Many enterprises have licenses to issue shares to increase their chartered capital. However, the enterprises still cannot fix the list of shareholders, because shareholders do not want to spend more money on stakes.

Are there any opportunities?

According to some securities companies, institutions and funds have planned for the disbursement. In October, for example, VF1 fund disbursed, lowering the cash proportion from 10 percent to 7 percent of NAV, and sold all the bonds in its investment portfolio. VF4 also disbursed, while the proportions of cash and other assets have decreased from 7.2 percent to 2.4 percent.

According to Tuan, domestic institutions have disbursed because of the cheap stocks, but they also can see the uncertainties.

“At this moment, they dare not spend too much money. The main force in the stock market is individual investors who account for 80 percent of the trading volume,” he said.

So far this year foreign investors’ net sale has reached over 10 trillion dong or 500 million dollar. According to Au Viet Securities Company, the figure is not big, because in the first quarter of 2008 alone, they incurred a loss of up to $1.3 billion.

Why do foreign investors keep purchasing? According to AVSC, foreign investors always target long term investments (3-5 years), and it is still early to explain their investment strategies.

The advice for investors is to maintain high proportions of cash. However, some analysts believe that if investors have idle money, they should think of medium term investments, because they can expect opportunities when the cash flow of $600 billion is pumped into the US economy and a part of the sum may flow to Vietnam.

Source: Saigon tiep thi

http://english.vietnamnet.vn/en/business/1805/stock-market--are-there-any-opportunities-for-long-term-investments-.html

Vietnam: Stock market keeps falling, stocks dirt cheap

Last update 18/11/2010 04:56:58 PM (GMT+7)


Stock market keeps falling, stocks dirt cheap
VietNamNet Bridge – The stock market has become unprecedentedly gloomy. Securities investors say the stocks are now as “cheap as vegetables”. 105 out of 603 share items listed on both the bourses have market prices below the face values.

T, a securities investor earlier this week came to a securities company to reconsider his investment portfolio. In the first quarter of the year, T purchased a large volume of shares on credit. Now, as the stock prices keep decreasing, he has to put more money into his account, or the security company will have to sell his stocks to take back money.

“I cannot sleep for the last month. This is for the third time the securities company threatened to sell my stocks,” T said.

T’s investment portfolio was once worth five billion dong. However, as stock prices have been decreasing, the values of stocks have decreased by a half. T said he has “blue chips” – the stocks of big insurance companies and banks, but it is very difficult to find buyers nowadays, when the stock prices have become “as cheap as vegetables”.

“The shares are now like waste-papers. The dividends are just 3-4 percent per annum,” he said. Twice T had to put more money into his account (more than 400 million dong) in September in order to keep his investment portfolio.

Trinh Hoai Giang, Deputy General Director of the HCM City Securities Company (HSC), also said that stocks are now dirt cheap. 105 out of 603 share items listed on both the bourses now have the market prices below the face values.

On the HCM City bourse, for example, BAS is now selling at 5800 dong per share, CAD 6500 dong, HVX 5900 dong, MHC 5700 dong, while PRUBF fund certificate 5100 dong, TRI 5100 dong. On the Hanoi bourse, SHC is trading at 6500 dong, SVS 7700 dong, TTC 6300 dong and VTA 4200 dong.

According to stox.vn, 280 share items are being traded at the prices lower or equal to the book values, including blue chips.

Le C, a big stock investor said that he and many friends of his are “meeting troubles” because of the stock price decreases. They do not want to put more money into the accounts, and also do not want to sell stocks to take back money. They decide to “nourish” the investment portfolios, hoping stock prices may increase one day.

Head of the brokerage division of a securities company has revealed that the number of repo contracts of his company has been decreasing sharply.

“They have withdrawn money to make bank deposits. Instead of asking me to give advices on stock prices, they ask me to help update gold and dollar price information,” the broker said.

He added that securities investors do not make transactions these days. They just keep the wait-and-see attitude.

According to Le Dat Chi, MA, a securities analyst, the average trading value has been very low since the beginning of November, at 700 billion dong per trading session. This shows that the majority of investors have been staying out of the market.

Analysts say the stock market remains gloomy because investors still cannot see positive signs of the macro economy, while there are signs showing that the cash flow will be tightened towards the year end. Securities investors have been advised to keep cash until the signs about development become clearer.

Giang said that HSC has been mostly selling its stocks since the beginning of the year. It continues selling stocks now to keep cash and hopes that it will not take a loss.

According to Le Dat Chi, securities investors now feel insecure. The cash flow is still running into gold, foreign currencies and bank deposits as the deposit interest rates have been increasing.

Securities investors are awaiting information about CPI in November to decide what they have to do next. If the CPI keeps increasing, the cash flow will keep away from the stock market.

Source: Saigon tiep thi

http://english.vietnamnet.vn/en/business/1656/stock-market-keeps-falling--stocks-dirt-cheap.html

Vietnam Real estate bubble – the accessory to inflation

Last update 23/11/2010 03:43:17 PM (GMT+7)


Real estate bubble – the accessory to inflation
VietNamNet Bridge – The real estate bubble is the accessory to inflation, and it should be considered as the “dangerous germ” which must not be allowed to live together with a healthy economy.

Minh, a securities investor, who went bankrupt due to the continued drops in stock prices, has unexpectedly got rich again. Several days ago, he came to a friend’s party as a real estate billionaire. Minh related that after he lost big sums of money on the stock market, he decided to sell all the remaining stocks he had. With the sum of money from selling shares, he bought 200 square meters of land near the Bao Son Paradise area in Hanoi at 30 million dong per square meter. Now he can sell the land plot at 60 million dong per square meter. If he sells the land plot right now, he will get a huge profit of six billion dong – the dream of many businessmen.

Living on virtual values

In theory, Minh’s sum of money has increased by two times. Meanwhile, the 200 square meter of land will still be the same and it has not been enlarged. The increased value can be described as a pumped ball that will return to its initial shape when it goes flat.

However, in urban areas, hundreds of thousands of people are living on the “bubble”.

The real estate fever not only has attracted professional real estate traders, but also individuals, both Vietnamese and foreigners. Even regular employees in state agencies have also jumped on the bandwagon.

Wealthy people rush to purchase land and keep land as valuable assets. People with lower income rush to purchase land to resell land later for profit. As for many ordinary workers, the money from trading land, not daily wages, is now the main income for their families.

No official statistics have been released, but it is estimated that the volume of traded land has reached several millions hectares with the added value of 30-40 percent. The value of the land may reach tens of trillions dong which obviously accounts for a big proportion in GDP.

The real estate bubble is feeding millions people.

People have their pockets picked

While millions people are getting richer thanks to the real estate bubble, another millions people are losing their opportunities to have accommodations.

A civil servant related that he has nearly one billion dong now deposited at banks. He has been saving money for the last 20 years and he hopes he can buy a mid-class apartment in the suburb area. However, he could not imagine that the real estate price would increase so dramatically. At the beginning of the year, an apartment in the area was priced at 20 million dong per square meter. Meanwhile, the price has jumped to 30 million dong. As such, with his sum of money, he would only be able to buy 30 square meters instead of 50 square meters as he previously thought.

According to experts, a reasonable sale price of apartment in multi-storey buildings (25-30 stories) is about 20 million dong per square meter which is high enough for real estate developers to cover expenses and generate profit. However, in fact, apartments are selling at 30 million dong per square meter.

As the price of real estate keeps rising, regular employees are getting poorer. Previously, they could purchase an apartment after 10 years of working, but now, they need 15 years or 20 years to buy an apartment.

The real estate price increases have brought about the increases of all other kinds of goods. House tenants have to pay higher rents, while the prices of materials, equipments all increase. The service fees of education, healthcare and transport all increase accordingly. The “price storm” is attacking every corner of society. It is obvious that the real estate bubble is the accessory to inflation.

A dangerous germ

In 2008, the US witnessed the worst financial crisis in the last 80 years. The crisis originated from a swelling real estate bubble.

Experts have warned that recently the real estate market in Vietnam recently has shown characteristics similar to the US real estate market during the crisis.

People are still rushing to purchase real estate which in turn is leading to virtual growth (the actual value does not increase). If the situation does not improve the real estate bubble is due to burst in a matter of days.

In the world, every family spends 33 percent of their monthly income to pay debts for their house. Meanwhile, in large urban areas in Vietnam, the figure may reach 80 percent.

Experts have warned that a debt crisis is likely to occur in a economy where people have to spend most of their income on accommodation.

Phan The Hai

http://english.vietnamnet.vn/en/business/1854/real-estate-bubble---the-accessory-to-inflation.html

Vietnam: Oversupply in resort real estate market

Last update 23/11/2010 09:00:00 AM (GMT+7)

Oversupply in resort real estate market


VietNamNet Bridge – The Ministry of Planning and Investment has requested local authorities to check the resort real estate development projects in their localities and report back to the ministry. The move has been understood by the public as the warning about the possible excess of the resort real estate projects.

The wave of developing resorts

Market surveys all show that in the past five years, the resort real estate market has been developing rapidly and going beyond the expectations of the management agencies.

Five years ago, there were only several resorts, namely Mui Ne Domaine, The Nam Hai (in Binh Thuan province), or Olalani, Indochina Riverside Tower in Da Nang, and some in tourist cities of Nha Trang and Vung Tau. Most of them were foreign invested projects.

However, the market has welcomed a lot of new investors, both foreign and domestic, over the past five years. The investors hope for big profit.

According to CBRE Vietnam, a real estate service provider, by the end of 2010, Vietnam will have some 55 resort real estate projects which will provide 5318 villas and 6601 apartments.

The figures make people believe that the resort market has become too hot.

In the region, Thailand is considered to have developed resort marketvery early. However, in Phuket, a famous tourist site for the past 20 years, there are only 5624 resort villas and apartments. Meanwhile, in Vietnam there are already 3745 apartments and villas in the central region. In fact, the number of high grade apartments and villas there is even higher than that in Phuket, 253 vs 135.

General Director of CBRE Marc Townsend described the investment wave as the “tsunami” which has landed in Vietnam.

It seems that people now prefer injecting their money in real estate projects to other investment channels, such as gold or securities, because they believe that real estate development can bring larger profit.

More harm than good

An expert from CBRE said that it seems that Vietnamese real estate developers have been too busy to develop the number of villas or apartments, not paying much attention to the quality.

Once the supply far exceeds the demand and goes beyond the management capability, this will be a big trouble.

An official from the Ministry of Planning and Investment said currently Vietnam has nearly no more land left along the coast, especially the localities with good infrastructure such as Da Nang and Binh Thuan.

This seems to be the blunder made by local authorities in the past. They hurried to call for investment by allocating beautiful land plots. many investors were allocated the land, even when they were not capable of carrying out their projects.

Under the current regulations, investors have to obtain permission from the Government only if their resort projects cover more than two hectares. Therefore, investors only register the projects with less than two hectares. As the result, the beautiful seaside has been divided into small plots.

The excessive development of the resort real estate sector, according to experts, may do more harm than good. Investors should be informed that the number of foreign guests and secondary investors is not has high as expected, as only 15 percent of resort real estate projects have been sold to foreigners, according to CBRE.





http://english.vietnamnet.vn/en/business/1819/oversupply-in-resort-real-estate-market.html

Vietnam: Instead of depositing gold at banks, people will keep gold under their pillows

Last update 03/11/2010 09:30:00 AM (GMT+7) 

Instead of depositing gold at banks, people will keep gold under their pillows

VietNamNet Bridge – While some experts believe that the Circular No 22, forbidding commercial banks from lending cash against gold collateral, will bring positive effects to the market, others argue that the legal document will take a big volume of gold out or circulation, which will be a big waste.

New legal document will help stabilize gold and foreign currency markets 

SBV halts lending against gold collateral 

New circular will put pressure on the marketWhen issuing the new regulation on borrowing and lending in gold, Nguyen Ngoc Bao, Director of the Monetary Policy Department under the State Bank of Vietnam said that to date, 23 credit institutions have mobilized and lent in gold. By the end of September 2010, the total deposits in gold had reached 92.6 tons, worth 73 trillion dong. Meanwhile, the outstanding loans in gold had only accounted for 60 percent of the mobilized capital.

With the new decision, commercial banks, especially the ones in the south, now have to stop accepting more deposits and think of taking back the loans in gold.

Experts have warned that in the context of the current high and fluctuating gold prices taking back a big volume, estimated at 55 tons will have big impacts on the market.

An expert from Bao Tin Minh Chau Company said that recently, when the State Bank allowed to import only several tons of gold, this was enough to cool down the market. However, the estimated 55-ton volume of gold banks are going to take back is too big.

As such, the demand for gold will increase, while the quotas for importing gold are not likely to be granted. Even if the State Bank allows to import gold, the volume will not be large .

Governor of the State Bank of Vietnam Nguyen Van Giau, before issuing the new legal document, said that gold mobilization and lending can be seen only in Vietnam.

In reality, the demand for mobilizing capital in gold and lending in gold are quite commonplace in Vietnam. Therefore, when the central bank prohibits gold borrowing and lending, banks will lose profit, while deposits will lose a safe investment channel.

New regulation will not be able to prevent uncertainties

The State Bank of Vietnam, when issuing the new legal document, said that the new policy aims to settle the problems in gold circulation and reduce the gold and foreign currency speculation, thus helping stabilize the market.
However, experts still have doubts about the possible effects of the new document.

In Vietnam, gold can be divided into two kinds: merchandise gold and the gold kept among people. Merchandise gold is being used as a type of currency which is used to trade, contribute capital and to lend to others. Meanwhile, a big volume of gold is still lying among people as their assets.

Once banks are not allowed to lend in gold, they will not accept gold deposits any more. As such, instead of depositing gold at banks, people will keep gold under their pillows. This also means that a big volume of capital will be put out of circulation and control, which should be seen as a big waste.

The State Bank believes that the new regulation will stop people from hoarding, because they cannot deposit it for profit. However, some experts do not think this will happen, saying that it is not so easy to change the way of thinking of Vietnamese people, who have the habit of hoarding gold as their assets.

Le Khac

http://english.vietnamnet.vn/en/business/1040/instead-of-depositing-gold-at-banks--people-will-keep-gold-under-their-pillows.html

Vietnam: High grade apartment prices going down on profuse supply

Last update 08/11/2010 04:29:23 PM (GMT+7)

High grade apartment prices going down on profuse supply

VietNamNet Bridge – The more profuse supply and the lack of investment capital both have forced real estate developers to ease sale prices to attract more buyers.

Real estate developers have to slash sale prices

FLC Company has announced the plan to put apartments at FLC Landmark Tower project on Le Duc Tho Road in Tu Liem District on sale for the second phase. The apartments are being offered at 28 million dong per square metre. The registrations to buy the apartments should be made from November 1, 2010 to November 15, 2010.

According to FLC, the price of 28 million dong per square metre has been kept unchanged if compared with the price set for the second phase of sale, even though the prices of construction materials, and the prices of gold and dollar have increased sharply. Meanwhile, buyers would get the credit support from the Bank for Investment and Development of Vietnam (BIDV) and Techcombank. The two banks promise to give the loans worth up to 85 percent of the values of the apartments.

The fact that the prices remain unchanged – though in fact, if set against the dollar and gold prices, they have even decreased – shows the difficulties currently faced by real estate developers.

Not only the developer of FLC Landmark Tower decides to keep the sale prices unchanged. Other developers have also been trying to attract customers by launching promotion campaigns and offering other discounts to buyers.

Capitaland Ha Thanh, for example, the developer of Mulberry Lane project in Mo Lao town in Ha Dong District, has decided to offer the price discount of 10 percent to  thouse who buy two apartments at the same time.

Besides, buyers will be able to borrow money from VIBank to purchase the apartments. The values of the loans could reach 65 percent of the values in the contracts, if borrowers mortgage the apartments. The values of loans could even reach 90 percent of the values of contracts, if borrowers mortgage other kinds of assets for the loans.

Most recently, Lam Vien Company also announced that the actual sale prices of the high grade apartments at Richland Southern will be five percent lower than the initially announced prices. Moreover, buyers will also have the right to delay the process of making payment and be exempted from the management fee for the first two years.

Last week, a transaction selling a 170 square metre apartment at TSQ project in Ha Dong District was successfully carried out. The apartment was sold for $1150 per square metre, what real estate brokers in Hanoi consider as the lowest price among all the projects in the last six months (the project is expected to be completed in June 2011).

The gap between the original prices (the prices at which real estate developers sell apartments to buyers in the primary market) and the prices in the secondary market (the prices at which the buyers sell to other buyers in the secondary market) has narrowed by more than 50 percent. For example, the original price of a 104-square metre apartment at Usilk project is $850 per square metre. Previously, the gap between the prices was just 350-500 million dong, while now the gap has reduced to 150-160 million dong ($80 per square metre)

In the golden age of the high grade apartments ( in 2007 and first half of 2008), real estate developers announced new sale prices once every three months, and the new prices were always higher than the previous ones. By doing so, analysts say, they made people think that the prices would increase further in the future, thus prompting them to rush to buy apartments.

However, they have to change their strategy now, when the market has cooled down due to the global economic recession.

According to CBRE, a real estate service provider, in the second half of 2010, 10,000 new apartments in Hanoi were put on sale, raising the total number of new apartments on the primary market to 20,000. CBRE believes that the profuse supply will keep the apartment sale prices stable from now to early 2011.

P.V

http://english.vietnamnet.vn/en/business/1223/high-grade-apartment-prices-going-down-on-profuse-supply.html

Exchange rate paradox occurring only in Vietnam

Last update 05/11/2010 05:17:23 PM (GMT+7)

Exchange rate paradox occurring only in Vietnam

VietNamNet Bridge – The greenback is losing its value against most other currencies in the world, but it is appreciating against the Vietnam dong. The exchange rate paradox is harming the national economy, forcing the government to apply urgent measures to stabilize the market.
Vietnam to use reserves, won't devalue 
The urgent government’s meeting on November 3 evening ended at 9 pm. Several measures were put forward to deal with the uncertainties on the forex market and prevent high inflation.

An unscheduled press conference was convened on the morning of November 4. Le Duc Thuy, Chair of the National Finance Supervision Council was assigned by the Government to inform the press about new policies on forex management. Representatives from the State Bank of Vietnam did not appear at the conference, where a series of new decisions relating to the monetary policies and forex management were announced.

The paradox only exists in Vietnam
The dollar price on the black market has been increasing continuously over the last two weeks, far exceeding the official exchange rate. On November 3, the dollar price once soared to 21,000 dong per dollar, much higher than the ceiling price of 19,500 dong per dollar.

Meanwhile, according to Thuy, the greenback has been losing its value against nearly all other currencies in the international market. In Russia, for example, ruble, not dollar, is required in making payment because people fear that the dollar will depreciate further.

Foreign experts said that with the loosened policy currently applied by the US Federal Reserves (FED), the dollar value would decrease by 20 percent in the time to come.

As such, a paradox exists: the gold price is increasing and the dollar price is decreasing in the world, while the gold price is increasing and the dollar price is also increasing in Vietnam

Overly high dollar credit growth rate is the “culprit”

Thuy said at the press conference that all macroeconomic indexes are very “beautiful”. The GDP growth rate may reach 6.7-6.8 percent, higher than the targeted level at 6.5 percent. The trade deficit would not be as high as previously thought, about 12.5 billion at maximum. 

Therefore, the high price of the dollar is a problem which needs to be solved.

According to Thuy, earlier this year, a lot of businesses rushed to borrow money in dollars. However, the problem was that they did not use the dollar, but they sold dollars on the market, thus causing an artificially high supply on the market. As a result, at that time the dollar price decreased and sometimes was even lower than the official exchange rate.

However, after that, businesses have to buy dollars to pay back debts, leading to increasing demand and the temporarily exhausted supply.

It is clear that to some extend, there exists the imbalance in dollar supply and demand. Besides, the prediction that the inflation rate in 2010 would exceed 8 percent has also made the Vietnam dong weaker.

Dong devaluation will not occur

In current circumstances, the move that people expect from the central bank is the further devaluation of the dong. However, the government has decided that Vietnam will not devalue the dong.

The Asia Development Bank has recently advised Vietnam not to adjust the exchange rate. Government officials have all agreed that adjusting the exchange rate at this moment is not a wise move and could even have very bad consequences.

The Vietnam dong has not become so weak that it is necessary to adjust the dong/dollar exchange rate. The dong devaluation also will not be a powerful tool to help boost exports. Especially, Vietnam is expecting to see exports increase significantly this year.

If Vietnam adjusts the exchange rate at this moment then it will send the inflation rate soaring. If so, the National Finance Supervision Council has estimated that the increase in the price of goods would be double-digits or more. Meanwhile, the top priority task for now is to obtain macroeconomic stability, especially, to control inflation. If the government fails to do that, people will lose their confidence.

However, the State Bank of Vietnam will take necessary measures to cool down the forex market. It will “pump” foreign currencies into circulation to ease the situation.

The announcement has raised the concern that this could make Vietnam’s foreign currency reserves become “thinner”. However, Thuy has reassured the public that the foreign currency reserves are sufficient enough. In the long term, Vietnam needs to increase its foreign currency reserves and will so when there are more favorable conditions.

Le Khac

http://english.vietnamnet.vn/en/business/1169/exchange-rate-paradox-occurring-only-in-vietnam.html

Vietnam: In critical situations, information must be transparent

Last update 08/11/2010 03:35:07 PM (GMT+7)

In critical situations, information must be transparent

VietNamNet Bridge – When the national economy shows signs of uncertainties, experts say, the information released by management agencies must be transparent, while the policies must be consistent in order to stabilize the market and calm the public down. However, these things are still not evident in Vietnam.

Exchange rate paradox occurring only in Vietnam 

At a recent press conference where urgent measures to regulate the national economy were informed, Le Duc Thuy, Chair of the National Finance Supervision Council, stressed that one of the most important measures to stabilize the market is to provide accurate and transparent information in order to create public confidence.
Nevertheless, the two most important agencies in charge of regulating and supervising monetary policies prove to be contradictory with each other. 
Whom to believe?
Le Duc Thuy, Chair of the National Finance Supervision Council told the press that in the first 15 days of October, the Vietnam dong deposits at banks were reduced by 45 trillion dong ($2 billion) in comparison with late September. 
Also according to Thuy, the deposits in foreign currencies have been increasing. By late September 2010, the foreign currency deposit balance had been 40 trillion dong lower than the foreign currency outstanding loans. Meanwhile, the gap between the deposit balance and outstanding loans in foreign currencies had reduced to 20 trillion dong by early October, which meant that the foreign currency deposits had increased by 20 trillion dong. The figure has been explained by the fact that people have withdrawn Vietnam dong to purchase foreign currencies or gold.
However, after that, the State Bank of Vietnam affirmed that some newspapers reported wrong information about the Vietnam dong deposit balance, saying that in fact, the Vietnam dong deposit balance at the banking system has been increasing.

According to the State Bank of Vietnam, by October 15, the Vietnam dong deposits had increased by 0.64 percent (nearly 5400 billion dong) in comparison with September 30, 2010. Therefore, the central bank has accused some newspapers of reporting wrong information.
Regarding the interest rates, Thuy has said that the Government does not strive to slash interest rates at any cost and that it allows commercial banks to set up the deposit and lending interest rates in accordance with the market supply and demand.

However, in a meeting with representatives of the Vietnam Banking Association (VNBA) and representatives from commercial banks on November 5, chaired by the State Bank, when there was a proposal to raise the ceiling deposit interest rate from 11 percent per annum to 12 percent, the State Bank requested VNBA to come forward and to coordinate the implementation.
This has caused conflicting information about the intervention by the State Bank of Vietnam in the implementation of the new interest rates.
After that, an official from the State Bank said that easing interest rates is the decision of VNBA’s members, and that the management agency does not intervene with their decision.
However, people still have doubts about the intervention of the management agencies in banks’ operation. Two weeks ago, commercial banks were put under  pressure to push their interest rates down, though the inflation rate in the first nine months of the year was relatively high.
Macroeconomic stability – the top priority task
Thuy has admitted that the consumer price index (CPI) has been increasing and causing concerns. Macroeconomic stability should be seen as the top priority task, and curbing inflation is the most important goal.
In fact, right at the beginning of October, economists issued warnings about the possible high inflation rates. Vo Tri Thanh, Deputy Head of the Central Institute for Economic Management stressed that it was necessary to continue to tighten monetary policies in order to curb inflation. “Everything is very clear: the macroeconomic stability must be the top priority,” he said

At this moment, the most important thing is that management agencies need to do is to provide transparent information and keep consistent policies so as to avoid eroding the public confidence.
Le Khac

http://english.vietnamnet.vn/en/business/1209/in-critical-situations--information-must-be-transparent.html