Interbank market rates remain high

Interbank market rates rose steeply from November to December 2015. They reached a two-year peak at five per cent per annum, and remained high till the end of the year at rates that were the same as the borrowing cost of reverse repos via open market operations. By Nguyen Thi Ngoc Anh - Research Department VPBank Securities The main reason for the surge in interbank market rates was the high demand for short-term capital at the end of the year, illustrated by consecutive injections of money by the central bank, with substantial amounts added to the banking system and a high trading volume in the interbank market. Substantial credit growth and exchange rate fluctuations were leading reasons for a rise in demand for short-term loans, and due to huge purchases of government bonds the need for short-term capital to make bond-purchase payments also increased. At the end of the year, the interbank market rates were quoted at: overnight (4.9 per cent), one week (5.0 per cent), two week … [Read more...]

Five-year bond yield seen rising this year

HA NOI (VNS) — Yields of Government bonds with terms five years or longer will likely rise this year, VPBank Securities said in a report yesterday. The research said the G-bond market experienced its most successful trading in the fourth quarter of 2015 with bonds sold at auction at between 70 and 90 per cent of. The Government mobilised VND131 trillion ($5.8 billion) in the quarter, thanks to the 3-year bond supply and newly launched products from the State Treasury in December such as long-term bonds and zero-coupon bonds that sold at 100 per cent. The research said the sale of G-bonds was still growing from 2014 with a total issuance of VND243 trillion ($10.8 billion), up 2.8 per cent in G-bonds and government-guaranteed bonds Despite good demand in the last quarter, the State Treasury, the largest G-bond issuer in Viet Nam, failed to meet their target for the year. The State Treasury issued VND196 trillion ($8.7 billion), completing 51.2 per cent of the year's target and a … [Read more...]

Five-year bond yield seen rising

Yields of Government bonds with terms five years or longer will likely rise this year, VPBank Securities said in a report yesterday. Yields of G-bonds with terms five years or longer will likely rise this year. - Photo motthegioi.com The research said the G-bond market experienced its most successful trading in the fourth quarter of 2015 with bonds sold at auction at between 70 and 90 per cent of. The Government mobilized VND131 trillion ($5.8 billion) in the quarter, thanks to the 3-year bond supply and newly launched products from the State Treasury in December such as long-term bonds and zero-coupon bonds that sold at 100 per cent. The research said the sale of G-bonds was still growing from 2014 with a total issuance of VND243 trillion ($10.8 billion), up 2.8 per cent in G-bonds and government-guaranteed bonds Despite good demand in the last quarter, the State Treasury, the largest G-bond issuer in Viet Nam, failed to meet their target for the year. The State Treasury issued … [Read more...]

Bond yields shaken in 2015 despite last quarter surge

In spite of disappointingly low issuance during the first three quarters of the year, total issuance volume in the last quarter of 2015 reached a two-year high of VND130,666 billion ($5.96 billion) due to the availability of short-term bonds and new products. However, even with this late surge, total issuance still failed to meet the annual target, fulfilling only 51 per cent of total planned volume for the year. Winning bond yields, after rising quite significantly in June, thereafter moved essentially sideways until the end of the year. Although the demand for government bonds and the liquidity of the market were both high at year-end, bond yields did not decline for three reasons: strong credit growth, exchange rate fluctuations, and a substantial supply of bonds in the primary market. The fourth quarter of 2015 is now notable as the most successful period in the history of Vietnam’s bond market. The winning rate of weekly bond auctions during the quarter was consistently … [Read more...]

VN shares extend two-day drop

Investors follow transactions at VPBank Securities in Ha Noi. Viet Nam authorities should watch closely moves made by China in its economy and currency in order to minimise their negative impact on Viet Nam's foreign exchange rate and stock market. — VNS Photo Truong Vi HA NOI (VNS) — Vietnamese shares yesterday extended losses on both local markets for a second day as investors remained cautious amid volatility in Chinese stock markets. The benchmark VN Index on the HCM Stock Exchange dropped 0.8 per cent to close at 569.94 points. The southern index has fallen 1.6 per cent during the last three days. The VN Index lost 1.3 per cent to finish at 78.43 points. The northern index has declined by 1.9 per cent in two days. "Investors remained cautious after Chinese stocks fell sharply and shut down on Monday," Sai Gon Ha Noi Securities Corporation (SHS) wrote in a report. Chinese shares fell 7 per cent on Monday and dropped further yesterday. Viet Nam authorities should … [Read more...]

Musicians to perform NYE shows

HCM City (VNS) — Three leading artists will perform at September 23 Park in downtown HCM City to count down New Year starting at 10.30pm today. VPBank Countdown, featuring electronic dance music (EDM), will see DJ Hoang Anh, named Viet Nam's top DJ for three consecutive years by EDM legend Tiesto, perform. Anh, also a producer for top singers like Dam Vinh Hung, Hong Ngoc, My Le, successfully combines EDM with the classical music of Mozart and Puccini. Also performing will be DJ SlimV, who has performed along with international DJs like Steve Aoki, Afrojack, and Armin and produced for some famous singers like Son Tung, Ho Ngoc Ha and Noo Phuoc Thinh. — VNS … [Read more...]

Facing TPP dairy deluge, Vietnam milk firms shift strategy to survive

Vietnam's fast-growing dairy companies are investing big in new markets as they brace for stepped-up competition at home from global giants on the prowl to take advantage of a Pacific trade pact. Domestic milk demand is soaring as household spending power increases in the country of 90 million people, boosting profits for dairy firms that are expanding quickly, but can meet only a third of the milk needs. That's leaving a void that giants like New Zealand's Fonterra and Canada's Saputo could fill with new products and lower prices once the U.S.-led Trans Pacific Partnership (TPP) comes into play, eliminating tariffs among 12 markets worth 40 percent of the global economy, and nearly three-fourths of Vietnam's dairy imports. It is the flip-side of the country's aggressive drive to outpace Southeast Asia in getting preferential access to the world's biggest markets for its swelling electronics, textiles, seafood and commodities output. Trade liberalisation would strengthen a … [Read more...]

Overseas Vietnamese investments important for development

Investments by overseas Vietnamese in Vietnam play an important role in the development of the domestic economy, said Ministry of Industry and Trade official Duong Phuong Thao. Thao made this announcement on December 27 at a meeting held by the State Committee for Overseas Vietnamese (SCOV) under the Ministry of Foreign Affairs in Hanoi. According to Thao, overseas Vietnamese have invested in 52 out of 62 provinces and cities in Vietnam. Also, they currently run about 3,600 businesses nationwide, with some 2,000 projects valued at a combined 8.6 billion USD. The projects concentrate in trading, tourism, construction and real estate fields, besides production of export goods, aquaculture and seafood processing. They bring in an average income of some 20 billion USD to the country annually. (Photo for illustration) Overseas Vietnamese enterprises and entrepreneurs have stakes in domestic banks, such as Techcombank and VPBank, and major property and tourism businesses, such as … [Read more...]

Overseas Vietnamese investments important for development: official

HA NOI (VNS) — Investments by overseas Vietnamese in Viet Nam play an important role in the development of the domestic economy, said Ministry of Industry and Trade official Duong Phuong Thao. Thao made this announcement yesterday at a meeting held by the State Committee for Overseas Vietnamese (SCOV) under the Ministry of Foreign Affairs in Ha Noi. According to Thao, overseas Vietnamese have invested in 52 out of 62 provinces and cities in Viet Nam. Also, they currently run about 3,600 businesses nationwide, with some 2,000 projects valued at a combined US$8.6 billion. The projects concentrate in trading, tourism, construction and real estate fields, besides production of export goods, aquaculture and seafood processing. They bring in an average income of some $20 billion to the country annually. Overseas Vietnamese enterprises and entrepreneurs have stakes in domestic banks, such as Techcombank and VPBank, and major property and tourism businesses, such as VinGroup and … [Read more...]

Credit growth expected near 20% next year

A branch office of VPBank in HCM City. The State Bank of Viet Nam targets national credit growth between 18 per cent and 20 per cent for next year. — VNA/VNS Photo Tran Viet HA NOI (VNS) — The State Bank of Viet Nam (SBV) yesterday targeted credit growth between 18 per cent and 20 per cent for next year, with possible adjustments depending on the actual situation. At a conference to review the performance of the banking industry in 2015 and prepare for next year, in Ha Noi yesterday, SBV Deputy Governor Nguyen Thi Hong said that the estimate was based on targets of the GDP and inflation approved by the National Assembly. The central bank would ensure an active and flexible monetary policy next year, in close co-ordination with fiscal and other macro policies, to meet the NA's targets of inflation at less than 5 per cent, and economic growth at roughly 6.7 per cent, Hong said. However, Hong said, the credit growth rate might be adjusted flexibly based on the actual … [Read more...]

Debt Burdens Risk Capital Loss

Many Vietnamese banks reported impressive profit growth, while the bad debt ratio fell sharply by the end of the third quarter. However, according to their reports, irrecoverable debts (classified as debts of Group 5) increased, forcing banks to add provisioning. The sale of debts to Vietnam Asset Management Company (VAMC) seems not to be a thorough solution and bad debts remain unsettled. Group 5 debts of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) might be the most startled. As of September 30, BIDV’s debts were classified into Group 3 to Group 5, totalled VND11.9 trillion, compared with more than VND9 trillion as of December 31, 2014. Notably, irrecoverable debts amounted to VND5,631 billion as of September 30, 2015, a sharp rise from VND32,66.8 billion, or growing 72.3 percent, and accounting for nearly half of total non-performing loans. The sharp increase in irrecoverable debts was partly resulted from the merger with ailing Mekong Housing … [Read more...]

Comparison of China’s capital controls with Vietnam’s

Economic theory defines the ‘Impossible Trinity’, also known as ‘the Triangle of Impossibility’, as a nation’s inability to simultaneously pursue three macroeconomic goals: a stable exchange rate, free capital flows, and an independent monetary policy. This theory was named the Mundell-Fleming Model, put forward by Robert Mundell and Marcus Fleming in the 1960s. Despite similarities with Vietnam in terms of macroeconomic goals, China has greater inbound foreign investment controls Vietnam approaches the triangle of impossibility in much the same way as China does. They both implement capital controls in order to pursue their inflation target, while maintaining exchange rate stabilisation. In a previous article, we examined China’s controls regarding inbound foreign direct and indirect investment capital, in order to draw parallels with Vietnam. Today, we review China’s control on inbound foreign indirect investment capital by … [Read more...]

How will the Fed rate rise affect Vietnamese stocks?

We, like many people, believe that the US Federal Reserve Bank (the Fed) will increase its benchmark interest rate by 25 basis points (0.25 percentage points) at its Federal Open Market Committee meeting on December 15 and 16. illustration photo The Fed targets two policy objectives in deciding whether to raise rates: employment and inflation. The two objectives are linked based on the idea that when the economy reaches full employment, then companies will be forced to pay higher salaries, which will create inflationary pressures. The Fed has therefore quantified these objectives to say that it is seeking to maximise employment growth until it achieves a 2 per cent inflation rate. Recent economic data show that the targets have been met. The October US jobs report recorded 271,000 new jobs added (the highest amount in five years). Also, the unemployment rate has dropped to 5 per cent. The Labour Department’s gauge of average hourly earnings is also starting to show signs of … [Read more...]

Taking the reins on capital controls is key to stability

Economic theory defines the ‘triangle of impossibility’ as a nation’s inability to simultaneously pursue three macro-economic goals: a stable exchange rate, free capital flows, and an independent monetary policy. This theory was named the Mundell-Fleming Model, put forward by Robert Mundell and Marcus Fleming in the 1960s. illustration photo Vietnam approaches the triangle of impossibility in much the same way as China does. They both implement capital controls in order to pursue their inflation target while maintaining exchange rate stabilisation. In this article, we examine China’s exchange rate management mechanisms and controls regarding inbound foreign indirect investment capital in order to draw parallels with Vietnam. The most important Chinese legal documents relating to these topics include the "Provision on foreign exchange administration of domestic securities investment by Qualified Foreign Institutional Investors (QFIIs)" or Decree No.1/2009 of … [Read more...]

How foreigners use foreign currency accounts in Vietnam

I am a foreigner currently working in Vietnam, and have just obtained a temporary residence permit. As far as I know, foreigners being resident individuals are allowed to open foreign-currency accounts at a bank in Vietnam. So, am I regarded as a resident and how can foreigners use their foreign-currency accounts? Under Vietnamese law, you will be regarded a resident individual if satisfying one of the following conditions: First, you must be present in Vietnam for 183 days or more in a calendar year or 12 consecutive months counting from the first date of your presence in Vietnam, of which the arrival date is counted as one day and the departure date is also counted as one day. These two dates will be determined based on the immigration management agency’s certifications on your passport (or laissez-passer) upon your arrival at, and departure from, Vietnam. In case you enter and leave Vietnam on the same day, this day is counted as one day of residence. Transactions at … [Read more...]

Global economic events cause CDS spread spikes

Sovereign credit default swap or CDS spreads measure the yield, not including their funding cost, that global investors require in order to take on the risk of investing in a country’s government bonds. CDS spreads can be impacted not only by events within a country but also by global events that make the country seem more or less risky relative to other investment destinations. Source: Bloomberg, VPBS collected The higher CDS spreads, the riskier investing in the country is. Whereas in the first half of the year, the CDS of Southeast Asian emerging countries fluctuated in a marginal band, during the third quarter the CDS of these countries increased sharply mainly due to the impacts from global events such as the Chinese economic slowdown and the US Federal Reserve’s (the Fed) likely upcoming decision to raise interest rates. By the end of the third quarter, Vietnam’s CDS spreads had risen by 93 basis points (bps) (note that one basis point equals 1/100 of one … [Read more...]

Interbank activity picks up pace during third quarter

After two quarters of decline, the interbank market traded actively during the third quarter, with total trading volume rising by 31 per cent compared to the second quarter and by 1.04 per cent compared to the same period last year, to reach VND1,332 trillion ($60.8 billion) for the quarter. The market was particularly active in August and September. Market volume increased by 14.3 per cent in August and then surged in September to reach VND506 trillion ($23.1 billion) for the month, up 15 per cent from August and 38.1 per cent year-on-year. Interbank market rates also increased quite strongly through most of the quarter and only fell slightly at the end of September. From the second quarter, interbank market rates rose strongly between the end of July and mid-August but fell slightly by the end of September. According to Bloomberg, interbank market rates were quoted as: overnight (2.2 percent, +10 points from the second quarter), one week (3.1 per cent, +30 points), two week (3.5 … [Read more...]

Commercial banks take an interest in seaports

VietNamNet Bridge - Why do many banks hold membership on seaport management boards? VietinBank and VPBank, as the strategic shareholders of the Saigon Port, have representatives that belong to the port developer’s board of directors and supervision board. Meanwhile, Vietcombank, BIDV and Agribank have announced their investments in seaports. The state has kicked off the process of withdrawing capital from nine large seaports. It will retain 51 percent of stake at four important ports of Hai Phong, Quang Ninh, Da Nang and Sai Gon, and hold 49 percent or take back all investment capital from the other ports in Can Tho, Nghe Tinh and Cam Ranh. Vinalines, the state owned shipping firm, which is still a big debtor after a long period of struggling with restructuring, has proposed that the State reduce the state’s ownership ratio at the Sai Gon and Hai Phong Ports to 20 percent, which is far below the proportion suggested by the Ministry of Transport. There are many … [Read more...]

Seasonal effect to boost real estate stocks in Q4

As of November 5, the real estate price index had decreased by 4.5 per cent during the previous 12 months, better than HNX-Index (-7.8 per cent) but slightly lower than VN-Index (+2.3 per cent). Data as of November 05, 2015. Source: Bloomberg, VPBS Home buyers still excited with the real estate market According to Savills’ preliminary statistics, apartment sales volume in Ho Chi Minh City was 5,220 units in the third quarter of 2015, up five per cent quarter-on-quarter (q-o-q) and 59 per cent year-on-year (y-o-y). The absorption rate in Ho Chi Minh City is at 17 per cent, down two per cent points q-o-q and y-o-y. The absorption rate has decreased due to the sharp increase in supply. In the third quarter, primary stock was 30,500 units, up 17 per cent q-o-q and 78 per cent y-o-y. Sales volume in Hanoi for the third quarter of 2015 was 6,650 sold units, up 44 per cent q-o-q. The absorption rate in Hanoi was 45 per cent, up 11 per cent points q-o-q and six per cent points … [Read more...]

Businesses hurry to divest bank shares

VietNamNet Bridge - About VND18 trillion worth of capital was still stuck in banks by the end of September 2015 which needs to be divested as per the government’s request, according to the Ministry of Finance (MOF). ''' 'As soon as EVN offered the sale of 81.5 million ABBank shares, six investors would buy 40 million shares at VND10,000 per share, equal to the face value. As such, EVN still needs to sell the remaining 41.5 million bank shares to fulfill the divestment as per the request by the government. The Debt & Asset Trading Company (DATC), governed by MOF, has announced the auction of 26,660 OCB shares at the starting price of 4,900 per share and 24,662 million SCB shares at VND4,100 per share. Some months ago, SJC, a gold, silver and gemstone company, successfully divested 25 million Eximbank shares, or 2 percent of the bank’s chartered capital. The shares were only sold after four auctions. Capital withdrawal stuck According to MOF, the … [Read more...]