Vietnam has no devaluation plans: newspaper

The State Bank of Vietnam has no plans to adjust the dong exchange rate against the US dollar, even though the dong's value has been dropping on the unofficial market, a local newspaper reported on Tuesday.

"At present the State Bank does not have any plans for exchange rate adjustment," Governor Nguyen Van Giau was quoted by the Saigon Giai Phong daily as saying, rejecting market rumors of a dong devaluation.

The central bank has devalued the dong three times since November and speculation of another devaluation has been putting pressure on the currency, making businesses reluctant to sell dollars.

Dollar demand has also been rising as businesses need the currency for loan repayments and importers need dollars for settlements.

However, the dong edged up to 19,870/19,920 per dollar on the unofficial market on Tuesday morning from 19,920/19,970 on Monday, while it was steady at VND19,490/19,500 on the interbank market, with the selling rate at the permitted ceiling.

Victoria Kwakwa, the World Bank's representative in Vietnam, told reporters on Tuesday that "we think that broadly the government has been moving in the right direction" on monetary and fiscal policy.

However, she said more could be done by the authorities to communicate their policy stance and give more information on indicators, so as to build up confidence in overall macroeconomic management.

This would help "address some of the left-over expectations of inflation and continued instability that are underpinning some of the challenges".

The Bank's lead economist for Vietnam, Deepak Mishra, said he expected pressure on the dong to ease over time, but how the market reacted would depend on the government putting forward a "credible road map" for dealing with the problem.

The International Monetary Fund warned in September that Vietnam needed to concentrate on maintaining the level of the dong, and said that repeated comments from the government about the need to lower lending rates was counter-productive.

"A lack of coordination between monetary and fiscal policies, or the appearance thereof, would amplify market skepticism," it said.

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Bank denies new rumours of devaluation

The State Bank of Vietnam is not planning any adjustments to foreign
exchange rates, State Bank Governor Nguyen Van Giau said on Oct. 19 in
Hanoi .

The statement was made to the public in an effort to ease speculative
rumours that the Vietnamese dong might be further devalued – rumours
which had driven the black market price for a US dollar on Oct. 19 to
20,030-20,050 VND, up 150 VND over Octoner 18’s rate.

On
the non-deliverable forward (NDF) market on Oct.19 – a currency futures
market – the US dollar was expected to rise to 19,948.99 VND by next
month, 20,279 VND in three months,20,749.540 VND in six months and
21,520.76 VND by October of next year.

Rumours have also
begun circulating that the interbank rate – the rate at which banks
trade currencies amongst themselves – has already risen as high as
19,870-19,990 VND per dollar, although the official rate set by the
centre bank remains at 18,932 VND per dollar.

Commercial banks are meanwhile quoting nominal sell prices of 19,500 VND per dollar.

The deputy head of the State Bank's HCM City branch, Nguyen Hoang
Minh, said that the central bank has worked with relevant agencies to
establish hot lines to monitor the forex market and stamp out
speculative business practices.

The State Bank also
reaffirmed that it will penalise banks that sell the dollar at prices
higher than the official ceiling rate.

But, Minh noted,
the HCM City branch has not yet caculated practical demand for the
dollar in October, and that market inspections are difficult because of
limited human resources.

A senior central bank official
who asked to remain anonymous commented, "The sudden appreciation of the
greenback has resulted from rising global gold prices and dollar
accomodation. Some enterprises which have revenue in US dollars are also
keeping the dollars in accounts and not selling them back to the banks.

"However, there is a postive balance in the dollar supply in the banking system of 250-300 million USD." ./.

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Vietnam has no devaluation plans

HANOI - The State Bank of Vietnam has no plans to adjust the dong exchange rate against the US dollar, even though the dong's value has been dropping on the unofficial market, a state-run newspaper reported on Tuesday.

"At present the State Bank does not have any plans for exchange rate adjustment," Governor Nguyen Van Giau was quoted by the Sai Gon Giai Phong daily as saying, rejecting market rumors of a dong devaluation.

The central bank has devalued the dong three times since November and speculation of another devaluation has been putting pressure on the currency, making businesses reluctant to sell dollars.

Dollar demand has also been rising as businesses need the currency for loan repayments and importers need dollars for settlements.

However, the dong edged up to VND19,870/19,920 per dollar on the unofficial market on Tuesday morning from VND19,920/19,970 on Monday, while it was steady at VND19,490/19,500 on the interbank market, with the selling rate at the permitted ceiling.

Victoria Kwakwa, the World Bank's representative in Vietnam, told reporters on Tuesday that "we think that broadly the government has been moving in the right direction" on monetary and fiscal policy.

However, she said more could be done by the authorities to communicate their policy stance and give more information on indicators, so as to build up confidence in overall macroeconomic management.

This would help "address some of the left-over expectations of inflation and continued instability that are underpinning some of the challenges".

The Bank's lead economist for Vietnam, Deepak Mishra, said he expected pressure on the dong to ease over time, but how the market reacted would depend on the government putting forward a "credible road map" for dealing with the problem.

The International Monetary Fund warned in September that Vietnam needed to concentrate on maintaining the level of the dong, and said that repeated comments from the government about the need to lower lending rates was counter-productive.

"A lack of coordination between monetary and fiscal policies, or the appearance thereof, would amplify market skepticism," it said.

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Shady foreign loan offers raise alarm

HA NOI — The State Bank of Viet Nam has issued a warning that some foreign individuals claiming to represent international institutions have recently approached ministries and municipal authorities, offering low-interest loans and non-refundable aid on condition of receiving a Vietnamese Government guarantee.

Therefore, the State Bank has issued Official Document No 7824/NHNN-TD reminding its branches and credit institutions nationwide to cautiously consider loan offers in accordance with foreign debt regulations.

Credit institutions were also told to work closely with law firms, embassies, credit rating agencies and bank agents to verify the financial capacity and legal capacity of foreign partners before entering any agreement. Credit institutions and central bank branches were also ordered to report all documents pertaining to foreign loan offering to the State Bank no later than December 31.

State Bank branches were further instructed to support municipal authorities in preventing credit risks arising from foreign loan offers. — VNS

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Lifted import quota cools gold rush

HA NOI — Domestic gold prices yesterday plunged by VND1.2 million (US$61.53) from Thursday's record high to around VND31.85 million ($1,630) per tael, following the State Bank of Viet Nam's announcement late Thursday that it had approved additional gold imports. A tael is equal to 1.2 ounces.

Gold-selling districts in Ha Noi and HCM City saw prices change at least three times in the morning and early afternoon, with Saigon Jewelry Co, Sacombank Jewelry Co, Bao Tin Minh Chau, Agribank Jewelry Co and Phu Nhuaân Jewelry Co each quoting buy/sell prices at VND32.1-32.24 million per tael.

But late Thursday, with the domestic gold price VND1 million (around $50) higher than global prices, State Bank governor Nguyen Van Giau decided to allow 10 major gold trading enterprises to import an additional three tonnes of the precious metal over the course of the next week.

It marks the second time the central bank has allowed additional gold imports this year, allowing seven tonnes to be imported in July – a figure decried as too low.

"When people knew the gold import quota was so restrictive, many bought up gold," said Sacombank Jewelry Co general director Ton The Vinh Quyen.

But not everyone welcomed yesterday's move by the State Bank.

"Gold imports at this time may soak up the limited supply of dollars, while helping drive inflation up in the last two months of the year, when it is usually higher anyway before the lunar new year," said Do Thi The, a forex investor.

Similar concerns yesterday drove the cost of the greenback on the black market to VND19,850-19,880, about VND20 higher than on Thursday. However, bank exchange rates remained unchanged at VND19,470-19,500 per dollar, while the interbank rate continued at VND18,932.

The State Bank again yesterday denied rumours of a dollar shortage, saying that it continued buying up dollars from credit institutions in the third quarter, suggesting a plentiful dollar flow in circulation. However, yesterday's comments from the State Bank marked the third time since February it has issued a similar message to the public. — VNS

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Central bank may allow gold imports

Gold trading enterprises may be allowed to import gold if domestic
prices continue to surge, says the head of the State Bank of Vietnam's
Foreign Exchange Department Nguyen Quang Huy.

The statement was made on Oct. 7 after domestic gold prices soared in
the afternoon. One tael of gold (equivalent to 1.2 troy ounces) costs
33.05 million VND (1,690 USD), a record high.

"The central
bank may consider allowing dealers to import a suitable quota to
stabilise market prices in line with global changes," Huy said.

He added that the sudden surge in gold prices was caused by the
increase in global prices, which are now at a record high of 1,349 USD
per ounce. Speculation and psychological worries also likely effected
the inflation.

As of Oct. 7 afternoon, the price of gold
in the domestic market was 1 million VND (51.28 USD) per tael higher
than the global price.

"The imbalance between supply and
demand is making gold prices ‘crazy'," said Huynh Trung Khanh,
International Gold Council's senior consultant official in Vietnam. "The
supply is drying up."

In July, the State Bank allowed
enterprises to import seven tonnes of gold. However, dealers said the
volume was unable to meet the market's growing demand.

In
August, the Vietnam Gold Trading Association asked the central bank to
allow them to import more gold bars to process, but the proposal was
rejected.

The increase in the price of gold caused the US
dollar's exchange rate to increase to 19,850 VND on Oct. 7 from 19,750
VND on Tuesday./.

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Central bank asks for foreign exchange reports

Photo: Tuoi Tre

The State Bank of Vietnam has asked credit institutions to provide reports concerning outstanding loans and investments that involve US dollars.

The State Bank is requesting the information so that the institution can begin drafting a monetary policy for the latter months of the year.

Lenders were also told to draw up plans concerning how they will use their foreign currency reserves to pay debt during this year's final quarter and next year's first quarter.

The report must be completed and delivered to the State Bank this Friday.

By the end of September, total outstanding loans in foreign currencies at banks in Ho Chi Minh City were VND186.1 trillion (US$9.5 billion), up 36 per cent against the same period last year.

The US dollar credit growth during September increased by 6.1 percent against August, while the month-on-month dollar credit growth in August was up just 1 percent against July.

In an unusual move, loans in foreign currencies exceeded mobilized capital. Financial experts explained that banks had a surplus of US dollars that they received from mother companies or foreign credit institutions.

This is the second time the central bank has asked for such reports.

In May, commercial banks and financial companies were ordered to provide a detailed report about their foreign exchange operations to help reduce the country's trade deficit and improve Vietnam's payment balance.

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Business briefs

• Pledged foreign direct investment into property projects in Vietnam dropped by 12.7 percent in the first nine months from a year earlier, according to figures from the Foreign Investment Agency. Of the total US$12.2 billion committed foreign investment in the first nine months of this year, $8.05 billion has been disbursed.

• Banks have been slow in lowering interest rates because they are investing more in government bonds, said Nguyen Van Giau, the central bank’s governor. Banks can make profits from high yields on government bonds, he said. About VND48 trillion ($2.46 billion) of bonds have been issued so far this year, five to six times the usual amount over the same period in previous years.

• The Asian Development Bank said it has approved a $630 million loan to help reform Vietnam’s state-owned enterprises (SOEs). The multi-tranche facility aims to improve the efficiency of SOEs and enhance corporate governance to spur Vietnam’s economic growth, the Manila-based bank said in a statement.

• Loans in Vietnam by the end of September were estimated to rise 19.5 percent from the end of 2009, in line with an annual target of 25 percent credit growth. The projection was based on expansion of 19.27 percent as of September 27, State Bank of Vietnam Governor Nguyen Van Giau said. “Compared with the 25-percent target for 2010, (such growth) is not low,” he said.

• TNK-BP, BP Plc’s venture with a group of Russian billionaires, will make a proposal to buy BP’s share in an offshore natural gas project in Vietnam. BP, Europe’s largest oil producer by volume, plans to sell $30 billion of assets in 18 months to cover costs linked to the Gulf of Mexico oil spill, the worst in US history. BP said in July it plans to sell interests in the Nam Con Son gas project in Vietnam.

• The State Bank of Vietnam said on Wednesday it would relax compulsory reserve requirements for banks that made significant loans for agriculture or rural development as a way to mobilize funding for the countryside. Banks with loans for the agricultural sector or rural development totaling 70 percent or more of outstanding loans would only be required to hold 5 percent of normal reserve levels, which depend on deposit terms, it said in a statement.

• Commercial banks will reduce deposit rates to as low as 11 percent by October 15 from the current 11.2 percent after the central bank’s recent easing of lending rules, Duong Thu Huong, chairwoman of the Vietnam Banks Association. Banks will have greater scope to lend after the central bank said it would allow them to use 25 percent of non-term deposits made by businesses for loans.

• Vietnam will start planting crops for genetically modified food between 2011 and 2015 with the goal of increasing the planting area of crops like genetically modified corn, cotton and soybeans to 30 to 50 percent of the country’s total by 2020, based on a government directive in 2006.

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Vietnam needs to improve corporate governance in banks: US advisor

Photo: Tuoi Tre

Vietnamese banks need to improve corporate governance to reduce the risks to the banking system among other benefits, a seminar in HCMC heard Wednesday

Speaking at the meeting sponsored by the State Bank of Vietnam and US Department of Treasury, Le Thanh An, the US consul in HCM City, said the Treasury had an agreement with the SBV to provide assistance in a number of areas, including corporate governance.

"The recent financial crisis is a compelling reminder of the critical importance of corporate governance and supervision of the banking system. No country's financial sector is perfect, but every country can seek to improve governance to make banking a stable pillar of the economy."

David Hawkins, the US Treasury banking advisor, said good corporate governance would create public trust and confidence in banks and the banking system.

"To have effective corporate governance, the board needs to establish good policies and procedures, goals that promote transparency, and systems to implement them and to control risks, have sufficient audit functions and good management information systems to keep informed of deficiencies and initiate corrective action when problems are noted."

Boards members should be and remain qualified, including through continued training, for their positions. They should have a clear understanding of their role in corporate governance and be able to exercise sound judgment about the affairs of the bank.

Under the direction of the board, senior management should ensure that the bank's activities are consistent with its business strategy, risk tolerance, and policies.

Banks should have an independent risk management function including a chief risk officer with sufficient authority, stature, independence, resources, and access to the board.

Risk management information should be tested for accuracy periodically.

The governance of a bank should be adequately transparent to its shareholders, depositors, other stakeholders, and market participants.

The role of the State Bank of Vietnam is to provide guidance to banks for effective corporate governance.

It has to regularly perform a comprehensive evaluation of banks' overall corporate policies and practices, and evaluate their implementation through inspecting internal reports.

The central bank should insist on effective and timely remedial action by banks to address material deficiencies in their corporate governance policies and practices.

 

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VN needs to improve corporate governance in banks: US advisor

HCM CITY — Vietnamese banks need to improve corporate governance to reduce the risks to the banking system among other benefits, a seminar in HCM City heard yesterday.

Speaking at the meeting sponsored by the State Bank of Viet Nam and US Department of Treasury, Le Thanh Aân, the US consul in HCM City, said the Treasury had an agreement with the SBV to provide assistance in a number of areas, including corporate governance.

"The recent financial crisis is a compelling reminder of the critical importance of corporate governance and supervision of the banking system. No country's financial sector is perfect, but every country can seek to improve governance to make banking a stable pillar of the economy."

David Hawkins, the US Treasury banking advisor, said good corporate governance would create public trust and confidence in banks and the banking system.

"To have effective corporate governance, the board needs to establish good policies and procedures, goals that promote transparency, and systems to implement them and to control risks, have sufficient audit functions and good management information systems to keep informed of deficiencies and initiate corrective action when problems are noted."

Boards members should be and remain qualified, including through continued training, for their positions. They should have a clear understanding of their role in corporate governance and be able to exercise sound judgment about the affairs of the bank.

Under the direction of the board, senior management should ensure that the bank's activities are consistent with its business strategy, risk tolerance, and policies.

Banks should have an independent risk management function including a chief risk officer with sufficient authority, stature, independence, resources, and access to the board.

Risk management information should be tested for accuracy periodically.

The governance of a bank should be adequately transparent to its shareholders, depositors, other stakeholders, and market participants.

The role of the State Bank of Viet Nam is to provide guidance to banks for effective corporate governance.

It has to regularly perform a comprehensive evaluation of banks' overall corporate policies and practices, and evaluate their implementation through inspecting internal reports.

The central bank should insist on effective and timely remedial action by banks to address material deficiencies in their corporate governance policies and practices. — VNS

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Bank capital rules help lift shares

Stock indices returned to positive territory on Thursday, following a message from the State Bank of Vietnam that it would revise strict new rules on the capital adequacy ratio of commercial banks.

The State Bank announced on Wednesday that it would revise regulations in the controversial Circular No 13 on commercial bank equity and capital adequacy ratios, in compliance with a Government instruction issued late last month to review the circular.

The VN-Index responded with a gain on the fallowing day of 1.14 percent, closing the session at 463.68 points.

Trading on the Ho Chi Minh Stock Exchange remained modest, with a volume of 47.7 million shares, down 12.8 percent from the previous session.

The value of trades reached just VND1.2 trillion (US$61.5 million).

Vietnam Ocean Shipping Co (VOS), which listed 140 million shares on the HCMC market on Wednesday, was the most-active share, with 2.8 million sold.

Among 184 gainers on the southern market, a number of penny stocks rose to their ceiling prices, including Binh Thanh Import-Export and Trade (GIL), HCMC Metal Corp (HMC) and Nari Hamico Mineral Corp (KSS).

Meanwhile, banking shares underperformed despite the supporting news from the State Bank. Sacombank (STB) and Eximbank (EIB) each rose by about 1.5 percent, while VietinBank (CTG) closed up by 0.5 percent. Vietcombank (VCB) continued to decline, meanwhile, dropping by 0.26 percent.

On the Hanoi Stock Exchange, the HNX-Index rebounded by a more notable 2.75 percent to a close of 136.24 points, on a total volume of 47 million shares.

The value of trades reached VND1.2 trillion ($61.5 million), with PetroVietnam Construction (PVX) leading the session with a volume of 5.3 million shares.

Foreign investors were net buyers on both bourses during the day, picking up a total 1.55 million shares worth VND64.2 billion ($3.3 million).

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Bank capital rules help lift shares

Stock indices returned to positive territory on Serpt.9, following a
message from the State Bank of Vietnam that it would revise strict
new rules on the capital adequacy ratio of commercial banks.

The State Bank announced on Sept 8 that it would revise regulations in
the controversial Circular No 13 on commercial bank equity and capital
adequacy ratios, in compliance with a Government instruction issued late
last month to review the circular.

The VN-Index responded with a gain on the fallowing day of 1.14 percent, closing the session at 463.68 points.

Trading on the HCM City Stock Exchange remained modest, with a volume
of 47.7 million shares, down 12.8 percent from the previous session.

The value of trades reached just 1.2 trillion VND (61.5 million USD).

Vietnam Ocean Shipping Co (VOS), which listed 140 million shares on the
HCM City market on Sept 8, was the most-active share, with 2.8
million sold.

Among 184 gainers on the southern market, a
number of penny stocks rose to their ceiling prices, including Binh
Thanh Import-Export and Trade (GIL), HCM City Metal Corp (HMC) and Nari
Hamico Mineral Corp (KSS).

Meanwhile, banking shares
underperformed despite the supporting news from the State Bank.
Sacombank (STB) and Eximbank (EIB) each rose by about 1.5 percent, while
VietinBank (CTG) closed up by 0.5 percent. Vietcombank (VCB) continued
to decline, meanwhile, dropping by 0.26 percent.

On the
Hanoi Stock Exchange, the HNX-Index rebounded by a more notable 2.75
percent to a close of 136.24 points, on a total volume of 47 million
shares.

The value of trades reached 1.2 trillion VND (61.5
million USD), with PetroVietnam Construction (PVX) leading the session
with a volume of 5.3 million shares.

Foreign investors
were net buyers on both bourses during the day, picking up a total 1.55
million shares worth 64.2 billion VND (3.3 million USD)./.

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SBV to review capital rules

The State Bank of Viet Nam in Ha Noi. — VNS Photo

HA NOI — The State Bank of Viet Nam will review new strict capital adequacy requirements imposed on commercial banks by Circular No 13, following an outcry from the banking sector and a directive from the Government.

The announcement late Wednesday helped boost shares on the nation's stock market yesterday.

The review and analysis of Circular No 13 would aim to address shortcomings in various risk management provisons, including the imposition of stricter capital adequacy ratios, the State Bank said.

A deadline for conclusion of the review was not disclosed. However, last month, Prime Minister Nguyen Tan Dung ordered the State Bank to review the circular and report its findings and possible solutions before the new regulations were scheduled to take effect on October 1.

Circular No 13 would require commercial banks to increase their capital adequacy ratios from 8 to 9 per cent, as well as impose other risk management measures.

For instance, the circular would restrict banks from lending out funds from non-term deposits made by the State or State entities, the social insurance fund or commercial lending organisations.

According to media reports, many commercial banks and the Viet Nam Banking Association complained that this last provision would require commercial banks to leave idle as much as 35 per cent of deposited funds. They urged the central bank to extend the deadline for complying with the circular in order to give banks more time to restructure investment portfolios.

Fiachra Mac Cana, managing director of the research department of HCM Securities Co, predicted that the review would not result in any significant changes to the requirements but would allow banks more time to comply and adjust loan and capital ratios.

A central bank official who asked to remain unnamed told Viet Nam News yesterday that Circular No 13 was indeed the opening salvo of what would be an ongoing programme of stricter risk management measures to be imposed on the nation's banking system.

Many economists, the official noted, have complained that the capital adequacy ratios in Circular No 13 were still too low to adequately guard against risk. The newly passed Law on Credit Institutions to take effect in January includes provisions stricter than those in Circular No 13, he noted, but still short of the Basel standards for finance and banking. — VNS

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State Bank holds line on prime rate

The State Bank of Vietnam on Aug. 25 announced it would retain the
prime rate at 8 percent in September for the tenth straight month,
quelling market hopes that it might be lowered and borrowers enjoy a
more affordable stream of income from this source.

The unchanged rate is seen as a sign of stability.

The refinancing and interbank electronic payment interest rates will
also remain at 8 percent and the discount rate, at 6 percent.

The benchmark lending rate has been held steady since last November,
having been lowered by a percentage point back in early 2009 to spur
lending during the economic crisis.

Since the
central bank gave the go-ahead for a negotiable interest rate mechanism
in March, the prime rate has not had the direct impact on the market
lending interest rate that it used to. However, the benchmark interest
rate is seen as a way of signalling the monetary policy direction of the
central bank at any given period.

Lending rates at
commercial banks are now ranging from 12.5-15 percent per year for
Vietnamese dong loans but the SBV is trying to lower the rate to as
little as 12 per cent in order to help enterprises access more credit./.

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Weaker dong a proactive move: experts

The devaluation of the dong this week will help improve Vietnam’s trade balance, but it may fuel inflation concerns, experts say.

The State Bank of Vietnam on Wednesday set the daily reference rate two percent lower at 18,932 to a dollar, the third devaluation since November.

A weaker currency may boost exports and demonstrate the government’s focus on economic growth over further easing inflation, said Prakriti Sofat, a Singapore-based economist at Barclays Capital.

“The main reason for the central bank’s move is to balance onshore foreign exchange demand-andsupply and to support exporters,” Sofat said. “Vietnam largely exports low value-added goods and typically competes on prices.”

Vietnam’s trade deficit widened in July from the previous month on falling exports, reaching US$1.15 billion from a revised $742 million in June. For the seven months through July, the gap was $7.4 billion, almost twice the figure for the same period last year.

“A weaker currency should in theory improve Vietnam’s balance of trade,” said Kevin Snowball, chief executive of Ho Chi Minh City -based fund manager PXP Vietnam Asset Management Ltd. “For the markets, the immediate beneficiaries of this should be companies with earnings in foreign currencies, including seafood companies.”

The dong dropped for a fourth straight day to a record low on Thursday. It traded at 19,450 per dollar as of 8:56 a.m. on Thursday in Hanoi, compared with 19,500 in the so-called black market.

News website VnExpress on Tuesday cited a source from the State Bank of Vietnam as saying some banks are worried about difficulties in purchasing dollars, but the market was not strained at the moment.

“The State Bank of Vietnam adjusted [the reference rate] beforehand just to be proactive for future developments.”

Le Duc Thuy, chairman of the National Financial Supervisory Commission said dollar loans had started to rise after February and most of them were of three or six months. “As a result, if dollar demand for loan repayment is going to put a strain on the market, it will only happen at the end of September or after that,” he told VnExpress.

Inflation concerns

Trinh Vinh Quyen, an analyst at Hanoi-based Vietnam International Securities Co., said the central bank’s move to devalue the dong makes sense “as there is usually a lot of demand for foreign currency during the third quarter so the government is trying to address the trade imbalance.”

“Importers will suffer from lower profits because of higher input costs while they’ll try to keep prices stable at first. However, they will gradually increase prices of their products, so concerns about inflation arise. Gasoline prices, for example, will be raised soon.”

Analysts also said the downward adjustment this week may create more expectations of further devaluation, and exert continued pressure on the dong.

Barclays Capital is maintaining a year-end forecast for the dong to trade at 19,500 while Australia & New Zealand Banking Group Ltd. (ANZ) said the currency may weaken to 20,000 per dollar during the first half of next year.

“All-in-all, the 2 percent devaluation came sooner than we had expected but it was also smaller than we had expected,” wrote Singapore-based Tamara Henderson, head of Asian foreign exchange research at ANZ.

According to ACB Securities, an arm of Ho Chi Minh City -based Asia Commercial Bank, the adjustment might benefit the economy in encouraging exports and increase the liquidity of US dollars in the banking system, but it could affect the equity market.

The expectations of further dong depreciations may encourage investment in the dollar rather than in the equity market, the company said on Wednesday.

Source: Thanh Nien, Bloomberg

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Weaker dong sends shares down on both bourses

The State Bank of Vietnam's decision to depreciate the dong by another 2 percent accelerated the downward slide of shares on both national stock exchanges on Wednesday, with nearly 80 percent of codes shedding value despite an overnight rise on Wall Street.

The depreciation of the dong from VND18,544 to VND18,932 per US dollar was part of an effort to control the nation's trade deficit, the State Bank said.

In response, the VN-Index lost 1.73 percent to close at 455.49 points, while the value of trades on the HCM City Stock Exchange fell 7 percent to a one-month low of just VND988 billion ($51.2 million). Volume reached just 37 million shares.

Sacombank (STB), the most-active share on a volume of 1.87 million, closed down 1.25 percent, while Vinh Son-Song Hinh Hydropower (VSH) fell by 2.45 percent with 1.68 million traded.

On the HanoiStock Exchange, the HNX-Index declined by 2.62 percent to end the session at 132.62 points. Both volume and value dropped by 10 percent, with only 26 million shares traded, worth a combined VND651 billion ($33.7 million).

PetroVietnam Construction (PVX), the most-active stock nationwide with a volume of 4.86 million shares, declined by 3.8 percent, while Kim Long Securities Co (KLS) dropped by 3.23 percent on a volume of 1.5 million shares. Construction giant Vinaconex (VCG) also plunged by 2.43 percent with 800,000 shares traded.

Pomina Steel (POM) was among few codes to post a gain, hitting its ceiling price for the fourth straight day after announcing its plans to buy back 9 million shares.

Several export companies which stood to benefit from the dong depreciation also posted gains, including Long An Food Processing Export (LAF), Ben Tre Forestry and Seafood Import-Export (FBT) and Sao Vang Rubber (SRC).

PIV Petro Investment and Valuation Co (PIV) saw its first day of trading on Aug. 18, closing up nearly 27 percent from its reference price to VND20,300 ($1.05) per share, with 36,000 shares changing hands.

Both stock exchanges opened in positive territory but exhausted share demand depressed most shares in the latter part of the trading day. More than 460 codes out of a total of 586 on both exchanges lost value.

Foreign investors were most immediately influenced by the currency depreciation, decreasing buys to a net of just VND34 billion ($1.8 million) on both bourses, a decrease of 60 percent from the previous session.

Tran Van Don, head of analysis department for Ha Thanh Securities Co, said the State Bank decision reignited investor worries about inflation.

"Many investors will likely shift investment from risky and low profitable securities to more attractive channels including foreign currency, gold or real estate," Don said.

In addition, a number of investors who had bought shares at depressed prices following last week's slump were active in selling out again on the trading session, contributing to the steep decline, he said.

Analysts of Ho Chi Minh City Securities Co said the higher exchange rate would put pressure on interest rates and the coupon rates of Government bonds.

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Weaker dong sends shares down on both bourses

The State Bank of Vietnam's Aug. 18 decision to depreciate the dong by
another 2 percent accelerated the downward slide of shares on both
national stock exchanges on the same day, with nearly 80 percent of
codes shedding value despite an overnight rise on Wall Street.

The depreciation of the dong from 18,544 VND to 18,932 VND per US
dollar was part of an effort to control the nation's trade deficit, the
State Bank said.

In response, the VN-Index lost 1.73
percent to close at 455.49 points, while the value of trades on the HCM
City Stock Exchange fell 7 percent to a one-month low of just 988
billion VND (51.2 million USD). Volume reached just 37 million shares.

Sacombank (STB), the most-active share on a volume of 1.87 million,
closed down 1.25 percent, while Vinh Son-Song Hinh Hydropower (VSH) fell
by 2.45 percent with 1.68 million traded.

On the
HanoiStock Exchange, the HNX-Index declined by 2.62 percent to end the
session at 132.62 points. Both volume and value dropped by 10 percent,
with only 26 million shares traded, worth a combined 651 billion VND
(33.7 million USD).

PetroVietnam Construction (PVX),
the most-active stock nationwide with a volume of 4.86 million shares,
declined by 3.8 percent, while Kim Long Securities Co (KLS) dropped by
3.23 percent on a volume of 1.5 million shares. Construction giant
Vinaconex (VCG) also plunged by 2.43 percent with 800,000 shares traded.

Pomina Steel (POM) was among few codes to post a
gain, hitting its ceiling price for the fourth straight day after
announcing its plans to buy back 9 million shares.

Several export companies which stood to benefit from the dong
depreciation also posted gains, including Long An Food Processing Export
(LAF), Ben Tre Forestry and Seafood Import-Export (FBT) and Sao Vang
Rubber (SRC).

PIV Petro Investment and Valuation Co
(PIV) saw its first day of trading on Aug. 18, closing up nearly 27
percent from its reference price to 20,300 VND (1.05 USD) per share,
with 36,000 shares changing hands.

Both stock
exchanges opened in positive territory but exhausted share demand
depressed most shares in the latter part of the trading day. More than
460 codes out of a total of 586 on both exchanges lost value.

Foreign investors were most immediately influenced by the currency
depreciation, decreasing buys to a net of just 34 billion VND (1.8
million USD) on both bourses, a decrease of 60 percent from the previous
session.

Tran Van Don, head of analysis department
for Ha Thanh Securities Co, said the State Bank decision reignited
investor worries about inflation.

"Many investors will
likely shift investment from risky and low profitable securities to
more attractive channels including foreign currency, gold or real
estate," Don said.

In addition, a number of investors
who had bought shares at depressed prices following last week's slump
were active in selling out again on the trading session, contributing to
the steep decline, he said.

Analysts of HCM City
Securities Co said the higher exchange rate would put pressure on
interest rates and the coupon rates of Government bonds./.

Related Articles

• Weaker dong sends shares down on both bourses
• Market moves up sharply
• Greenback firmer on signs of rising demand
• New decree hopes to protect holders of convertible bonds
• Traders keep watchful eye as U.S. dollar rallies