Dollar rises to record vs dong on unofficial market

HCMC – The U.S. dollar surged to a new record high of VND20,000 per dollar on the unofficial market on Tuesday and as a result businesses are seeking to hold on to the greenback for fear of foreign exchange risk.

The dollar on the underground market on Tuesday afternoon traded at VND19,980 for buying and VND20,020 for selling, up VND50 from the previous day and VND170 from late last week.

Reportedly rumors that the central bank would continue devaluing the Vietnam dong were behind the dollar rally on the unofficial market on Monday. However, the central bank governor, Nguyen Van Giau, on Tuesday affirmed in Saigon Giai Phong newspaper that there would be no more dong devaluation but his message did not appease the market.

The central bank has yet to take a single move to ease the dollar fervor. Commercial banks on Tuesday quoted the dollar selling price at VND19,500 per dollar although no companies could buy the dollar at that price.

Corporate clients must now pay extra fees to buy dollars at banks, virtually appreciating the dollar versus the dong. 

There are no official reasons for the dollar jump but market watchers said shaky confidence in the local currency had led to volatility on the foreign exchange market, so any rumors could drive the dong down.

When the dong fell to VND20,000 per dollar, the dollar price in futures contracts on Asian markets on Tuesday afternoon was VND19,950 for one month and VND21,520 for one year.

There are signs that enterprises are holding on to dollar funds on their bank accounts. A source from the State-owned bank BIDV told the Daily BIDV’s dollar purchases had dipped strongly recently, because corporate customers declined to sell.

Individuals are also speculating on the dollar, the source said.

According to a report by the central bank’s HCMC Branch by late August, dollar purchases from enterprises accounted for 40% of the city-based banks’ total.

If enterprises had sold the dollar to banks last week, it would have lost VND500 for each dollar. Therefore, no one wants to sell dollars to banks given the continued price increase of the dollar on the unofficial market, the source said.

Meanwhile, companies having dollar debt are rushing to buy dollars for premature payment.

Outstanding dollar loans rose sharply in the first nine months of this year, and in HCMC alone, dollar credit expanded by a whopping 36.4%.

Dollar supply is in decline while dollar demand is sharply up, leading to a sudden imbalance on the foreign exchange market, the source said. However, the source affirmed BIDV could meet all legitimate corporate needs for dollars.

Meanwhile, the general director of a joint-stock bank told the Daily that dollar funds were ample but prohibitively high prices really mattered.

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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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Gold slips VND500,000 from all-time high, dollar keeps rising

Local gold prices Wednesday slid about VND500,000 off the all-time high to VND32.8-32.9 million, while dollar prices kept pushing forward to VND20,100 in the black market.

Ho Chi Minh City’s SJC bullion was listed at VND32.8 million a tael and VND32.9 million a tael for bid and ask respectively, down VND70,000 a tael from opening prices. A tael is equal to 37.5 grams or 1.2 troy ounces.

Local gold trading was lackluster this morning as investors stayed on the sidelines on price volatility. Bid and ask spread were mostly narrowed to VND100,000 a tael to encourage profit-taking.

In Asia trade this morning, spot gold was flat at $1,336 an ounce. It fell to a two-week low of $1,334.45 on Tuesday, compared to an all-time high of $1,387.10 hit last week.

In the local forex market, dollar bid and ask prices at gold shops rallied to VND20,000 and VND20,050. But Vietcombank’s dollar bid and ask were unchanged at VND19,490 and VND19,500 respectively.

In the global market, the dollar soared at the news that China central bank raised the lending interest rate by 0.025 percent to curb inflation and cooling off the overheating realty market, and held steady on Wednesday morning as investors poised to cut short positions.

Vietnam central bank governor on Tuesday ruled out the rumors of another dong devaluation, adding that the central bank will likely take actions to improve the liquidity in the market in the coming time.

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Gold slips VND500,000 from all-time high, dollar keeps rising

Local gold prices Wednesday slid about VND500,000 off the all-time high to VND32.8-32.9 million, while dollar prices kept pushing forward to VND20,100 in the black market.

Ho Chi Minh City’s SJC bullion was listed at VND32.8 million a tael and VND32.9 million a tael for bid and ask respectively, down VND70,000 a tael from opening prices. A tael is equal to 37.5 grams or 1.2 troy ounces.

Local gold trading was lackluster this morning as investors stayed on the sidelines on price volatility. Bid and ask spread were mostly narrowed to VND100,000 a tael to encourage profit-taking.

In Asia trade this morning, spot gold was flat at $1,336 an ounce. It fell to a two-week low of $1,334.45 on Tuesday, compared to an all-time high of $1,387.10 hit last week.

In the local forex market, dollar bid and ask prices at gold shops rallied to VND20,000 and VND20,050. But Vietcombank’s dollar bid and ask were unchanged at VND19,490 and VND19,500 respectively.

In the global market, the dollar soared at the news that China central bank raised the lending interest rate by 0.025 percent to curb inflation and cooling off the overheating realty market, and held steady on Wednesday morning as investors poised to cut short positions.

Vietnam central bank governor on Tuesday ruled out the rumors of another dong devaluation, adding that the central bank will likely take actions to improve the liquidity in the market in the coming time.

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Asia braces for currency wars but options limited

Photo: AFP

SINGAPORE - Emerging Asia is braced for collateral damage in case of an all-out currency war between the world's most powerful economies, but regional governments have limited options, economists said.

The subject dominated annual International Monetary Fund talks in Washington at the weekend, but there was no consensus as the US and China wage an acrimonious dispute over Beijing's currency policies.

"I strongly hope that this will not escalate into an all-out war," said Cyn Young Park, a senior economist at the Asian Development Bank (ADB), voicing fears any conflict could derail the world's fragile recovery from recession.

"We are now at the stage where many countries have to maintain the recovery momentum and it is really counterproductive that we slip into protectionism, whether it is trade or financial," she told AFP.

Battered by the financial turmoil that began in 2008, the US, Japan and Europe are moving to weaken or cap their currencies in a bid to make their exports more competitive in the global market.

The war drums grew louder as the US, facing midterm elections next month, mounted a high-profile campaign to pressure China to allow the yuan currency to rise more rapidly against the dollar to correct trade imbalances.

As China dug in, Japan intervened in the market for the first time in six years to stem a sharp rise in the yen.

Emerging Asian economies are caught in the cross-fire. With Beijing keeping a tight rein on its exchange rate, their currencies have risen faster against the dollar than has the Chinese yuan, making their exports less competitive.

The US and Britain have also injected more money into their banking systems to stimulate growth.

But with growth in the US, Japan and Europe anemic, a large chunk of the money is heading to emerging markets, including in Asia, where it stands to gain better yields, said David Carbon, an economist with Singapore's DBS Bank.

According to the Washington-based Institute of International Finance, net private capital flows to emerging economies are projected to reach US$825 billion this year, or over $2 billion a day, up from $581 billion in 2009.

The massive inflow has been a key factor pushing Asian currencies higher. It has also led to steep gains in stocks and property prices, stoking fears of "bubbles" which could later burst if the money exits as fast as it has come in.

Pressure is now on Asian policymakers to limit the rise in their currencies and yet at the same time manage the effects of growing inflation, as well as the rising asset prices.

DBS Bank said that since January, Asian currencies have gained by 6.0 percent on average against the dollar, with the Malaysian ringgit and the Thai baht up the most at 9.0 percent.

Comparatively, the yuan appreciated by only 2.0 percent.

While market intervention remains an option, many central banks are preferring to keep their powder dry because of inflationary risks.

The Malaysian ringgit has been trading at a 13-year high against the dollar, but the central bank has said the strength in the currency reflects Malaysia's robust 9.5 percent economic growth rate in the first half of the year.

Bank Negara, the Malaysian central bank, said it would only intervene if there were any sudden or excessive movements.

A decision to intervene is not simple for the Reserve Bank of India, despite the rupee reaching over a two-year high against the dollar, as a strong currency is helping the central bank battle rising inflation, officials said.

South Korea is one country that is said by traders to have intervened repeatedly in the currency markets to put the brakes on the won's rapid ascent.

Thailand's central bank declined to say whether it intervened in the market after the baht hit a 13-year high against the dollar last week but dealers suspected it might have bought dollars.

In the Philippines, officials have expressed concern over the rise of the peso, but also admitted that the government had limited resources to help exporters deal with the problem.

"Policymakers in smaller Asian countries have to accept that they are powerless in the face of policy decisions made by the G3 (US, Europe and Japan) and China," said Manu Bhaskaran, head of economic research at consultancy Centennial Group Inc.

Their options include imposing capital controls and introducing measures restricting foreign investors' access to some assets, he said, citing Singapore's recent measures to cool down its property market.

But that risks setting off a round of beggar-thy-neighbor policies that jeopardizes the global recovery, analysts say. Battle will be rejoined at upcoming G20 meetings in South Korea.

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Easing of safety rules sparks lending rush

Local banks are taking advantage of the central bank’s recent relaxation of bank safety regulations to boost lending and meet the year’s credit growth target after a sluggish nine months.

The general director of a Ho Chi Minh City-based lender said the bank had faced difficulties in attracting deposits during the first nine months. Besides, it had to set aside reserves to meet strict safety requirements supposed to take effect this month.

Now that the rules have been amended, his bank wants to focus on lending, after posting a credit growth of only 5 percent over the last nine months, he said.

Do Minh Toan, deputy general director of the Asia Commercial Bank, said the bank will focus on businesses in the agricultural sector who are in need of funds to purchase rice and other crops. These clients can help increase the bank’s credit growth, he said.

Other bankers have said they are targeting corporate clients, especially exporters.

Dam The Thai, deputy general director of the HD Bank, said the competition between banks is getting harsh. His bank will slightly lower its lending rates this month to make sure it can retain and get more customers, he said.

The Vietnam Banks Association has asked members to reduce deposit rates to no more than 11 percent by October 15, according to a statement on the central bank’s website on Monday.

For non-term deposits and deposits of less than three months, the association asked commercial banks to make a bigger reduction to create a “suitable” interest-rate curve to attract long-term funds, according to the statement. Members were also asked to lower dollar-deposit rates and to cut borrowing costs to spur lending, according to the statement.

This call for interest rate cuts came after the State Bank of Vietnam adjusted safety rules last week, allowing banks greater scope to lend. Among the adjustments is permission to use 25 percent of non-term deposits made by businesses for lending, starting October 1.

Economist Le Tham Duong of the Ho Chi Minh City Banking University said dong-denominated loans have expanded at a slow pace so far this year. As a result, local banks will compete for clients in the next months, which will help bring interest rates down.

Duong said to speed up this process, the government should increase money supply and lower the yields on government bonds to less than 10 percent a year. When banks cut back their investments in government bonds, they would pay more attention to lending to businesses, he said.

The Vietnam Banks Association has requested that the central bank cut its refinancing rate, discount rate and interest rates in open market operations to help banks lower their interest rates. The central bank on September 27 set its refinancing rate at 8 percent and its discount rate at 6 percent.

Loans are estimated to have risen 19.5 percent in the January to September period. Vietnam has set an annual target of 25 percent credit growth for this year.

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Easing of safety rules sparks lending rush

Local banks are taking advantage of the central bank’s recent relaxation of bank safety regulations to boost lending and meet the year’s credit growth target after a sluggish nine months.

The general director of a Ho Chi Minh City-based lender said the bank had faced difficulties in attracting deposits during the first nine months. Besides, it had to set aside reserves to meet strict safety requirements supposed to take effect this month.

Now that the rules have been amended, his bank wants to focus on lending, after posting a credit growth of only 5 percent over the last nine months, he said.

Do Minh Toan, deputy general director of the Asia Commercial Bank, said the bank will focus on businesses in the agricultural sector who are in need of funds to purchase rice and other crops. These clients can help increase the bank’s credit growth, he said.

Other bankers have said they are targeting corporate clients, especially exporters.

Dam The Thai, deputy general director of the HD Bank, said the competition between banks is getting harsh. His bank will slightly lower its lending rates this month to make sure it can retain and get more customers, he said.

The Vietnam Banks Association has asked members to reduce deposit rates to no more than 11 percent by October 15, according to a statement on the central bank’s website on Monday.

For non-term deposits and deposits of less than three months, the association asked commercial banks to make a bigger reduction to create a “suitable” interest-rate curve to attract long-term funds, according to the statement. Members were also asked to lower dollar-deposit rates and to cut borrowing costs to spur lending, according to the statement.

This call for interest rate cuts came after the State Bank of Vietnam adjusted safety rules last week, allowing banks greater scope to lend. Among the adjustments is permission to use 25 percent of non-term deposits made by businesses for lending, starting October 1.

Economist Le Tham Duong of the Ho Chi Minh City Banking University said dong-denominated loans have expanded at a slow pace so far this year. As a result, local banks will compete for clients in the next months, which will help bring interest rates down.

Duong said to speed up this process, the government should increase money supply and lower the yields on government bonds to less than 10 percent a year. When banks cut back their investments in government bonds, they would pay more attention to lending to businesses, he said.

The Vietnam Banks Association has requested that the central bank cut its refinancing rate, discount rate and interest rates in open market operations to help banks lower their interest rates. The central bank on September 27 set its refinancing rate at 8 percent and its discount rate at 6 percent.

Loans are estimated to have risen 19.5 percent in the January to September period. Vietnam has set an annual target of 25 percent credit growth for this year.

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Vietnam grants new gold import licenses, quotas

Photo: AFP

HANOI - Vietnam's central bank granted permits for gold imports to several firms on Thursday, giving each a quota of 200-300 kg in a bid to narrow the spread between gold prices in the country and in world markets.

The licenses were issued on Thursday afternoon and are valid through Oct. 12, according to a report on Vneconomy.vn, the online version of the Vietnam Economic Times.

Vietnam effectively banned gold imports in mid-2008 to help tackle a trade deficit as the economy overheated, but the central bank has granted import quotas on a selective basis since then.

A source with direct knowledge of the licensing and quotas said nine firms were part of the arrangement, which would put the total volume somewhere between 1.8 and 2.7 tons.

There was no immediate comment from the State Bank of Vietnam, which earlier published an interview on its website quoting a senior official as saying the central bank would consider granting new licences if the price on the domestic market rose "unreasonably high".

Spot gold which has risen some 8 percent over the past month, hit an all-time high for a third straight session on Thursday, rising above US$1,360 an ounce, as a weak dollar pushed investors into bullion in the face of economic uncertainty and speculation of further monetary easing by central banks.

The import licenses were the first granted by the State Bank of Vietnam since February, and came in reaction to a widening spread between onshore prices and those on world markets.

Although the volume is limited it will have "a positive psychological effect" on the market, Vneconomy quoted Nguyen Thi Cuc, deputy director of importer Phu Nhuan Jewelry Co, as saying.

In Vietnam, gold in Hanoi had eased to VND32.77/32.85 million per tael by Thursday evening after rising as high as VND33.07/33.15 million earlier, according to Saigon Jewelry Co Ltd, the country's top dealer. One tael equals 1.21 troy ounces.

The unofficial exchange rate was quoted earlier at around VND19,800/19,850a per dollar at a major Hanoi gold shopa putting the gold price in Vietnam at a premium then of about $20 to global prices.

Markets will be tight

Earlier, the central bank's website quoted Nguyen Quang Huy, director of the foreign exchange department of the State Bank of Vietnam, as saying new imports might be permitted "at appropriate volumes and times, to stabilize the market".

Dealers in Asia said the Vietnamese comments helped nudge the price of gold up on the international market.

"People are going to focus on the fact that the Asian physical market will be tight. Last time Vietnam opened the door to gold imports, gold went up $20.

In percentage terms, it could translate into $30 today," said a Singapore-based trader after

Foreign exchange dealers have said the rise in global gold prices, and curbs on imports, had fed smuggling. Demand for dollars to buy this gold overseas was pushing down the value of the dong.

A similar scenario unfolded a year ago, leading the authorities to issue gold import licenses then, too. The pressure on the dong continued, however, and the central bank devalued the currency and raised interest rates just weeks after relaxing the import ban.

Traders said gold was being smuggled into Vietnam from neighboring countries and Thailand.

Nguyen The Hung, chief executive officer of Vietnam Gold Corp, said domestic supply was limited as investors had sold and businesses had increased gold exports when prices hit VND29-30 million per tael.

Speaking before the new licenses were announced, he said the differential between domestic and world gold prices had to be addressed. "The gap requires measures from the central bank."

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2 held in UK over Australia banknote graft

A 100 Australian dollar note (R) is displayed with other foreign currencies

Photo: AFP

Two men were arrested in raids by Australian, British, and Spanish police over alleged corruption involving a banknote-printing firm part-owned by Australia's central bank, officials said on Thursday.

British and Australian police said they carried out 15 coordinated swoops Wednesday, while there were two more in Spain. Two men were arrested in Britain and are being questioned, Britain's Serious Fraud Office said.

"This action ... involves the activities of employees and agents of Securency International PTY Ltd and their alleged corrupt role in securing international polymer banknote contracts," a statement said.

Melbourne-based Securency is embroiled in a long-running investigation over claims its agents offered bribes to officials in countries including Indonesia, Vietnam, Malaysia, and Nigeria to win contracts, according to media reports.

Australian police on Thursday confirmed raids in six areas in and around Melbourne and said they were part of a joint probe with British investigators.

Securency was not immediately available to comment while the Reserve Bank of Australia, the central bank, said it takes the allegations "very seriously" and "condemns corrupt behaviour of any kind."

Securency is a joint venture between the bank and Innovia Films, which helps design and produce polymer banknotes known for their durability and for being hard to counterfeit.

The company's website says its banknotes have been issued in more than 30 countries around the world, from China to Zambia and Mexico.

Its managing director and company secretary were suspended last November as Australian police probed alleged bribery and kickbacks which reports say amounted to several million dollars.

RBA could take all of Securency

The private equity group that sits behind the Reserve Bank's partner in the troubled Securency polymer banknote business is conducting an asset fire sale that may open the way for the central bank to take 100 per cent ownership of Securency, as a prelude to completely offloading it.

Co-ordinated raids by the Australian Federal Police and Britain's Serious Fraud Office on Wednesday in Australia and Britain were related to allegations that Securency paid millions of dollars in bribes through agents in countries where it marketed its polymer banknote technology.

The allegations were first raised by The Age in May, and are spurring the Reserve's search for ways to get Securency off its books.

Securency is a 50:50 joint venture between the Reserve Bank and Innovia Films, a British-based specialty plastics producer. Innovia was the subject of a €320 million leveraged buyout in 2004 that was led by Candover Partners, the funds management arm of Candover Investments.

Candover was a high-profile private equity investor in Britain and Europe during the boom. But Candover Partners shut its main private equity fund in January after Candover Investments failed to inject new capital, and Candover Investments announced last month that intended to sell its assets, and return the cash proceeds to its investors.

Innovia and its stake in Securency are not automatically on the block following Candover Investments' move. The senior investor in Innovia is Candover Partners, not Candover Investments, and there are other non-Candover shareholders.

 

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Vietnam grants new gold import licenses, quotas

Vietnam's central bank granted permits for gold imports to several firms on Thursday, giving each a quota of 200-300 kg in a bid to narrow the spread between gold prices in the country and in world markets.

The licenses were issued on Thursday afternoon and are valid through Oct. 12, according to a report on Vneconomy.vn, the online version of the Vietnam Economic Times.

Vietnam effectively banned gold imports in mid-2008 to help tackle a trade deficit as the economy overheated, but the central bank has granted import quotas on a selective basis since then.

A source with direct knowledge of the licensing and quotas said nine firms were part of the arrangement, which would put the total volume somewhere between 1.8 and 2.7 tonnes.

There was no immediate comment from the State Bank of Vietnam, which earlier published an interview on its website quoting a senior official as saying the central bank would consider granting new licenses if the price on the domestic market rose "unreasonably high."

Spot gold, which has risen some 8 percent over the past month, hit an all-time high for a third straight session on Thursday, rising above $1,360 an ounce, as a weak dollar pushed investors into bullion in the face of economic uncertainty and speculation of further monetary easing by central banks.

The import licenses were the first granted by the State Bank of Vietnam since February, and came in reaction to a widening spread between onshore prices and those on world markets.

Although the volume is limited it will have "a positive psychological effect" on the market, Vneconomy quoted Nguyen Thi Cuc, deputy director of importer Phu Nhuan Jewelry Co, as saying.

In Vietnam, gold in Hanoi had eased to VND32.77/32.85 million per tael by Thursday evening after rising as high as VND33.07/33.15 million earlier, according to Saigon Jewelry Co Ltd, the country's top dealer. One tael equals 1.21 troy ounces.

The unofficial exchange rate was quoted earlier at around VND19,800/19,850 per dollar at a major Hanoi gold shop , putting the gold price in Vietnam at a premium then of about $20 to global prices.

Markets will be tight

Earlier, the central bank's website quoted Nguyen Quang Huy, director of the foreign exchange department of the State Bank of Vietnam, as saying new imports might be permitted "at appropriate volumes and times, to stabilize the market".

Dealers in Asia said the Vietnamese comments helped nudge the price of gold up on the international market.

"People are going to focus on the fact that the Asian physical market will be tight. Last time Vietnam opened the door to gold imports, gold went up $20. In percentage terms, it could translate into $30 today," said a Singapore-based trader after

Foreign exchange dealers have said the rise in global gold prices, and curbs on imports, had fed smuggling. Demand for dollars to buy this gold overseas was pushing down the value of the dong.

A similar scenario unfolded a year ago, leading the authorities to issue gold import licenses then, too. The pressure on the dong continued, however, and the central bank devalued the currency and raised interest rates just weeks after relaxing the import ban.

Traders said gold was being smuggled into Vietnam from neighboring countries and Thailand.

Nguyen The Hung, chief executive officer of Vietnam Gold Corp, said domestic supply was limited as investors had sold and businesses had increased gold exports when prices hit VND29-30 million per tael.

Speaking before the new licenses were announced, he said the differential between domestic and world gold prices had to be addressed. "The gap requires measures from the central bank."

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Vietnam grants new gold import licenses, quotas

Vietnam's central bank granted permits for gold imports to several firms on Thursday, giving each a quota of 200-300 kg in a bid to narrow the spread between gold prices in the country and in world markets.

The licenses were issued on Thursday afternoon and are valid through Oct. 12, according to a report on Vneconomy.vn, the online version of the Vietnam Economic Times.

Vietnam effectively banned gold imports in mid-2008 to help tackle a trade deficit as the economy overheated, but the central bank has granted import quotas on a selective basis since then.

A source with direct knowledge of the licensing and quotas said nine firms were part of the arrangement, which would put the total volume somewhere between 1.8 and 2.7 tonnes.

There was no immediate comment from the State Bank of Vietnam, which earlier published an interview on its website quoting a senior official as saying the central bank would consider granting new licenses if the price on the domestic market rose "unreasonably high."

Spot gold, which has risen some 8 percent over the past month, hit an all-time high for a third straight session on Thursday, rising above $1,360 an ounce, as a weak dollar pushed investors into bullion in the face of economic uncertainty and speculation of further monetary easing by central banks.

The import licenses were the first granted by the State Bank of Vietnam since February, and came in reaction to a widening spread between onshore prices and those on world markets.

Although the volume is limited it will have "a positive psychological effect" on the market, Vneconomy quoted Nguyen Thi Cuc, deputy director of importer Phu Nhuan Jewelry Co, as saying.

In Vietnam, gold in Hanoi had eased to VND32.77/32.85 million per tael by Thursday evening after rising as high as VND33.07/33.15 million earlier, according to Saigon Jewelry Co Ltd, the country's top dealer. One tael equals 1.21 troy ounces.

The unofficial exchange rate was quoted earlier at around VND19,800/19,850 per dollar at a major Hanoi gold shop , putting the gold price in Vietnam at a premium then of about $20 to global prices.

Markets will be tight

Earlier, the central bank's website quoted Nguyen Quang Huy, director of the foreign exchange department of the State Bank of Vietnam, as saying new imports might be permitted "at appropriate volumes and times, to stabilize the market".

Dealers in Asia said the Vietnamese comments helped nudge the price of gold up on the international market.

"People are going to focus on the fact that the Asian physical market will be tight. Last time Vietnam opened the door to gold imports, gold went up $20. In percentage terms, it could translate into $30 today," said a Singapore-based trader after

Foreign exchange dealers have said the rise in global gold prices, and curbs on imports, had fed smuggling. Demand for dollars to buy this gold overseas was pushing down the value of the dong.

A similar scenario unfolded a year ago, leading the authorities to issue gold import licenses then, too. The pressure on the dong continued, however, and the central bank devalued the currency and raised interest rates just weeks after relaxing the import ban.

Traders said gold was being smuggled into Vietnam from neighboring countries and Thailand.

Nguyen The Hung, chief executive officer of Vietnam Gold Corp, said domestic supply was limited as investors had sold and businesses had increased gold exports when prices hit VND29-30 million per tael.

Speaking before the new licenses were announced, he said the differential between domestic and world gold prices had to be addressed. "The gap requires measures from the central bank."

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Vietnam may allow gold imports if local prices jump

Photo: AFP

HANOI - Vietnam's central bank said on Thursday it would consider granting permits for gold imports if prices in the domestic market rose "unreasonably high", helping to drive world bullion prices up to another record.

Spot gold, which has rallied 8 percent over the past month, hit an all-time peak for a third straight session on Thursday, rising above US$1,355 an ounce, as a weak dollar pushes investors to bullion in the face of economic uncertainty and speculation of further monetary easing by central banks.

Nguyen Quang Huy, director of the foreign exchange department of the State Bank of Vietnam, said gold prices were still largely in line with world markets but the central bank was closely monitoring the situation.

"If gold prices in the country rise unreasonably high, the state bank may consider giving permission to businesses to import gold, at appropriate volumes and times, to stabilize the market so that the price of gold in the country sticks with the price of world gold," he said on the central bank's website, www.sbv.gov.vn.

Dealers said the Vietnamese comments helped nudge the price of gold up.

"People are going to focus on the fact that the Asian physical market will be tight. Last time Vietnam opened the door to gold imports, gold went up $20. In percentage terms, it could translate into $30 today," said a Singapore-based trader.

In Vietnam, gold rose to VND32.80/32.89 million per tael from VND32.67/32.75 million early on Thursday, according to Saigon Jewelry Corp, the country's biggest gold dealer. One tael equals 1.21 troy ounces.

The unofficial exchange rate stood at 19,800/19,850 dong per dollar at a major Hanoi gold shop, putting the gold price in Vietnam at a premium of about $20 to global market prices.

Vietnam banned gold imports in mid-2008 to help tackle a trade deficit as the economy overheated, but the central bank has granted import quotas on a selective basis since.

Repeat scenario

Foreign exchange dealers have said the rise in global gold prices, and curbs on imports, had fed smuggling. Demand for dollars to buy this gold overseas was pushing down the value of the dong.

The scenario appears to be a repeat of pressures that built up in Vietnam about a year ago, leading the central bank to grant quotas for several tons of gold imports.

The pressure on the dong continued, however, and the central bank devalued the currency and raised interest rates just weeks after relaxing the import ban.

Nguyen The Hung, chief executive officer of Vietnam Gold Corp, said domestic supply was limited as investors had sold and businesses had increased gold exports when prices hit VND29-30 million per tael.

He said the differential between domestic and world gold prices had to be addressed. "The gap requires measures from the central bank," he said.

Traders said there had been a significant amount of gold suggled into Vietnam from neighboring countries and Thailand.

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Banks turn cautious about rate cuts

HANOI - Banks in Vietnam have received another call to lower interest rates, but neither the lenders nor the central bank are expecting any cuts to be large, said economists.

The Vietnam Banks Association, which acts as a mediator between the State Bank of Vietnam and lenders, called on banks last Wednesday for the third time in the past six months to cut dong deposit rates, this time to 11 percent from 11.2 percent by Oct. 15.

The association referred to amendments the central bank made to a new set of banking safety rules last Tuesday, suggesting that they would make it easier in future to raise deposits.

But the industry association had previously urged banks to slash deposit rates to 10 percent and lending rates to 12 percent by the end of September, and the new target of 11 percent appeared to reflect an understanding that macroeconomic developments were making it hard to bring rates down by much.

The association's request came as the Ministry of Planning and Investment said economic growth would reach 6.7 percent this year, exceeding the official target of 6.5 percent.

September annual inflation hit 8.92 percent, quickening for the first time in half a year.

"With current market movements, the recent decrease in interest rates is positive, but they cannot drop much more," the newspaper Vietnam Investment Review quoted government adviser Tran Du Lich as saying.

Many lenders considered the central bank's original set of safety rules too stringent. Lich said the amendments may not have a direct impact on rates, but they aimed to give banks with low liquidity more time to prepare for new requirements.

The central bank was also urging lenders to cut rates to help spur economic growth, but its enthusiasm appeared curbed by the 1.31 percent surge in consumer prices in September.

"Monetary policy needs to guarantee the two targets of boosting economic growth and containing inflation are met. It is necessary to cut interest rates, but it requires time and gradual steps", Nguyen Dong Tien, deputy governor of the State Bank of Vietnam, said last week.

But Le Dang Doanh, an independent economist, warned that a minor cut in rates would not be enough.

"Vietnam's economic growth this year has been fueled by public investment and an increase in exports. If interest rates remain high, businesses, especially those in the private sector, will feel the heat early next year," he said.

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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 Jan-Sept credit expected to rise 19.5 pct

Photo: Tuoi Tre

HANOI - Loans in Vietnam by the end of this month are estimated to rise 19.5 percent from the end of 2009, the central bank said on Thursday, on course to reach an annual target of 25 percent credit growth.

The projection was based on expansion of 19.27 percent as of Monday, State Bank of Vietnam Governor Nguyen Van Giau said in a statement on the central bank's website.

"The credit growth target of 25 percent for the whole of the year will be attained," Giau said in the statement.

The government has supported credit expansion to facilitate economic growth, which accelerated to an annual rate of 7.16 percent in the third quarter.

Credit jumped 37.7 percent last year from 2008, speeding from an annual rise of 23.58 percent the previous year, the central bank has said.

Loans for securities investment of 15 trillion dong (US$769.6 million) had the highest rise of 19.8 percent, consumer loans jumped 19.7 percent to 151 trillion dong while non-production loans rose 18.2 percent to 385 trillion dong, Giau was quoted by Thursday's Thanh Nien newspaper as saying.

He gave no value estimates for Vietnam's total credit at the end of September.

He said lending interest rates dropped very slowly in September, edging down just 0.01 percentage point from August. Lending rates in Vietnam now range at between 13-15.5 percent.

The central bank will work with commercial banks to further cut interest rates, Giau said in the newspaper report.

The central bank 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.

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Vietnam to relax bank lending rules to boost loans

Vietnam’s central bank said it would let commercial banks lend money from a wider array of sources as of Oct. 1 to assuage concerns that new regulations would dampen lending and possibly hurt the economy.

However, a senior government adviser said the measures did not go far enough.

Bankers had voiced concern about the original rules, arguing they would hinder their ability to boost credit and lower interest rates. In response, and under pressure from the government, the central bank issued amendments late on Monday.

These allow banks to lend up to 25 percent of non-term deposits raised from economic institutions instead of keeping them as reserves. Banks can also lend money they have borrowed from the interbank market for terms of three months or longer.

A central feature of the new rules – raising banks’ capital adequacy ratio to 9 percent from 8 percent – remained unchanged.

The benchmark Vietnam Index gained 1.1 percent on the news, but share traders remained wary. Many analysts had flagged the original set of rules as a potential damper on the market and economy, and had hoped for bigger changes.

“The market is unlikely to see a big rally because traders are still cautious and they will look at how commercial banks react to the new circular in the near term,” said Doan Tran Phuong Phi, a broker at Ho Chi Minh City Securities.

Le Xuan Nghia, deputy director of the National Financial Supervisory Commission, said the amendments would not really help banks expand credit or cut interest rates. “The changes are not large enough to boost lending,” he said.

Central bank Governor Nguyen Van Giau has defended the original rules, saying they would make the banking sector safer. He also warned even stricter rules would take effect from January because of amendments to the law on credit institutions.

Earlier this year the central bank asked banks to restrict their interbank borrowing to less than 20 percent of deposits.

Dong lending rates range from 13 percent to 15.5 percent, although the government wants them cut to 12 percent. Banks promised in May to get nearer that level by the end of September.

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Central bank eases credit rules

The State Bank of Vietnam has amended regulations on the use of deposits for lending by commercial banks following a request by the government.

The amended Circular 13 issued Monday now allows banks to use up to 25 percent of their non-term deposits for lending. It also allows banks to have their deposits with the State Treasury counted as part of their funds for lending.

Originally the circular banned banks from using the money in non-term accounts to fund loans. According to the Vietnam Banking Association, this regulation created a huge funding pressure as non-term accounts make up 15-20 percent of deposits at local banks.

Banks have welcomed the revised regulations, saying they would help improve liquidity and allow them to boost lending.

The amended circular, however, kept unchanged a provision that requires banks to increase capital adequacy ratio from 8 percent to 9 percent.

Despite some changes, Circular 13 will still take effect on October 1 as planned.

Since it was first announced in May, the circular has faced a lot of criticism from banks, who said the new safety requirements were too strict and difficult to implement by the deadline.

Prime Minister Nguyen Tan Dung last Friday asked the central bank to review the rules and ensure stability for the country’s financial and monetary market.

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Central bank eases credit rules

The State Bank of Vietnam has amended regulations on the use of deposits for lending by commercial banks following a request by the government.

The amended Circular 13 issued Monday now allows banks to use up to 25 percent of their non-term deposits for lending. It also allows banks to have their deposits with the State Treasury counted as part of their funds for lending.

Originally the circular banned banks from using the money in non-term accounts to fund loans. According to the Vietnam Banking Association, this regulation created a huge funding pressure as non-term accounts make up 15-20 percent of deposits at local banks.

Banks have welcomed the revised regulations, saying they would help improve liquidity and allow them to boost lending.

The amended circular, however, kept unchanged a provision that requires banks to increase capital adequacy ratio from 8 percent to 9 percent.

Despite some changes, Circular 13 will still take effect on October 1 as planned.

Since it was first announced in May, the circular has faced a lot of criticism from banks, who said the new safety requirements were too strict and difficult to implement by the deadline.

Prime Minister Nguyen Tan Dung last Friday asked the central bank to review the rules and ensure stability for the country’s financial and monetary market.

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State bank decision stabilises markets

Shares advanced on the nation's stock exchanges on Sept. 28 as the
central bank's final decision on Circular No 13 helped settle investor
psychology.

The State Bank of Vietnam's decision, issued late Monday, allows banks
to lend 25 percent of their non-term deposits and count State Treasury
and loans from other credit institutions of terms of three months or
longer as part of their reserves for lending.

The
decision is expected to help ease the capital crunch that banks feared
due to Circular No 13's stricter capital adequacy requirements, which
will take effect on Friday as previously announced.

The central bank on Sept. 28 also decided to keep the prime interest rate at 8 percent for an 11th consecutive month.

On the HCM Stock Exchange, the VN-Index closed up 1.1 percent to
455.13 points. Market value rose by 10 percent over Monday's session to
slightly over 1 trillion VND (53.8 million USD) on a volume of almost 39
million shares.

Advancers outnumbered decliners by
150-57, with Sacombank (STB) the most-active share with over 3 million
changing hands. STB rose for a second day and closed up 1.2 percent to
17,000 VND (0.87 USD) per share.

Of the 10 leading
shares by capitalisation, nine posted gains, with insurer Bao Viet
Holdings (BVH) and property developer Vincom (VIC) rising to their
ceiling price.

Ha Thanh Securities Co's head of
analysis and investment, Tran Van Don, said the impacts of Circular No
13 had dissipated and the market was unlikely to react dramatically.

Many investors remained watchful, Don said, noting the modest increase in trading volume and value on Sept. 28.

He predicted that rising inflation would cause banks difficulties in
lowering interest rates, putting further pressure on the markets.

Duong Hong Ha, chief analyst of Tri Viet Securities Co, agreed the
domestic stock market was unlikely to see any explosive development in
light of rising inflation, high interest rates and a large volume of new
shares to list by year's end.

On the Hanoi Stock
Exchange, the HNX-Index advanced on Sept. 28 by a modest 0.18 percent to
close at 130.17 points. Volume hit 34.6 million shares worth 981.6
billion VND (50.3 million USD) – an increase by 39.5 percent in volume
and nearly 60 percent in value – while gainers outnumbered losers by
203-72. /.

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Central bank makes little change to Circular 13

HCMC – The central bank on Monday evening issued a new circular amending Circular 13, but it made little changes to the highly-controversial legal document on safety ratio for banking operations.

In the new document coded Circular 19/2010/TT-NHNN, the State Bank of Vietnam allows banks to calculate 25% of non-term capital deposited by companies as mobilized funds, meaning this capital can be used to make loans. In Circular 13, such deposits cannot be used for loans.

In addition, capital borrowed from other credit institutions with a term of three months or more, and capital borrowed from foreign banks will also be added into mobilized funds for lending. The amount of loans underwritten by a bank will not be considered its own loans under the new amendments.

These changes will help increase the amount of mobilized funds of credit institutions, and is seen a quantitative easing measure by the central bank in response to complaints by banks over Circular 13 as a monetary tightening policy.

The new changes came forth following instructions from the Government, asking the central bank to rethink Circular 13 issued in May this year.

Last Friday, the Prime Minister sent a fresh document to the central bank asking the governor to adjust Circular 13 based on proposals of the National Financial Supervisory Commission. The central bank was also told to assess the real financial market situation, capital raising process of banks, and the Government’s policy on decreasing interest rates.

Apart from aforesaid changes, the new circular still sticks to the loans-to-deposit ratio of 80% for commercial banks, and 85% for non-banking credit institutions. Besides, the central bank also upholds its stance about the risk coefficient at 2.5 for stock and real estate loans, thus restricting the cash flow for these two sectors.

The capital adequacy ratio (CAR) will be also unchanged at 9%. The effective time of new regulations is kept unchanged at October 1 although lenders and the National Financial Supervisory Commission said that was too hurried.

Earlier, the National Financial Supervisory Commission submitted a proposal to the Prime Minister suggesting methods to amend Circular 13.

Le Xuan Nghia, vice chairman of the commission, in a seminar last week in HCMC showed opinion that the Circular 13 was even stricter than the new international safety standard of Basel III. He also objected regulations on CAR, loans-to-deposit, and risk coefficient for stock and real estate loans, as well as time to meet those requirements.

Nghia said given strict regulations on safety in banking operation, the desire of lowering deposit and lending rates of the Government would be far away from reality and enterprises would find it harder to access banks’ loans.

In early August, Vietnam Banks Association representing 14 credit institutions sent a nine-page proposal asking the central bank to amend many things in the Circular. However, the amended regulation meets just a small part of the demand of credit institutions.

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