Dollar borrowers still wary, dong rates high

HANOI - Potential US dollar borrowers in Vietnam remain gun shy about taking out greenback loans three weeks after the central bank devalued the dong, despite signs that lenders have ample supplies, bankers said on Monday.

Demand for dollars was expected to pick up later in 2010, they said, likely piling renewed pressure on the currency.

"There could be a light fever this year," a currency dealer in Ho Chi Minh City said, noting that most of the demand came from importers.

The central bank cut the dong exchange rate by around 2 percent against the dollar on Aug. 18, saying the move was to help control the trade gap. It was the third devaluation since last November.

While rates on dollar deposits and loans remained stable in the second half of August, according to central bank reports, Eximbank said it had raised its dollar deposit rate by 0.2 percentage points to 4.65 percent as of last Wednesday.

It was the lender's second rate increase for dollar deposits since Aug. 18, a move bankers said was taken to catch up with the rising demand for dollar loans.

Banks in Vietnam had built up their dollar holdings before the devaluation so they were now long the dollar, the HCMC-based dealer said.

"We have dollars now sitting idle but have not found borrowers because they are afraid of the exchange rate risk," a Hanoi-based domestic bank executive said.

Industry officials have suggested that banks increase dong loans between now and year-end to meet an annual credit growth target of 25 percent set by the central bank. Loans at the end of July grew nearly 13 percent against last December, the central bank has said.

Bankers, however, said it was tough to increase dong lending now, given relatively high rates banks were paying to depositors.

"It is difficult to lower interest rates because banks have to maintain their market share and protect depositors, but in doing so they cannot cut deposit rates," the Hanoi-based bank executive said.

Banks were paying between 11.0 percent and 11.2 percent for dong deposits with terms from three months to one year, and lending the domestic currency at 13-15.5 percent.

Market rates were above a government goal which envisaged banks cutting dong deposit rates to 10 percent and lending rates to 12 percent to spur an expansion of credit to support economic growth.

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Shares cement pre-holiday gains

The market built on its pre-holiday gains on Sept. 6, with the VN-Index rising an additional 1.58 percent to 466 points.

The volume of trades on the HCM Stock Exchange also continued to
revive, increasing by nearly 18 percent from last Wednesday's session to
55.1 million shares, with a value of 1.5 trillion VND (76.9 million
USD).

Profit-taking increased at
mid-session, causing the Index to recede from a high point of 470
during the session, said Dinh Thi My Hanh, a market analyst with a
Hanoi-based securities firm.

"However, purchasing power was maintained throughout the day," Hanh said.

Banking stocks performed well despite unfavourable news late last
week, including Fitch's downgrading of Vietcombank and Asia Commercial
Bank and the decline in Sacombank's net profit following an audit of its
financial statements.

Sacombank (STB)
shares still rose 1.85 percent on the day, while Eximbank (EIB) gained
an even more impressive 4.17 percent. Vietcombank (VCB), meanwhile,
declined by 1.04 percent.

Foreign investors
were net buyers of 2.2 million shares on the HCM City market,
worth a net of 70.6 billion VND (3.6 million USD).

On the Hanoi Stock Exchange, the HNX-Index gained 3.9 percent over
last Wednesday's close to end the session at 136.8 points. Volume on the
northern bourse receded by 2.8 percent, however, to just 36.3 million
shares, worth an anaemic 880.5 billion VND (45.1 million USD).

"The drop in volume is not worrying since sellers continue to hold onto stocks waiting for higher prices," Hanh said.

Foreign investors were net sellers on the Hanoi exchange by a
volume of only 20,000 shares, worth a net of just 1.3 billion VND.

Pham Thanh Thai Linh, head of analysis for Bao Viet Securities Co,
said that capital inflow this month would be carefully directed towards
fundamental investments and not as random as in the previous period,
thanks to the more settled state of the economy.

A survey by Bao Viet Securities also found that about 60 listed firms
were intending to spend about 7 trillion VND (359 million USD) on share
buybacks in the near future, Linh said.

Linh
pointed to three sectors for investment this month with the highest
potential – real estate, consumer goods and industrial services./.

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India urged to invest in drugs companies

Deputy Minister of Health Cao Minh Quang has encouraged Indian-owned
pharmaceutical enterprises to pour more investment in the local
pharmaceutical industry.

During on Sept. 6's seminar
on prospects of the industry, Quang said he had told the Indian
Business Chamber in Vietnam (INCHAM) that Indian companies had provided
drugs of high quality, safety and efficacy at reasonable prices in
Vietnam .

"The Ministry of Health recognises the
efforts made by foreign investors in the development of the
pharmaceutical sector and will try its best to create a favourable and
equitable business environment for INCHAM members who invest in
Vietnam ," Quang said.

The ministry is committed to
continue increasing transparency and accountability, and will reform
administrative procedures to smooth the way forward for enterprises,
according to Quang.

The ministry's goal is to
develop the pharmaceutical sector on many levels, including investment,
integration with the world market, and creation of new policies and laws
governing the industry.

According to the ministry,
128 Indian enterprises among 545 foreign similar enterprises have been
licensed to work in the pharmaceutical industry, accounting for 23.5
percent, the highest ranking.

The number of valid
registrations granted to Indian drugs is 4507, accounting for 37.8
percent, the highest level. Drugs from the Republic of Korea rank
second, 19.23 percent.

India is an emerging
pharmaceutical market in the Asia-Pacific region with an impressive
growth rate of 13 percent per year.

At 193 million
USD in export turnover to Vietnam , India , the world's third-largest
producer of pharmaceuticals, was the largest pharmaceutical exporter to
Vietnam in 2009.

Abhay Thakur, consul general of
India in HCM City , said India 's industry had average annual
exports of 8.5 billion USD.

The 21 billion USD Indian pharma industry was small in comparison to the global market, he added.

" Vietnam can increasingly look towards India as a source for
affordable medicines and to solve concerns about increasing healthcare
costs," he said./.

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Vinamilk joins Forbes list of best firms

Forbes magazine has added Vinamilk to its list of Asia's 200 Best Under A
Billion, making it the first Vietnamese company to join the US
publication's prestigious list.

Asia 's 200 Best
Under A Billion highlights the 200 top-performing small- and mid-sized
companies with annual revenue under 1 billion USD, with the list
focusing on profitability, growth, modest indebtedness and future
prospects.

Vinamilk ranked 31st in market value on
the list, with equity of 1.56 billion USD. The company's sales reached
575 million USD in the most recent 12-month period, putting it in 16th
place.

"The magazine's recoginisation will help
market our trademark worldwide, as well as peg our performance to
international levels," said Vinamilk chairwoman Mai Kieu Lien.

Vinamilk (VNM) closed unchanged on Sept. 6 at 88,500 VND per share.

The Forbes list showed Hong Kong companies predominating, with 71
listed. India grabbed 39 spots, up from only 20 last year, while
only two Japanese companies made the list, down from 24 in 2009./.

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Dairy firms push up prices while they can

Dairy consumers have been angered as some producers jump to increase
their prices before a new pricing law takes effect next month.

Under Circular No 122 that applies from October 1, dairy firms must
register the price of milk for infants under six with the Ministry of
Finance's Price Management Department or the provincial departments of
finance. The agreed price would be calculated from the cost of materials
and production.

Since the end of last month, some
milk brands have increased prices by as much as 10 percent to get in
before the new law that aims to stabilise the price of dehydrated
children's milk and prevent unreasonable price hikes, Lao Dong (Labour)
reports.

For instance, Abbot has adjusted prices on three of its products by 7 percent.

Anmum brand put its price up by 10 percent a few days ago. The price
of Abbot's Ensure Gold for adults has jumped by 8 percent to 470,000 VND
(24.7 USD) each 900g tin.

Milk shops on Nguyen
Thong Street , district 3, said within a week Abbot's Pediasure brand
would also have a price adjustment.

Nguyen Thi Hanh,
general director of Sai Gon Co.op, said among the dozens of imported
powered milk brands, only Mead Johnson had made a commitment not to
boost prices.

For domestic dairy firms, only Hancofood has confirmed not to alter its price tag.

The dairy firms blamed the price increases on high production costs
brought on by higher material costs and the changed USD/VND exchange
rate.

Experts said, however, that dairy firms spent
too much on advertising and sales commissions and passed the added cost
to the consumers.

A woman shopping for milk, Thuy
Oanh, on Nguyen Du street , Go Vap District was concerned that the
circular only applied to powdered milk for six-year-olds so she expected
price increases for milk for pregnant women and the elderly.

Apart from the regulations, the Consumer Right Protection Association
needs to coordinate with retailers and boycott milk brands that always
increase their prices./.

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School privatisation ‘slow'

Though HCM City leads the country in privatising education, it
needs to do much to speed up the process at all levels of education and
improve quality, officials have said.

A Government
resolution on pre-school education targets having 80 percent of nursery
schools for children aged below three and 70 percent of kindergartens
for children aged up to five privately owned by the end of this year.

The city has only crossed the halfway mark yet but is already facing problems in monitoring their quality.

However, Tran Thi Ngoc Anh, head of the People's Council's Culture and
Social Affairs Division, said around 50 percent was a reasonable number
in the current situation. If this rate increased now, facilities and
teaching staff would fall below required standards, affecting the
schools' quality, she told Sai Gon Giai Phong (Liberated Sai Gon)
newspaper without offering an explanation.

Nguyen Thi Kim
Thanh, head of the city Department of Education and Training's
Pre-school Education Division, said it was a contradiction that private
pre-education schools have helped reduce the overload at public schools
but have got no tax breaks.

At the high school level, the
quality of students admitted to private schools remains a concern in the
absence of entrance exams unlike at public schools.

The
fees at private schools, many times higher than at public schools, are
the biggest obstacle to privatising education since poor students can
hardly afford them.

The process of privatisation has,
however, widened the choice of schools for children from high-income
families. Many quality private schools at all levels have been set up,
some even of international standards, but they are affordable only for
wealthy children.

Experts say privatising education has
not helped reduce poor students' expenses for studies as expected though
the city has exempted fees for them since tuition fees account for only
a small part of the costs. They also call on authorities to review the
working of self-financing public schools since they collect higher fees
than other public schools./.

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Vietnam 2010 inflation may stay below 7 pct

HANOI - Vietnam's inflation rate this year may stay below 7 percent, below earlier government and World Bank forecasts, state-run newspaper quoted a government minister on Tuesday as saying.

Industry and Trade Minister Vu Huy Hoang said keeping the annual inflation at below 7 percent was "fully feasible" if the industrial sector expands 13-14 percent a month between now and year-end, the Lao Dong newspaper reported.

With such monthly growth, the sector would make a significant contribution to Vietnam's economic growth, expected at between 6.5-6.7 percent this year, Hoang told a ministry meeting to review performance in the first eight months of 2010.

In May Prime Minister Nguyen Tan Dung raised the government's inflation target for this year to 8 percent from 7 percent, and said the central bank will increase liquidity in the economy by boosting money supply.

Forecasts released early this year by the Asian Development Bank placed Vietnam's 2010 inflation at 10 percent while the World Bank projected a 9 percent consumer price increase.

The monthly consumer price index in January-August rose an average 8.61 percent from a year ago, while annual inflation in August eased to 8.18 percent from 8.19 percent in July and 8.69 percent in June, government statistics show.

Last Wednesday a state media report quoted Nguyen Tien Thoa, head of the Finance Ministry-run Price Management Department, as saying full-year inflation could be as low as 7 percent.

Hoang urged businesses to pay more attention to expanding retail sales in order to stabilize domestic markets in the remaining months of this year and avoid unexpected price changes caused by intermediaries, Lao Dong said.

Experts said a central bank devaluation of the dong last month did not affect the country's consumer price index.

On Aug 18 the central bank cut the dong exchange rate by around 2 percent against the dollar, saying the move was to help control the trade gap.

The Vietnamese government has also projected inflation next year at around 7 percent and the economic growth at 7.5 percent.

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