Vietnamese inflation quickened in September to 8.92 pct

Vietnamese inflation accelerated for the first time in six months as food and education costs rose, signaling the government may have less scope to push for lower lending rates to bolster the economy.

Consumer prices climbed 8.92 percent in September from a year earlier, compared with an 8.18 percent advance in August, according to figures released Friday by the General Statistics Office in Hanoi. The reading is the highest since May. Prices rose 1.31 percent in September from the previous month.

Prime Minister Nguyen Tan Dung’s government is targeting a 25 percent expansion in credit this year and 6.5 percent economic growth, even as inflation has held above its 8 percent goal for eight consecutive months. Today’s data may fan concerns that the drive to increase loans and a recent devaluation of the dong conflict with price stability.

The latest inflation figure is “surprisingly high, even though we had expected greater price pressures this month as the effect of the dong’s devaluation kicked in and world commodity prices rose,” Hai Pham, a Singapore-based analyst at Australia & New Zealand Banking Group Ltd., said in a note. “We are concerned about high inflation becoming more entrenched in the coming months.”

The State Bank of Vietnam weakened the dong’s reference exchange rate by 2 percent last month, citing the need to narrow the trade deficit.

‘Weak currency’

The dong traded at 19,490 per dollar at 1 p.m. in Hanoi from 19,099 before the devaluation was announced. The Ho Chi Minh City Stock Exchange’s VN Index fell 0.2 percent today to 449.71, and is down 9.1 percent this year.

“Vietnam’s expansionary fiscal and monetary policy are resulting in a weak currency and high inflation,” said Jonathan Pincus, a Ho Chi Minh City-based economist with the Vietnam Program at the Harvard Kennedy School. “Unless we see evidence of tighter policy, we would expect prices to continue to rise.”

The government has been urging commercial lenders to cut loan rates. The central bank said this month short-term lending rates in dong ranged from 12 percent to 15 percent, and that credit growth reached 16.3 percent in the first eight months of 2010 from the end of last year.

While the government is concerned that high lending rates could affect industrial activity, “premature” monetary loosening may cause a “deterioration” in the trade deficit and boost inflation, the International Monetary Fund said in a report this month.

Overall food prices gained 10.81 percent in September from a year earlier, while costs in a category including rice advanced 14.01 percent, today’s report showed. Education prices jumped 15.56 percent from a year ago, and surged 12.02 percent from August.

“The lofty rise in education” largely reflects an increase in tuition costs as well as back-to-school spending, Matt Hildebrandt, a Singapore-based economist at JPMorgan Chase & Co., said in a note.

Economic growth may reach 6.7 percent this year, exceeding the government’s target, Deputy Minister of Planning and Investment Cao Viet Sinh said on Sept. 17.

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Telecom firms top list of corporate tax payers

Telecom giants MobiFone and Viettel have headed the top ten list of Vietnamese companies with the highest corporate income tax payments from 2007 to 2009, news website VnExpress reported Friday.

MobiFone, run by state-owned Vietnam Posts and Telecommunications Group, paid a total corporate income tax of nearly VND6 trillion over the period, followed by military-run Viettel, the report said.

VnExpress said it was a surprise that the two telecom firms topped the list, instead of large banks or the state oil and gas group PetroVietnam.

“The results show that telecom was the most lucrative sector over the past three years,” the report said, noting that both MobiFone and Viettel posted an average growth rate of 70-80 percent a year despite the economic downturn.

Together the companies in the top ten list paid a combined VND25.8 trillion in taxes. PetroVietnam Gas, Vietcombank and PetroVietnam were other companies making up the top five.

The figures were compiled by Tax Magazine, run by the General Tax Bureau, and VnExpress said they were confirmed by an official of the bureau.

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Telecom firms top list of corporate tax payers

Telecom giants MobiFone and Viettel have headed the top ten list of Vietnamese companies with the highest corporate income tax payments from 2007 to 2009, news website VnExpress reported Friday.

MobiFone, run by state-owned Vietnam Posts and Telecommunications Group, paid a total corporate income tax of nearly VND6 trillion over the period, followed by military-run Viettel, the report said.

VnExpress said it was a surprise that the two telecom firms topped the list, instead of large banks or the state oil and gas group PetroVietnam.

“The results show that telecom was the most lucrative sector over the past three years,” the report said, noting that both MobiFone and Viettel posted an average growth rate of 70-80 percent a year despite the economic downturn.

Together the companies in the top ten list paid a combined VND25.8 trillion in taxes. PetroVietnam Gas, Vietcombank and PetroVietnam were other companies making up the top five.

The figures were compiled by Tax Magazine, run by the General Tax Bureau, and VnExpress said they were confirmed by an official of the bureau.

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AIG flags $2 bln pre-tax profit for AIA in 2010

Photo: Reuters

HONG KONG - AIA Group Ltd, the Asian life insurance business of American International Group Inc, will likely have a pre-tax operating profit of at least US$2 billion for the fiscal year ending on Nov. 30, 2010, AIG said on Saturday.

"We believe that, in the absence of unforeseen circumstances, and, on the bases and assumptions set forth below, our consolidated operating profit for the fiscal year ending 30 November 2010 is unlikely to be less than $2 billion," the statement said.

The bailed-out U.S. insurer plans to list AIA in Hong Kong and the initial public offering could raise about $15 billion, which would make it the biggest-ever insurance IPO and a record offering in Hong Kong.

The profit forecast comes ahead of pre-marketing of the IPO which kicks off on Monday to gauge demand for the offer. The roadshows will begin on Oct. 6, while the listing is scheduled for Oct. 29.

AIA's planned IPO comes after AIG tried unsuccessfully to sell its Asian business earlier this year to Britain's Prudential Plc for $35.5 billion. The British insurer had asked AIG to cut the price to $30.4 billion, but it was turned down, leading to the termination of the agreement.

Hong Kong-based AIA had about $1.84 billion in pretax operating profit in 2009, Prudential said in a March filing.

AIG, which is nearly 80 percent owned by the US government, is disposing of assets to repay taxpayers who committed $182.3 billion to prop up the insurer during the financial crisis.

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AIG flags $2 bln pre-tax profit for AIA in 2010

Photo: Reuters

HONG KONG - AIA Group Ltd, the Asian life insurance business of American International Group Inc, will likely have a pre-tax operating profit of at least US$2 billion for the fiscal year ending on Nov. 30, 2010, AIG said on Saturday.

"We believe that, in the absence of unforeseen circumstances, and, on the bases and assumptions set forth below, our consolidated operating profit for the fiscal year ending 30 November 2010 is unlikely to be less than $2 billion," the statement said.

The bailed-out U.S. insurer plans to list AIA in Hong Kong and the initial public offering could raise about $15 billion, which would make it the biggest-ever insurance IPO and a record offering in Hong Kong.

The profit forecast comes ahead of pre-marketing of the IPO which kicks off on Monday to gauge demand for the offer. The roadshows will begin on Oct. 6, while the listing is scheduled for Oct. 29.

AIA's planned IPO comes after AIG tried unsuccessfully to sell its Asian business earlier this year to Britain's Prudential Plc for $35.5 billion. The British insurer had asked AIG to cut the price to $30.4 billion, but it was turned down, leading to the termination of the agreement.

Hong Kong-based AIA had about $1.84 billion in pretax operating profit in 2009, Prudential said in a March filing.

AIG, which is nearly 80 percent owned by the US government, is disposing of assets to repay taxpayers who committed $182.3 billion to prop up the insurer during the financial crisis.

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North in deficit as south runs surplus

Hanoi's trade deficit reaches nearly US$10 billion, while Ho Chi Minh City reaps a trade surplus of about $300 million in the first nine months of this year, statistics offices in the two cities stated.

In Hanoi, the trade deficit almost doubles the export value, the statistics office reports, adding that in the first nine months of this year, the city is expected to earn an export revenue of $5.5 billion, a year-on-year increase of 19.5 percent.

Meanwhile, the import value rises by 18.2 percent to $15.5 billion.

In September alone, Hanoi's trade gap is predicted to hit $1.08 billion, up $70 million over August. Export revenue is expected to drop 0.3 percent against the previous month to $680 million, while import turnover is expected to rise 1.3 percent to $1.76 billion.

“It is easy to understand why Hanoi has a big trade gap. It is a large developing city with a high demand for machinery, equipment, accessories and materials for construction projects," said an official from the statistics office's trade section.

She, however, added that in the first nine months of the year, huge sums are spent on imported luxury goods such as cars, wine, cigarettes and interior furnishings.

The Hanoi Statistics Office earlier forecast that the capital would suffer a trade deficit of $13.8 billion in 2010, with exports earning just $7.6 billion and imports $21.4 billion.

From January to September 2010, HCMC's import turnover is estimated to reach nearly $15.5 billion, a year-on-year increase of 12.6 percent. Its export value is predicted to reach $15.8 billion, representing a year-on-year increase of just 1 percent.

In the coming months, export turnover should rise as market demand would typically rise in the last months of the year, the city's Statistics Office stated. Although HCMC experiences a trade surplus, the office reports that exporters are encountering persistent difficulties.

Officials said the price of raw materials is increasing, which would affect exporters' competitiveness. They also said the city is suffering a shortage of skilled workers and that some industries are facing material shortages, both of which are hitting exports.

In September alone, the city's export revenue month-on-month drops 9.7 percent to $1.7 billion.

Meanwhile, the decrease in gold and crude export volumes also contributed to the fall in the city's total export value, officials said.

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Personal gains drive profit mismatch

Auditors find listed firms in Vietnam overstating or underplaying profits to serve different agendas

Investors check stock prices at Orient Securities Corporation in Ho Chi Minh City. Experts said investors need to read financial reports of listed companies carefully before making a decision.

Inflated and deflated profit figures do not hold huge major surprises for auditors, but the extent of discrepancy discovered recently with several listed companies has raised doubts over the transparency and accuracy of financial reports in Vietnam.

Investors and economists said the gaps were not likely to be oversights, but deliberate actions with an agenda.

Sacombank’s net profit in the first six months was revised down 35.5 percent by auditors, from VND1.17 trillion (US$60 million) to VND755 billion ($38.7 million).

Profits reported by Vietinbank were also adjusted significantly to VND1.65 trillion ($84.6 million) from VND2.37 trillion ($121.6 million) after audit. The bank said it had not included salary payments and certain losses in its report, hence the gap.

Meanwhile, property developer Quoc Cuong Gia Lai was found to report less profits than it should have. The company posted a half-year profit of VND9.7 billion while the audited figure was VND86.2 billion.

While the company explained that it decided to leave more than VND76.5 billion earned by selling a project for the upcoming third quarter report, many investors were skeptical. Listed companies are required to report all information that can affect share prices.

Economist Le Dat Chi of the Ho Chi Minh City Economics University said discrepancies between audits and financial reports of companies could not be taken lightly as something “accidental”.

It’s unacceptable that a head accountant at a bank or a large company fails to complete a financial report properly, he said.

If there are discrepancies in the figures, it means businesses have their own agenda, Chi said. Some companies may want to “save” parts of their profits for a later announcement to attract investors while others do so for some insider trading scheme. Delaying the announcement can give managers and board members some time to purchase more shares before they rise.

“In a market that lacks transparency, it’s definitely possible to hide profits for personal interest,” he said.

Experts said while some insiders may benefit from financial disclosures, a number of shareholders can be negatively affected if they, for instance, decided to sell shares without knowing that the company had actually earned higher profits.

Vietnam began to require public companies to disclose their half-yearly financial reports this year.

These reports, however, are not treated like the annual reports. Auditors only use it to caution businesses about what does not seem right so that due corrections can be made by the end of the year.

Economist Nguyen Van Thuan, head of the financial and banking department at the HCMC Open University, said half-year financial reports follow less stringent procedures than year-end reports, making it easy for companies to hide part of their profits and losses.

However, if the hidden parts are too large, it means the company is not being honest with its shareholders, and this can affect its reputation, Thuan said.

He said while waiting for the authorities to tighten control over financial reports, investors should “protect themselves” by checking the reporting carefully and comparing recent and past figures. A sudden rise or fall must be justified properly, he said.

Investors can also avoid risks by “staying away from shares of companies that engage in inaccurate reporting or try to delay publicizing their reports,” he said.

Economist Nguyen Thi Loan of HCMC Banking University agreed that investors need to equip themselves with skills to read and understand financial reports and audit reports.

It’s also necessary to check the credibility of the auditing firms chosen by businesses, Loan said.

Financial reports provide information based on which investment decisions are made and thus their accuracy is really important. If businesses, for any purposes, try to either exaggerate or understate their profits, the State Securities Commission must take punitive measures, she added.

Nguyen Doan Hung, vice chairman of the State Securities Commission, said the commission would continue to oversee the disclosure of information on the stock market to protect investors.

Violators will be fined in order to maintain investor confidence and keep their interest, Hung said at a recent conference.

Chi believed the authorities should be stricter with dishonest companies.

“If businesses are allowed to report however they like with whatever discrepancy, even the righteous ones will report wrongly for their own benefits,” Chi said. “This is really dangerous for a young stock market like Vietnam.”

With September coming to an end, local businesses will soon announce their financial reports for the third quarter.

As the stock market is still sluggish, some listed companies will want to sharpen up their reports in order to drive their shares up, Chi said.

Investors should be cautious with these quarterly reports as they will not be audited, he warned.

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