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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Japan mulls Asia-Pacific free trade talks

TOKYO - Japan is considering joining negotiations for a free trade partnership among Asia-Pacific nations in a bid to bolster its ailing economy, the foreign minister said Thursday.

Foreign Minister Seiji Maehara said the Trans-Pacific Partnership (TPP) concept, including Japan's key ally United States, may help boost Japan's efforts to conclude free trade deals to increase exports.

"The Trans-Pacific Partnership Agreement stands as our promising framework for economic integration in the Asia-Pacific region," Maehara said in an address to a Japan-US business conference in Tokyo.

"I'm fully committed to making the greatest possible efforts to promote Japan's (free trade agreement) and (economic partnership agreement) policies, including looking into Japan's participation in TPP negotiations," he said.

Washington has said it would enter TPP talks, viewing such a deal as a means to advance US economic interests with fast-growing Asia.

Australia, Brunei, Chile, New Zealand, Malaysia, Peru, Singapore, and Vietnam have also said they will join the talks.

Japan has lagged behind other Asian countries -- such as South Korea which Wednesday agreed a pact with the European Union -- in sealing free trade deals.

Former Japanese prime minister Yukio Hatoyama proposed building an East Asian community similar to the EU through economic integration, but the idea evaporated after his resignation in May.

Maehara, who has argued for a stronger Japan-US security alliance, welcomed further American involvement in Asia through forums such as the Asia-Pacific Economic Cooperation (APEC), which Japan hosts this year.

"I believe the active engagement of the United States in this region is an indispensable element for the peace and prosperity in the region," he said.

"I'm greatly encouraged by these signs of increased US commitment to the region," Maehara said.

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Dollar stays weak as it hits new 15-year yen low

A money dealer calls an order at a foreign exchange market in Tokyo.

Photo: AFP

TOKYO - The dollar stayed weak against the yen in Asia on Thursday after it hit a new 15-year low amid expectations of additional monetary easing by the US Federal Reserve, dealers said.

The dollar fetched 82.87 yen in Tokyo trade, close to a new 15-year low of 82.75 yen hit briefly in New York on Wednesday and near the level at which Japan carried out its first intervention since 2004 in September.

The euro was trading at 1.3930, hardly changed from 1.3928 in New York late Wednesday. It slipped to 115.39 yen from 115.58.

The greenback also fell to 29.88 Thai baht from 29.94 Wednesday, after Thailand's currency strengthened beyond 30 baht to the dollar for the first time in more than 13 years.

The unit, which has appreciated around 10 percent this year, roared past the psychologically important level, fanning concerns over the key export sector.

"The basic trend is dollar selling on the expected credit easing... The market is now sensitive to any negative news on the US economy," said Yasuyuki Takeuchi, dealer at Mitsubishi UFJ Trust and Banking.

The dollar came under new pressure in New York Wednesday after a report from payrolls firm ADP showed an unexpected drop in private sector jobs in September, highlighting concerns about the lagging economic recovery.

The data fuelled concerns that a closely watched government survey on non-farm payrolls for September due Friday may also indicate weakness.

The markets increasingly expect the US Federal Reserve to pump more money into the system to boost the flagging economy, even if doing so weakens the dollar and risks stoking inflation.

The dollar resisted further falls from the low hit in New York on speculation of further Japanese intervention, but some players believe Tokyo cannot move before a Group of Seven (G7) meeting starting Friday, dealers said.

"Some players are feeling safe (about pushing the dollar lower) as they believe Japan's intervention would at best be a solo move" with other countries also wanting to keep their currencies low to promote exports, Takeuchi said.

Finance ministers and central bank governors from the G7 economic powers are to hold two-day talks in Washington starting Friday.

Satoshi Tate, senior dealer at Mizuho Corporate Bank, told Dow Jones Newswires earlier that the dollar may fall as low as to 82.30 later Thursday.

If Japan intervenes, the dollar may rise to 85.50 but otherwise the upside would be limited around 83.50 Thursday, he said.

The dollar was mixed against other Asian currencies.

It fell to 1,115.40 South Korean won from 1,119.00, to 1.3074 Singaporean dollars from 1.3097 and to 43.46 Philippine pesos from 43.50.

The dollar firmed to 30.76 Taiwan dollars from 30.74 and to 8,922.50 Indonesian rupiah from 8,920.00.

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Heritage site aims to lure investment from South Korea

Thua Thien-Hue province, where the Hue Imperial City is located, has been given a promise from South Korea Ambassador to encourage investors to come.

The Korean diplomat, Park Suk Hwan, told the provincial People’s Committee Chairman, Nguyen Van Cao, during their meeting in the central region province on Wednesday, that he would promote the province’s strengths and potential among Korea business circles, to encourage them to invest.

Thua Thien-Hue is home to Hue Imperial City which has been recognized as a world cultural heritage site by the UN Educational, Social and Cultural Organization (UNESCO).

Cao reported that the province has granted 11 licenses for investment to businesses from the country, capitalized at some $560 million.

Most of their projects are in the hospitality industry, services, and construction and investment in technical infrastructure for industrial zones.

In addition to Foreign Direct Investment, the province has received the Korea’s aid in Official Development Assistance (ODA) for the construction of a 500-bed hospital, capitalized at $20 million.

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Vietnam’s largest industrial gas plant operational

An industrial gas plant with capacity of 8,500 N cubic meters per hour, the largest of its kind in Vietnam, was Wednesday put into operation at the Hoa Phat Steel Complex in the northern Hai Duong Province by the Messer Hai Phong Industrial Gas Co.

With an investment of US$20 million, the plan is capable of producing 300 tons of oxygen and 510 tons of nitrogen a day.

Additionally, the company built a liquefied petroleum gas plant, providing 100 tons of liquefied oxygen and nitrogen and 10 tons of liquefied argon a day.

Apart from serving the Hoa Phat Steel Complex, the plant will supply these products to the industrial gas markets in the north and central regions.

The Germany-based Messer Group has been operating over 13 years in Vietnam with two companies – Messer Hai Phong Industrial Gas Co. and Messer Vietnam Industrial Gas Co.

It is leading in gas supply and related engineering service in the Southeast Asian country.

In addition to the plant in Hai Duong, Messer Group invested in building filling stations in the southern provinces of Ba Ria-Vung Tau and Binh Duong and the northern city of Hai Phong.

It is expected to inject over $50 million in industrial gas production projects in Vietnam in the coming years.

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Domestic gold prices set new record

Domestic gold prices Wednesday soared to a new record of VND33 million per tael (US$1,690), an increase of VND1.4 million ($72) per tael over Tuesday's price, as speculators created a run on gold shops.

A tael is equivalent to 1.2 ounces.

The gold-selling districts in Ha Noi and Ho Chi Minh City were thronged with people and saw prices change at least four times in the morning, with Sai Gon Jewelry Co (SJC), Sacombank Jewelry Co, Bao Tin Minh Chau, Agribank Jewelry Co and Phu Nhuan Jewelry Co quoting buy/sell prices at VND32.85/33 million.

Domestic gold prices have increased by over 24.4 per cent since January, when prices stood at about VND26.5 million ($1,360).

Sacombank Jewelry general director Nguyen Ngoc Que Chi said yesterday's rush of buyers was due to a large number of speculators who had bought futures contracts in prior months and now sought to acquire gold before the price shot up further, putting a run on the available supply of the precious metal.

SJC's Ha Noi director, Luu Quang Dien, agreed, adding, "Many big trades are made by phone and the supply is limited, so the company has to select familiar customers to whom to sell."

The increase made domestic gold price be VND1 million ($51.28) higher than global gold price, which ignites concerns involving gold smuggling to take profits. Domestic price is normally just VND200,000-300,000 higher than global price.

Rumors were rife on the gold market last week that supplies were falling short of demand and that gold prices would continue to set new record highs, so State Bank of Viet Nam Governor Nguyen Van Giau attempted to counter the rumors and blamed any rises in prices on speculation rather than a gold shortage.

"With this kind of sensitive item, our policy is not to completely ban gold imports, but gold companies are not permitted to import any volume they want," Giau said.

"Despite the shortage of gold at this time, I don't think the State Bank of Viet Nam will allow enterprises to import more because of foreign exchange rates and inflation," commented the head of a jewelry company who asked to remain unnamed.

On the global market yesterday, spot gold rose as high as $1,349.80 per ounce, its eighth record in the past two weeks.

The US dollar on black market yesterday also rose by VND170 to VND19,750-19,850 while bank exchange rates remained unchanged at VND19,500 per dollar.

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Poor fuel management costs millions

Poor fuel forecasting and lack of communication had caused Vietnam to spend valuable foreign currency on importing petrol while domestic petrol was in oversupply, the Ministry of Industry and Trade said this week.

It has also contributed to Vietnam National Petroleum Corporation (Petrolimex) losing US$41 million in exchange rates so far this year.

Deputy Minister Nguyen Cam Tu said only 9 out of 11 petrol enterprises had bought petrol produced by Dung Quat Oil Refinery this year, using only 30-40 percent of its production capacity.

Petrolimex, which accounted for 60 percent of the country's market share of petrol, had been expected to buy 28 percent of Dung Quat's output, but had only bought 19 percent.

Tu explained that the reason for the high imports was a shortfall last year when the new refinery had failed to reach its production target due to teething problems and as a result petrol traders had had to import petrol in order to ensure supply.

This year, traders had again signed contracts to import fuel, hedging against the same thing happening again at the refinery, but the plant had ironed out its problems.

Since August it had been producing to its design capacity, which was equal to 6.5 million tonnes a year, or 30 percent of the country's needs, exceeding its own yearly plan by 25 percent.

Thus while local production was up, local demand was down as domestic traders would suffer heavy losses if they cancelled their import contracts.

The differences in exchange rates had already caused Petrolimex a loss of VND800 billion ($41 million) since the beginning of the year.

To address the problem, PetroVietnam would plan and work with petrol traders to limit stockpiled petrol and restrict imports.

In the meantime, Petrolimex had targeted to double petrol consumption from the refinery in the next three months and six out of 11 petrol importers had sought to reduce their imports to 700,000cu. m.

To date, the plant had processed 4.98 million tonnes and sold 4.74 million tonnes; in particular 4,500 tonnes of aviation fuel Jet A1 fuel was sold to PB Singapore Petroleum Company.

The country had imported 7.84 million tonnes in the first nine months, or 67.6 percent of its forecast consumption for the year.

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