Domestic firms gain confidence in business outlook: survey

Domestic firms are pinning high hope on business outlook since Vietnam’s business confidence index (BCI) bounded back in the third quarter, up three points over the last quarter and 37 points against the third quarter in 2008.

The survey, conducted by Vietnam World Vest Base Financial Intelligence Services and PetroVietnam Finance Investment and Consultancy Co, was carried out on 262 companies in 11 domestic key industries, of which over 70 percent were medium and small-sized businesses.

The result signaled a recovery and improved investment potential for Vietnam’s economy in the near future, compared with the first six months of the year.

Over 70 percent of them believed that Vietnam's economy was better than a year ago and nearly 73 percent of businesses believe their profits will rise in the next 12 months. The number of businesses who were optimistic about the prospects for profit growth was around 10.8 percent in the first quarter’s BCI survey.

About 77.23 percent of surveyed enterprises surveyed said that the general economy of Vietnam is now better than the previous 12 months.

When asked to make a forecast about the country’s economy in the next 12 months, 84.35 percent of those interviewed said the economy would be better and none believed they would see a worse economy than during the past six months.

Compared with the second quarter, the number of optimistic businesses increased by 7.19 percent and that of pessimistic ones decreased by 1.85 percent.

As many as 60 percent would increase their employment and invest more in fixed assets while 72 percent believed that their revenues and profits would rise in the next 12 months, the survey said.

But the number of businesses who were worried about revenues and profits were up 0.06 percent and 1.96 percent over the last quarter.

The result also showed that many domestic businesses were still concerned about the adverse effects to their business operations of inflation and fluctuations in the exchange rate between the US dollar and Vietnamese dong.

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US dollar drops on Singapore action, gold climbs

HONG KONG - The US dollar fell broadly to a 10-month low on Thursday after Singapore unexpectedly tightened policy by letting its currency strengthen, lifting Asian stocks and copper to two-year peaks and gold to a record high.

Major European stocks opened higher, mirroring gains in Asia, with the FTSEEurofirst 300 up 0.3 percent in early trade to 1,089.22.

The move by Singapore, viewed by analysts as a preemptive strike before policy loosening by the US Federal Reserve sends more investment to Asia, underscored the global currency tensions that have sparked a war of words among some policymakers.

Indeed, the dollar's decline to near parity against the Australian dollar and a 15-year low against the yen were fresh reminders about the US currency's dim prospects on expectations the Fed will soon have to flood the financial system with more newly printed money, or quantitative easing.

"One thing that people underestimate is that the US will do everything in its power to reflate the economy. It's not just a question of QE2, but if required they will do QE3, QE4 etc," Pranay Gupta, chief investment officer for ING Investment Management Asia Pacific, said.

"Like it or not, loose monetary policy is here to stay and money flow coming out of the US and into Asia is here to stay," said Gupta, who oversees $85 billion in assets.

With the next Fed policy meeting and the next G20 summit still weeks away, the well-worn trade of selling dollars to buy emerging market stocks, commodities and longer-term bonds was still in play.

Singapore's monetary authority surprised traders by tightening policy, which it manages through a secret band in which its currency is allowed to trade. The news prompted the US dollar to fall broadly, pushing up the euro to an eight-month high around $1.4095.

"It is a pre-emptive move," Chua Hak Bin, an economist with Bank of America Merrill Lynch, said of the Singapore decision.

"Another Fed package would have brought interest rates even lower and driven more capital flows into Singapore."

The US dollar index, which measures the dollar's performance against six other major currencies, slid 0.7 percent to the lowest since December 2009.

The Australian dollar was at US$0.9963, up 0.7 percent on the day and within sight of parity, something not seen since 1982.

Australia's currency, which has benefited from having relatively high yields among G10 currencies, has risen 9.3 percent since September.

The falling US dollar lifted gold prices 0.7 percent to $1,380.45 an ounce, a record high, and copper traded on the London Metal Exchange up 1.5 percent to $8,487.00 a ton, its highest since July 2008.

Climbing commodity prices have been a boon for resource-related shares, and the materials sector gave the biggest lift to MSCI's index of Asia Pacific stocks outside Japan.

The index was up 1.5 percent to the highest since June 2008, having risen 14.5 percent since September, outpacing the 11 percent rise in the all-country world index.

Japan's Nikkei share average led gainers in Asia, up 2 percent. Resource stocks led the rise, although analysts said the yen's strength would limit the market's upside potential.

Gains in oil-related stocks helped to push up Hong Kong's Hang Seng index 1.1 percent to a 28-month intra-day high.

China Petroleum & Chemical Corp (Sinopec) stock rose 1.2 percent after analysts at Bank of America Merrill Lynch added the stock to its Asia Pacific Focus 1 portfolio, a list of its highest conviction buy-rated stocks.

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Indexes rebound on low volume

The VN-Index gained 0.74 percent to close on Oct. 13 session at 457.7 points.

Blue chips had an impact, with Bao Viet Holding (BVH) up 4.20 percent,
VietinBank (CTG) 0.53 percent, the Corporation for Financing and
Promoting Technology (FPT) 1.40 percent, Hoa Sen Group (HSG) 0.1 percent
and the most daily active stock, Ocean Group (OGC), 2.03 percent,
despite a meagre volume of 1.2 million shares.

Meanwhile, the trading volume of the market stayed low at 24.2 million
shares worth 637.1 billion VND (32.7 million USD).

BVH was the highlight on Oct. 13. Foreigners bought 151,890 BVH shares, accounting for 85 percent of the share's trading.

The HNX-Index on the Hanoi Stock Exchange inched up 0.48 percent to
120.39 points, on a total volume of 16.9 million shares.

Trading remained lacklustre with only 370.1 billion VND (18.9 million
USD) changing hands. PetroVietnam Construction (PVX) saw the biggest
volume traded, with 2.05 million shares.

The
Government late on Oct. 12 asked the State Bank to draw up a plan for
commercial banks that would tighten money circulation, which would help
ease inflation pressure and stabilise the economy by the end of the
year./.

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Air travel surges 20 percent in 9 months

The aviation market in the first nine months saw a year-on-year increase
of more than 20 percent in the number of passengers, estimated the
Civil Aviation Administration of Vietnam.

The administration estimated that roughly 15 million passengers went
through the country's airports in the first nine months of this year, of
which Vietnam Airlines, Jetstar Pacific and Vietnam Air Service Co
(Vasco) accounted for more than 11 million.

In the
first nine months, the administration also estimated that roughly
340,000 tonnes of goods were transported via air, an increase of 36
percent over the same period last year.

Industry
insiders forecast the country's aviation market in the last quarter will
continue to surge due to an increased number of flights licensed by the
aviation authorities for foreign airlines including Turkish Airlines,
Poland 's LOT and Qatar Airways.

Vo Huy Cuong,
director of the administration's Air Transport Department, attributed
the steady growth to the continuing strong expansion of the domestic
segment backed by flagship carrier Vietnam Airlines.

Cuong said that Vietnam Airlines and its subsidiary Vasco still account
for the lion's share of around 80 percent of the domestic market while
the rest is covered by Jetstar Pacific.

With the
introduction of Air Mekong and Blue Sky Air recently, which lifts the
number of operational airlines in the country to nine, it is expected
that the competition in the domestic aviation market will increase.

The administration expects that the country's overall aviation market
will grow roughly 20 percent in 2010, higher than the 14 percent figure
it projected earlier this year, thanks to more domestic services and a
significant increase in the number of international visitors.

The administration's statistics showed that roughly 26.2 million
passengers and 445,800 tonnes of cargo were transported by air last
year, four times higher than in 2000./.

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State to develop fertiliser plan

The control of fertiliser production and distribution systems, to be
approved this month, is expected to benefit both farmers and businesses.

Speaking at a conference on Oct. 12 outlining fertiliser production
development for the next 10 years, the Deputy Minister of Industry and
Trade (MIT), Nguyen Hai Nam , said fertiliser is a strategic product
that helps ensure national food security.

Although
the Government has cooperated closely with the Vietnam Fertiliser
Association in planning fertiliser production and quality, farmers are
still faced with shortages and "price fever" when demand soars before
planting, said Phung Ha, head of MIT's Department of Chemicals.

Secretary of the association Nguyen Hac Thuy said there has been no
clear development strategy for the fertiliser industry and that demand
is unpredictable.

According to the association,
farmers lose 1.2 trillion VND (60 million USD) each year due to the
low-quality and fake fertiliser products.

This
year, the nation's demand for fertiliser is forecast to reach 9.1
million tonnes, but domestic production can satisfy only 60 percent of
this.

A report from An Giang University's Economics
Faculty claims farmers have to buy fertilisers at prices 30-40 percent
higher than those offered by producers. They often have to buy
low-quality products from small firms because State authorities can only
supervise large fertiliser companies.

Ha said one
of the reasons fertiliser prices are often unstable was that
distribution systems develop spontaneously. Products come to farmers
through many middlemen.

Ha said when planning is
approved, fertiliser distribution systems will develop based on the
establishment of agricultural economic areas, demand in each area, the
characteristics of local economic activities and farmers' purchasing
practices.

Under the plan, from now to 2015,
fertiliser distribution centres will be set up in Lao Cai, Phu Tho, Bac
Giang, Hai Duong, Ninh Binh, Nghe An, Da Nang, Binh Dinh, Dac Lac, Lam
Dong, Long An, An Giang, Can Tho and Kien Giang.

Ha
said to make planning more efficient, State agencies should change
their ways of management. He added that producers must be granted
certificates setting out conditions for business required by the
Ministry of Industry and Trade. Otherwise they should not be allowed to
trade.

He said this would help weed out small-scale companies using old technology and those producing low-quality fertiliser./.

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IFC eyes An Binh Bank investment

The International Finance Corporation (IFC) plans to forge a long term partnership with An Binh Bank (ABB).

IFC, a financial arm of the World Bank, will provide a long term 75 million USDloan to the bank.

The IFC is considering investing up to 50 million USD in the bank by
purchasing senior and convertible debt instruments. The investment is
expected to help the bank maintain a healthy Capital Adequacy Ratio
(CAR), while improving its loan portfolio.

A reliable
source from An Binh Bank said that the two sides were in the process of
negotiating the 50 million USD investment deal.

The
corporation also plans to provide a 25 million USD loan to the bank to
help support climate change initiatives and enhance financing for
eligible projects in the Energy Efficiency (EE) and Cleaner Production
(CP) sectors. These projects are congruent with the IFC's financial
strategy for Vietnam and are in line with the WB's efforts to use
market mechanisms to mitigate climate change's impacts in Vietnam .

IFC has been working with An Binh Bank on several projects to support
small and medium sized enterprises (SMEs) and to finance enterprises
that are committed to protecting the environment and conserving energy.
IFC also promises to help An Binh Bank to improve its technological
infrastructure and corporate governance.

By the end of
last month, the bank had total assets worth 36.26 trillion VND (1.85
billion USD) and a total outstanding loan worth 17.95 trillion VND
(920.51 million USD). The bank earned 546.2 billion VND (28 million USD)
in pre-tax profit during the first nine months of the year, a 94.1
percent increase against the same period last year.

An
Binh Bank has 3.48 trillion VND (178.46 million USD) in charter capital,
and the financial institute plans to increase its charter capital to
3.83 trillion VND (196.41 million USD) by the year's end.

Last week the IFC bought 10 percent stake, worth 190 million USD, in Vietinbank./.

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Vietnam steps up drive to tamp down inflation

HANOI - Vietnam is redoubling its efforts to tamp down inflation in the final months of 2010 amid concerns that rising prices will add to the downward pressure on the dong and get uncomfortably high ahead of a big political meeting.

A Reuters poll published on Thursday showed economists in Vietnam and outside expect consumer prices to rise 8.5 percent this year, exceeding a government target of 8 percent. They also saw the dong weakening into next year.

With end-of-year inflation pressures set to build, Prime Minister Nguyen Tan Dung issued a directive this week for government ministries and provincial authorities to strengthen measures to stabilize prices in the fourth quarter.

The finance ministry, meanwhile, took another step last week towards much-criticized price controls by naming 150 companies, including several foreign firms, that will be required to register new prices.

Annual inflation in September jumped to 8.92 percent from 8.18 percent in August, stoking fears of a return to high inflation, even though economists mostly attributed it to one-off factors.

"Obviously the action of the prime minister and the ministry of finance is reflecting at least partially the huge concern and the reaction of the population to the very high consumer price index in September, and expectations that it will continue to rise in October," said former government adviser Le Dang Doanh.

Dragon Capital, a Vietnam fund management firm, said in a report this week September's figure was "a bit unsettling", prompting it to raise its full-year CPI forecast to 8.9 percent from 7.8 percent.

"Inflation needs to be handled because it is a key driver of currency weakness -- the other one being the trade deficit, which is probably flatlining now, but is still big," it said.

Limited effect

The dong has slipped some 2.3 percent on unofficial markets since Aug. 18 when the central bank devalued the currency for the third time since last November.

The currency has come under renewed pressure, in part due to the meteoric rise in world and domestic gold prices, but confidence in the dong is anyway chronically weak in Vietnam.

With third-quarter gross domestic product growth at a comfortable 7.16 percent from a year earlier, on target to meet the government's goal of 6.5 percent for 2010, economists say the authorities have shifted their focus to inflation.

But Jonathan Pincus, head of the Fulbright Economics Teaching Program in Ho Chi Minh City and a former U.N. economist, said the government was taking the wrong approach.

"Reducing the fiscal deficit and tightening monetary policy are necessary now to take pressure off the currency in the short term and reduce expectations of inflation," he said.

"Administrative measures will not achieve these goals, since the problem is not, as the government often assumes, high levels of profit. Rather, profits are squeezed because input and financing costs are rising for domestic firms, while the scope for price increases is limited by the availability of cheap imports."

Still, Doanh said the government's efforts were understandable.

"It's very sensitive," he said. "We are approaching the Lunar New Year and approaching the Party Congress. If on the brink of the Party Congress the consumer price index is accelerating, I think it's a big problem."

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