Viet Nam Raises Its Benchmark Interest Rate to 12%

Saturday, May 17, 2008
Viet Nam will raise its benchmark interest rate, lifting the maximum return that commercial banks can offer depositors to 18% a year, the Southeast Asian nation's central bank said.
The State Bank of Viet Nam will increase the base rate to 12% from 8.75% on May 19, according to a statement released in Hanoi today. Under central bank regulations, banks cannot offer savers rates exceeding 150% of the base rate.
Viet Nam has sought to tame accelerating inflation by tightening credit and cutting the supply of money. Consumer prices that surged 21.4% in April, the most since at least 1992, and rate restrictions have hurt banks' ability to attract deposits.
``Today's move should help to ensure that banks have the mechanism available to them to mobilize more deposits,'' said Dominic Scriven, a director at Dragon Capital, a Ho Chi Minh City-based fund manager. ``That will help financial stability.''
The 12% cap on deposit rates before the rate rise has meant that real interest rates have been negative because of inflation, Scriven said. So-called real interest rates are returns paid on savings in excess of the inflation rate.
The State Bank of Viet Nam also said its discount rate will nearly double to 11% from 6%, while the refinance rate will be raised to 13% from 6%, according to the statement. The rates will also take effect on May 19, it said.
`Weren't Suitable'
``The rates haven't been changed since February and were not suitable with the market situation,'' Nguyen Van Giau, the central bank governor, said in a news conference today in Hanoi.
The central bank said on April 25 it didn't plan to increase its benchmark interest rate because month-on-month inflation showed recent policy measures were effective.
Viet Nam's bank lending rose 14.7% in the first four months, reaching almost half the 30% limit set by the central bank to reduce credit growth.
``Margins are decreasing with banks borrowing short at high interest rates and lending long, mostly at past lower rates,'' Vinacapital Investment Management Ltd., the Ho Chi Minh City- based manager of three U.K.-listed funds, said in a note this month posted on its Web site.
The amount commercial banks must set aside as reserves was raised in February to 11% for deposits of 12 months or less, from 10%. For dong and foreign currencies deposited for one year or more, the figure rose to 5% from 4%.
`Rising Risks'
Standard & Poor's Ratings Service this month cut its outlook on Viet Nam's credit rating to negative from stable, citing ``rising risks to macroeconomic stability from an overheating economy.''
``Given the unproven risk-management capability of domestic banks, an unexpectedly severe slowdown in economic growth could see sharply higher loan losses at many of these institutions,'' Standard & Poor's said in a May 2 report.
Viet Nam's Deputy Prime Minister Nguyen Sinh Hung said last month the government would reduce the 2008 economic growth target to 7% from a previous forecast of as much as 9%.
Gross domestic product growth slowed to 7.4% year- on-year in the first quarter. The economy expanded 8.5% in 2007, the fastest rate since 1996. (Bloomberg)

Eximbank approved to sell 25% stake to foreign investors

Saturday, May 17, 2008
The governor of the State Bank of Viet Nam has approved the Export-Import Commercial Joint Stock Bank (Eximbank) proposal to sell 25% stake to four foreign investors, the State Bank of Viet Nam (SBV) announced on its website.
Accordingly, Sumitomo Mitsui Banking Corporation (SMBC), Eximbank’s strategic investor, will buy 15% stake of Eximbank. Three other investors, VOF Investment Ltd. of Virgin Islands, Mirae Asset Exim Investment Ltd., a member of the Mirae Asset Group of the Republic of Korea and Mirae Asset Maps Opportunity Viet Nam Equity Balanced Fund 1 (OVEBF) will own 5%, 4.5% and 0.5% stake of the bank respectively.
Eximbank and SMBC signed an agreement on November 27 2007 in Tokyo in which Sumitomo Mitsui will purchase 15% of Eximbank shares worth US $225 million to become the strategic partner of Eximbank.
SMBC has pledged to support and co-operate with Eximbank in retail banking services, corporate banking services for Japanese firms operating in Viet Nam, T/F services, experience sharing in corporate governance, including risk management in conformity with international standards, etc.

From June 2, all Governments bonds be listed on HASTC

Saturday, May 17, 2008
From June 2, all government bonds listed on the Ho Chi Minh City Stock Exchange (HOSE) will be shifted to list on the Hanoi Securities Trading Centre (HaSTC).
This is under a decision dated May 16 by the State Securities Commission on shifting the listing of government bonds from Ho Chi Minh City Stock Exchange to Hanoi Securities Trading Centre.
According to the decision, the last trading day for government bonds listed on the southern bourse is May 28.
The move is to implement the project to build a special trading market for government bonds at the northern bourse approved by the Ministry of Finance in January 2008.

Stocks remain in free fall, but volumes up

Saturday, May 17, 2008
Ho Chi Minh City stocks closed the week Friday with yet another dismal day of trading after see-sawing for a while between positive and negative territories.
Panic selling at the opening caused the VN-Index of 154 listed companies to extend the weeklong fall.
But the trading volume rose in the first session to nearly 2.8 million shares, or equal to full-day volumes in recent days, as traders seemed to believe the market had bottomed out.
The high volumes helped the index regain ground somewhat in the next session, but heavy selling in the third and final session saw the VN-Index finally close at 460.04 points, or 6.63 points down.
The total trading volume topped eight million as 130 stocks lost.
Analyst Huy Nam told Thanh Nien that the recent narrowing of the daily trading band from 5% to 2% by the State Securities Commission (SSC) was the key factor behind the market’s fall.
“The cut prompted a huge investor withdrawal and drained the market of liquidity,” he said, suggesting the band should be widened again.
The band was narrowed to 1% on March 27 to halt a relentless slump in share prices.
The market regulator then increased it to 2% on the Ho Chi Minh Stock Exchange and 3% on the Hanoi Securities Trading Center on April 7.
A HCMC-based analyst, who wanted to remain unnamed, however, disagreed with Nam, saying the market had nosedived along with investor confidence.
He suggested that the regulator should calm investors’ panic by delaying imposition of capital gains tax or reducing brokers’ commission.
Foreigners still buying
As prices continued to fall, foreign investors continued to buy, pumping in VND26 billion ($1.6 million).
PetroVietnam Fertilizer and Chemicals, PetroVietnam Drilling and Well Services, Hoa Phat Group, dairy firm Vinamilk and Tan Tao Industrial Zone were among their favorite stocks.
The Hanoi market too continued to lose, with the HASTC-Index dropping 2.35 points, or 1.65%, to close at 139.74.
Of the 135 stocks listed on the market, 109 fell and just 14 rose.
Liquidity was partially restored as more than 4.4 million shares, four times the average volume in recent days, were traded.