A review of Vietnam’s 2011 monetary market

[nhoclikestock]

Despite achievements in curbing inflation and macro-economic stabilization, the Vietnamese monetary market last year still remained unstable.

On February 11, 2011, the State Bank of Vietnam increased the dollar exchange rate from VND18,923 a dollar to VND20,693 a dollar, meaning the dong was devalued by 9.3 percent against the greenback.

The unofficial market then experienced a strong fluctuation, with the forex rate soaring to VND22,000 a dollar at certain times.

However, the foreign exchange market then developed in a more stable way, without considerable volatility, thanks to the central bank’s tightened credit policies, plus the restriction put on those eligible to borrow foreign currencies, and the increase of the country’s foreign reserves.

By the end of last year, credit in foreign currencies enjoyed a growth of 19 percent, while the figure for deposits was 8 percent, proving that the public still preferred the US dollar over the dong, according to Dau Tu Chung Khoan newspaper.

Specifically, with the central bank keeping the forex rate stable for two months and then repeatedly hiking it during the first half of October, many economic experts said the foreign exchange rate will be under pressure this year.

The forex rate cannot remain at the current rate should inflation remain high, and public confidence in the dong has yet to be restored, they said.

Interest rates remained high

The central bank last year succeeded in restricting the total means of payment growth to around 10 percent, and credit growth to 12 percent.

Specifically, VND credit growth stood at 10.2 percent, and foreign currency at 18.7 percent. Meanwhile, credit for the production sector rose by 15.7 percent, while credit for the non-production sector, including securities, real estate, and personal consumption, dropped by 20 percent.

In the first eight months of last year, lending and deposit interest rates for VND constantly remained high, with many credit institutions even defying the central bank’s regulation setting the deposit interest rate cap at 14 percent a year to offer depositors higher rates. Accordingly, these banks charged borrowers with exorbitant lending rates of up to 28 percent a year, driving them to production suspension, and even bankruptcy.

Figures show that nearly 50,000 businesses had to declare bankrupt, shut down production, or merge with others in 2011.

The central bank then strengthened their crackdowns on violators of the interest rate cap, and implemented measures to ease the lending rate burden to assist businesses. Since this enforcement, most of the commercial banks now strictly follow regulations to offer the deposit rate at the ceiling of 14 percent a year.

However, in the last months of the year, with certain bank still charging high lending interest rates, local businesses still had to suffer rates of 20 to 22 percent a year.

Meanwhile, some banks again breached the interest deposit rate cap, leaving the public wondering how lending rates could be reduced this year.

Bank restructuring

In the last months of 2011, many small banks faced alarming liquidity shortages, leading to the necessity of a restructuring of the banking system.

In early December, the first merger in the system was implemented, with three banks, Ficombank, TinNghiaBank, and Saigon Commercial Bank merging with each other.

However, insiders expressed concern that merging banks is not a simple task given the Vietnamese banking system situation, while they also expect the restructuring to be more transparent.

It is difficult for three small, weak banks to become a strong one after merging, they said, adding that the central bank should stay cautious while processing the restructuring.

A review of Vietnam

 

[nhoclikestock]

2011 was a stormy year of many “big guys”

Some “big guys” – the owners of securities companies once intended to “give up the games” in 2011 because of the “stock market crisis”, but many others could see opportunities in the difficulties.

Chair of the Board of Directors of the Saigon Securities Incorporated SSC Nguyen Duy Hung

The turnover of securities companies dropped dramatically as investors have fled from the stock market, while the stock prices have plummeted which has made the assets of many stock millionaires decrease accordingly.

The owner of a securities company, who has the highest ranking in the list of 500 richest stock millionaires released by VnExpress in 2011, is Chair of the Board of Directors of the Saigon Securities Incorporated SSC Nguyen Duy Hung.

Holding the shares of four enterprises – SSI, Hoang Anh Gia Lai (HAG), Trans-pacific Companyy (PAN) and the Vinh Son-Song Hinh thermopower plant (VSH), but most of Hung’s assets are at SSI (28.7 million shares).

Meanwhile, the profits of SSI, like other securities companies, dropped sharply in the current difficult conditions of the stock market (the company incurred the loss of 13 billion dong after tax in the first nine months of 2011). The SSI share price has dropped by 55 percent in the last 12 months.

The share price falls have led to the decrease of nearly 1300 billion dong worth of Hung’s assets. After the last trading session of 2011, the total stock assets of the “big guy” plunged to 443.5 billion dong, which has put him on the 22nd position in the list of the stock millionaires, a 12 grade fall from the last year.

Another “big guy” who also experienced many ups and downs in 2011 is the Chair of the Board of Director of Kim Long Securities Company Ha Hoai Nam. Ranking the 60th in the list of the richest stock millionaires, Nam’s stock assets have been halved to 135.6 billion dong.

Nam has become better known after he intended to leave the stock market in early 2011. However, the plan to “escape” from the brokerage service of Nam and managers of Kim Long Company failed because it did not receive the support from shareholders.

However, just several months later, a lot of other securities companies had to make the decision that they gave up the brokerage service because of the big difficulties of the market.

After the unsuccessful plan on shifting to other type of business, Kim Long has decided to “take up a defensive position” by depositing 2 trillion dong at banks to get interests.

The decision to make deposits at banks made by Nam and his colleagues has been hailed as a “wise move”. This has helped Kim Long become one of the few securities companies that made profits (it made a profit of 140 billion dong in the first nine months of 2011).

While many people plan to leave the stock market, the owner of Xuan Thanh Group – Nguyen Duc Thuy – decided to take full advantage of the stock price decreases to buy Vincom Securities Company in early April.

Thuy has renamed the securities company as Xuan Thanh Securities Company and has become one of the 200 richest stock millionaires, ranking on the 193rd position. He now holds the volume of shares worth 30.7 billion dong.

Thuy, who has been also very successful as a football boss, has also gained big achievements after jumping into the securities market. Xuan Thanh Securities Company, which once incurred the loss of six billion dong in the first quarter of 2011, made a profit of 7.3 billion dong in the second quarter and then 5.4 billion dong in the third quarter.

The list of 100 stock millionaires also includes the names of many other bosses of securities companies, such as the Chair of the Saigon-Hanoi Securities Company Do Quang Hien (64th), Member of the Board of Directors of KLS Pham Tan Huy Bang (92nd) and Nguyen Manh Hung, the brother of Nguyen Duy Hung (94th).

investment