Vietnam Dong Savings: Safest Investment Channel?

by lexie Thu Nov 10, 2011 12:38 pm

November 10, 2011

Vietnam Dong Savings: Safest Investment Channel?

Dong savings emerge as the safest investment option to investors with idle funds in the context of easing inflation while other investment channels become less attractive and more risky, the central bank said on its website on Nov 10.

Commercial banks currently offered interest rates on VND-denominated deposits at 14% p.a. for over 1 month terms. If the consumer price index (CPI) rises by less than 1% on-month, depositors can obviously earn positive real interest rates.

Vietnam’s CPI in October slowed down to 0.36% from September, the lowest level since July 2010, the General Statistics Office said on its website. Besides, the government revised downward the annual credit and money supply growth rates to 12-13%. Inflation is expected to be curbed at 18% in 2011.

Vietnam National Assembly or the Congress also passed its resolution and socio-economic plans for 2012 with CPI targets at lower than 10% with its top priorities of curbing inflation. As a result, dong savings can bring positive real earnings to depositors.

Other investment channels such as gold, foreign currency, stock market and real estate appear to be less attractive to investors.

The domestic gold prices were relatively stable with local gold premium hovering around VND200,000 to VND300,000/tael. With tight gold management regulations of the government, it is expected that the domestic gold price cannot soar unusually despite global gold rise forecasts. Vietnam’s gold fell to VND 46.1million/tael on Nov 10, down VND350,000 from the day before.

The dollar exchange rates were also stable with a narrower price gap between the official and free market. In addition, the interbank exchange rates were kept steady at VND20,803 per dollar. The central bank also issued a series of legal documents to tighten the forex market and commercial banks were reported to adjust down the dollar exchange rates. Experts commented that exchange rates will be kept stable within 1% band until year end.

The stock market currently lacks supportive information and negatively affected by the central bank’ policy to reduce outstanding credits in non-production sector to 16%. Trading value stayed low, discouraging investors. Vn-Idex will find it hard to achieve 485 points until year end as expected by securities companies.

Meanwhile, high borrowing costs, surplus supply and the fall in real estate credits are posing big challenges to the local real estate sector. Local developers were reported to cut sales prices or sell the projects wholesale in an attempt to repay due debts from banks. It is forecast that the whole residential property market would be under pressure until end-2012.

http://www.vietfinancenews.com/2011/11/vietnam-dong-savings-safest-investment.html