Vietnam: Currency rate spike, OMO withdrawal on dong, WB funding, New Security Rules, Liquidity improvement and MORE!

by **ADMIN** Wed Jun 29, 2011 12:52 am

Currency rates to spike in late 2011

Financial experts have warned the dong-dollar exchange rate may hike in late 2011 on the back of soaring local demand.

The dong-dollar exchange rate in the unofficial market and that set by central bank is now in a tight range. Accordingly, the inter-bank exchange rate continues to be stable at around VND20,620 per dollar, and the actual rates at some local state-owned and joint stock commercial banks currently fluctuate from VND20,530 to VND20,640 per dollar.

The exchange rate is forecast to remain stable at least in the upcoming period. However, the State Bank statistics show that the banking sector saw 22.2 per cent growth in dollar outstanding loans while dollar deposits just hiked 8.9 per cent in 2011 by June 10.

Financial experts said serious imbalance in dollar lending and deposits in the first half of the year would be a significant threat to future dollar supply and potentially pressurise the exchange rate when dollar credit contracts come to maturity by the year’s end.

Ho Chi Minh City Open University’s Accounting-Finance-Banking Faculty head Nguyen Van Thuan assumed central bank policies had positive impacts on the foreign exchange market.

“However, it takes time for the dollar lending amounts to gradually go down since it had earlier shot to a high level,” Thuan said.

In fact, dollar credit currently accounts for around 19-23 per cent of the banking sector’s total outstanding loans.

“Vietnam status as a country facing a high trade deficit is still the fact of life and this will pressurise the dollar supply, especially on the back of current rising trade gap,” a National Financial Monetary Advisory Council member Dr. Tran Du Lich said.

From early 2011 until June 10, the State Bank reportedly bought around $3 billion to consolidate the national foreign reserves.

State Bank governor Nguyen Van Giau recently asserted that the central bank would further efforts to strictly control the forex market, gradually pull down trade deficit and basically stabilise the payment balance to keep the exchange rate stable.

Giau said outstanding dollar loans would drop in the wake of recent monetary policies such as those associated with dollar reserve requirement hiking, dollar ceiling deposit rate easing or restricted dollar loan provision.

http://vietnambusiness.asia/currency-rates-to-spike-in-late-2011/

Banks re-start to hike US dollar trading prices

A lot of banks on Monday noon raised the US dollar trading prices, pushing gold price up nearly 100,000 dong per tael compared with the early morning, the local newswire VnExpress reported.
At Vietcombank, US dollar purchase price rose 30 dong to 20,580 dong while the selling price was increased by 60 dong to 20,680 dong from 20,620 dong per US dollar.
ACB also hiked the greenback price to 20,560-20,650 dong (buying-selling), up 20 dong and 30 dong respectively against Monday early morning.

Some other banks have tended to increase or selling or buying prices. Eximbank in the morning listed US dollar at 20,530-20,640 dong. Then the buying price was up 20 dong to 20,550 dong per US dollar and the selling price was unchanged.

The move was extraordinary. Nguyen Thanh Toai, Vice Director of ACB said that US dollar transactions at banks also were under demand and suppl law. Prices are not able to stay still.

In the free market, US dollar price fell against the morning but rose 30 dong compared with last Friday (June 24).

In Hanoi, prices of gold bar fluctuated around 37.70-37.79 million dong per tael (buying-selling) and in HCM City, the prices were 37.70 and 37.77 million dong per tael.

http://vietnambusiness.asia/banks-re-start-to-hike-us-dollar-trading-prices/

LienVietBank allowed to hike chartered capital to 6.46tr dong

State Bank of Vietnam (SBV)’s governor on June 24 approved Lien Viet Commercial Joint Stock Bank (LienVietBank) to scale up chartered capital in 2011.

Accordingly, LienVietBank will hike its chartered capital from 5.65 trillion dong to 6.46 trillion dong in accordance with the plan approved by the shareholders at AGM held on May 27, 2011.

In detail, in 2011, the lender will increase its registered capital by 2.65 trillion dong.

In the first phase, the bank will increase chartered capital by 810 billion dong via offering 81 million common shares under the odd method for Vietnam Post Corp (VnPost). After this issuance, LienVietBank’s chartered capital will be 6.46 trillion dong.

In the second stage, the bank will issue 184 million common shares under the odd method, 18.7 million common shares and maximum 165.3 million preferential shares to pay dividend with an aim to hike its chartered capital to 8.3 trillion dong.

In 2010, LienVietBank gained nearly 760 billion dong pre tax profit and the figure is expected at 1.18 trillion dong in the fiscal year 2011.

http://vietnambusiness.asia/lienvietbank-allowed-to-hike-chartered-capital-to-6-46tr-dong/

SBV makes net withdrawal of 3.413tr dong on OMO between Jun 20 and 24

During the week between June 20 and 24, the State Bank of Vietnam (SBV) posted a net withdrawal of 3.413 trillion dong on open market operations (OMO), falling nearly 76% from the previous week.
According to the data from Reuters and NDHMoney’s calculation, in the week between June 20 and 24, in 10 tenders from 224 to 233, the central bank pumped nearly 21.449 trillion dong, of which, the highest injection was 8.192 trillion dong and the lowest volume was nearly 1.269 trillion dong.

The total amount of money injection on OMO this week was posted at the lowest level in recent eight weeks.

Also in last week, the central bank withdrew 24.862 trillion dong (equaling to the amount of money injection in the week between June 13 and 17).

Thus, in the week between June 20 and 24, the central bank posted a net withdrawal of over 3.413 trillion dong on OMO, down 76% against 14.138 trillion dong in the previous week.

The statistics from early June to June 24, the central bank injected about 128.853 trillion dong on OMO and drew out 174.267 trillion dong, giving a net withdrawal of 45.414 trillion dong on OMO during this period.

Meanwhile, according to the statistics during six weeks from May 16 to June 24, the total money injection was over 286.454 trillion dong and withdrawal was 368.595 trillion dong, leading a net withdrawal of nearly 82.141 trillion dong in recent six weeks.

http://vietnambusiness.asia/sbv-makes-net-withdrawal-of-3-413tr-dong-on-omo-between-jun-20-and-24/

World bank funds its first Vietnam hydro project

The World Bank will lend energy-hungry Vietnam $330 million to build a hydroelectric plant, the bank said Tuesday after a signing ceremony marking its first foray into hydro power for the country.

The Washington-based lender clinched a deal with the State Bank of Vietnam for the Trung Son development in northern Thanh Hoa province.

“It is the Bank’s first hydropower project in Vietnam,” the World Bank said on its website.

“The Trung Son Hydropower Project will help Vietnam meet growing demand from households and industry for electricity,” the Bank said, citing energy consumption growth of 15 percent annually.

The mid-sized plant will have a capacity of 260 Megawatts, and is intended to be fully operational by May 2017.

Construction of new power plants has not kept pace with demand, leading to worsening blackouts, the European Chamber of Commerce in Vietnam (Eurocham) told a forum backed by the World Bank last month.

Eurocham says the price that monopoly distributor Electricity of Vietnam (EVN) pays to producers is still far below neighbouring countries, giving foreign investors no incentive to enter the sector.

The country draws more than one-third of its electricity from hydropower but is trying to diversify its energy supply through coal-fired plants and other sources, including planned nuclear stations.

Vietnam plans to put 38 power plants into operation by 2015, the EVN’s head of planning, Trinh Ngoc Khanh, was quoted as saying last week in the official Vietnam News.

http://vietnambusiness.asia/world-bank-funds-its-first-vietnam-hydro-project/

Banks must cut foreign bank status to +/-20% from +/- 30%: draft circular

Domestic and foreign commercial banks will hae to keep a foreign currency position of +/-20% of their total equity compared to current requirement of +/-30%, said the State Bank of Vietnam (SBV) in its draft circular released on June 28.

Foreign bank branches in Vietnam, whose equity is below $25 million, is allowed to keep a foreign currency position of +/- $5million, the central bank added.

The SBV asked banks to report their foreign currency position of the previous working day no later than 11 a.m. every day; and foreign currency position on the last working day of the previous month no later than 11 a.m.on the first working day of current month.

http://vietnambusiness.asia/banks-must-cut-foreign-bank-status-to-20-from-30-draft-circular/

Regulators draft new securities rules

The State Securities Commission is racing to complete the regulatory framework pursuant to the amended Law on Securities, which takes effect on July 1.

The commission is drafting a decree on administrative sanctions for securities violations and a circular on the organisation and operation of securities companies.

Compared to Government Decree No 85/2010/ND-CP of August 2, 2010, which it would supersede, the draft decree on sanctioning of administrative violations would impose stricter punishments on violators, including a fine of VND200-300 million (US$9,700-14,600) for acts of manipulating securities prices or colluding to create false supply or demand for securities. In addition, profits earned from these unlawful acts would be forfeited.

Listed companies which abuse a public offer to make an illegal private placement would face a fine of VND150-200 million ($7,300-9,700).

A securities company that uses individual accounts to deal in securities or allows individual investors to use its account would be fined VND70-100 million ($3,400-4,800).

The commission said that these regulations would help clarify the financial situation of securities companies which illegally place trading orders via client accounts to conceal profits or losses.

Securities companies would be also required to adhere to new organisation and operating rules under a draft circular to replace Ministry of Finance Decision No 27/2007/TT-BTC of April 2007.

Under the draft circular, securities companies providing investment consultancy services would be disallowed to directly or indirectly invest in securities on behalf of their clients, forecast stock prices, advertise that their analysis and methods are superior to others’ or trade or invest in the same stock that they recommend to clients.

http://vietnambusiness.asia/regulators-draft-new-securities-rules/

Liquidity to improve this week: brokers

Securities firms have projected liquidity would improve strongly this week as foreign investment funds look to be more active to produce good net value asset (NAV) reports in the last week of June.

The market ended last week with one rising and four falling sessions, with the VN-Index losing 5.53 points, or 1.26%, to close at 433.4. Liquidity also tumbled as the average daily volume was 28 million shares worth nearly VND541.5 billion, dropping by 44.2% and 36.2% against a week earlier.

Vietnam International Securities Co. (VIS) said low trading volume last week suggested investors turned pessimistic and short-term speculative cash flow was retreating. Although the Government’s monetary tightening and inflation control measures had brought some impact and the nation’s consumer price index was forecast to grow 1.09% in June, the lowest level since late last year, investor caution impeded capital flow into the equity market.

Short-term investors are concerned that cash flow will keep falling as commercial banks will have to reduce lending for non-productive sectors by 22% before June 30. However, VIS said the deadline was not a big deal as securities firms mostly took short-term loans to finance investors and they had to settle debt in recent times. Therefore, brokers may not face heavy pressure at the deadline.

“The market may repeat flat movements again this week given the lack of strong supporting information. Investors had better stay outside the playground before more positive news is announced,” the broker said.

Fiachra Mac Cana, managing director of HCMC Securities Corp., after last Friday’s moment said the market was drifting sideways and down at the moment and this movement would likely continue into early this week. “However, once we get closer to the end of month we may see some bargain hunting again as spirits rise although the uncertainty overseas from both Greece and then the U.S. are factors,” he said.

“The government has set an initial price of VND11,000 per share and plans to hold 68.1% after the IPO (initial public offering) of Mekong Housing Bank on July 20. The privatization plan has taken so long to execute and we sense their business development lags behind other State-owned commercial banks such as CTG and VCB. However, they are likely to try to boost their performance after the IPO by focusing on building their business away from simple lending,” Mac Cana added.

The Hanoi market saw three falling and two rising sessions last week and trading volume was also sharply lower. The HNX-Index dropped 0.85 point, or 1.11%, from a week earlier to 76.63. The average daily trading volume was 35.4 million shares worth VND415.7 billion, contracting by 41.6% and 44% against a week earlier respectively.

http://vietnambusiness.asia/liquidity-to-improve-this-week-brokers/

State-owned giants go public quietly

Many state-owned giant corporations still carried out their initial public offering (IPO) as scheduled this year despite the plunging stock market. However, most of them went public quietly, without making promotion packages for the sales.

Vietnam Steel Corporation, the country’s biggest steel manufacturer, carried out an IPO on June 10th, selling nearly 10 percent stake. The auction is the largest IPO so far this year.

The Hanoi-based steel giant, also know as VNSteel, sold over 39 million out of 66 million shares they had offered at the price of VND10,101 per share.

The government retains around 90 percent stake in the Hanoi-based company after the share sales and is expected to reduce it to 65 percent at a later stage, which is expected to be carried out at the end of the year.

VNSteel will sell shares to its strategic partners after the last stage in order to raise its registered capital to VND8 trillion (US$400 million).

Analysts expect VNSteel would still be content with the result of the IPO, in which, for the first time ever in Vietnam, no one registered to buy nearly 50 percent of the offering amount of shares before the auction took place.

Brokers also say only around 300 investors attended the event since VNSteel did not make promoting packages for the IPO.

Despite the unexpected IPO, the board of directors of the steel manufacturer remains quite confident about the next sales, of which it will offer 15 percent stake, an equivalent of 120 million shares, to four strategic partners.

Japan’s Nippon Steel, US’s Evraz Group, Russia’s Novolipetsk Steel and another Japanese firm Itochu are among foreign steel giants expected to partner up with the Vietnamese manufacturer.

State fuel distributor Petrolimex has said it plans to go public next month by selling 27.43 million shares, equal to 2.56 percent of its registered capital of VND10.7 trillion ($512 million).

The Hanoi-based company plans to release its prospectus in the first week of July, and hold an investor road show from July 12 to July 15, Bloomberg quoted deputy general director Vuong Thai Dung as saying.

Dung said Petrolimex would carry out the IPO despite the bearish stock market as the company wanted to be quickly upgraded to a joint stock fuel group.

The company will propose a minimum starting price of VND15,000 per share, which is subject to approval from the Ministry of Industry and Trade, he said in a telephone interview with Bloomberg Monday.

Brokers say the amount of shares offered in the IPO is very small as Petrolimex plans to please its shareholders with the auction as scheduled, but still want not to sell too many shares at low prices due to the gloomy market.

The Ho Chi Minh Stock Exchange’s VN-Index has declined 10.9 percent this year on concerns that higher borrowing costs will crimp corporate earnings and economic growth.

Mekong Housing Bank announced that it achieved approval from the State Bank of Vietnam to carry out an IPO with the minimum starting price of VND11,000 per share. The HCMC-based lender did not say the time of the auction.

Mekong Housing Bank is set to sell 31.9 percent of its registered capital of VND4.5 trillion ($225 million).

However, analysts remain pessimistic about the equitization plan as share price of many listed lenders are traded below VND9,000. “That is why Mekong Housing Bank hesitates to announce the date it goes public,” said a broker from a HCMC-based securities firm.

http://vietnambusiness.asia/state-owned-giants-go-public-quietly/

Digital signatures get go-ahead

The Ministry of Information and Communications yesterday issued a licence to the CK Technology and Communications Joint Stock Co, Viet Nam’s sixth digital signature authentication provider.

The company will be able to offer the service to agencies, organisations, individuals, websites and other software developers.

Minister Le Doan Hop called on the company to join hands with State management agencies to disseminate knowledge and legislation on digital signatures in an attempt to promote the use of e-transactions.

Digital signature authentication is now used in many developed countries to ensure the safety of public e-transactions.

The e-transaction market will continue its upward trend as e-government begins to be applied and the number of internet users is predicted to increase to 45-50 million users by 2012.

Previously, the Viet Nam Post and Telecommunications Group, the Nacencomm Technologies Joint Stock Co, the BKAV Network Security Co, the military-run telecoms group Viettel and the FPT Information System Corporation had been given the go-ahead to provide the service.

A master plan to develop e-commerce for the 2011-15 period approved by the Prime Minister in 2010 targeted official recognition from foreign digital-signature authentication organisations by 2015.

http://vietnambusiness.asia/digital-signatures-get-go-ahead/