VietNamNet Bridge – The dong interest rate has sunk to the
bottom, but this has not brought high hopes to businesses. Meanwhile, experts
believe the cash would run into the stock market and other more attractive
investment channels.
Stock market awaits cash flow
The State Bank of Vietnam has
recently said it would be very cautious when considering lowering the ceiling
deposit interest rate further, because the August inflation far exceeded the
forecast level – at minus 0.15-1.2 percent. If the interest rate is eased once
more, depositors would not make profits with their deposits.
In theory, the low bank deposit
interest rate would pave the way for the capital to flow to other investment
channels, such as stocks, gold, real estate and bonds.
Of these, the stock market is
believed to be the most wanted destination for the capital flow, because
Vietnamese stocks have become surprisingly cheap. Besides, the stock market has
been backed by the information about the profuse foreign currency reserves,
which would be an advantage to attract foreign portfolio investment.
The profuse foreign currency
supply has been explained by the low demand for imports, which has led to the
significant decrease of the trade gap in recent months. Especially, in July,
Vietnam saw trade surplus since it exported more than imported.
According to the General
Department of Customs, Vietnam’s excess of exports over imports has reached 88
million dollars in the last seven months.
Foreign currencies have also been
flowing to Vietnam through other channels, including the foreign direct
investment (FDI), foreign portfolio investment, kieu hoi (overseas remittance).
The dong/dollar exchange rate has been stabilized at 20,850 dong per dollar.
Observers have commented that
stabilizing the dong/dollar exchange rate and intervening the market when
necessary are completely within the reach of the State Bank. This would help encourage
foreign capital to flow to the stock market, thus helping the market recover
soon.
Businesses still keep weighing
Some months ago, Governor of the
State Bank of Vietnam Nguyen Van Binh stated that the prime interest rate would
decrease by 1-2 percent further, which means that the input capital cost would
be lowered to 7 percent, and the lending interest rate would be 10 percent.
The statement made businesses
think that they would be able to borrow money at lower interest rates.
However, the higher-than-expected
inflation rate seems to make the hope become unrealistic.
In fact, though commercial banks
have been easing the lending interest rates step by step, but the disbursement
has not increased significantly. Those businesses, which want to borrow money
now, cannot satisfy the requirements set by the banks. Meanwhile, those,
eligible for borrowing, do not intend to ask for loans at this moment, because
they want lower interest rates and they decide to keep waiting.
Vo QuocThang, Chair of Dong Tam
Group, said though the lending interest rates have eased to 12-15 percent per
annum, the rates remain too high to encourage businesses to borrow money to
push up production in the context of the low purchasing power.
Thang said that the current sky
high interest rates would pave the way for foreign enterprises or foreign
individuals to make deposits at Vietnamese banks to enjoy high profits.
Meanwhile, the expensive capital cost would kill businesses’ production plans.
Businesses have expressed their
disappointment when hearing that the interest rate may not ease further. They
say only when the interest rate is lowered to 10 percent per annum, would they
be able to expand business.
Manh Ha
Business & Investment Opportunities
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