KTFA Members "News and Views" Friday PM 4-9-2021

KTFA:

ATPInfinity:  This is significant and timely IMO....The budget SIGNED WED. THE 7TH Published in gazette tomorrow THE 10TH

"The decision to change the exchange rate on 19/12/2020 is final and there will be no further
change in this rate"

Before that the CBI Deputy said this: "The exchange rate was changed at this time"   (AS IN TODAY, THE 9TH)

IS THIS THE ,"DROP THE ZEROS" ANNOUNCEMENT?  (FOR TOMORROW)

Bravo13:  Sure hope that is the case, guess we will know soon enough !

Samson: Central Bank Governor and British Ambassador discuss a "significant" rise in reserves

8th April 2021

Central Bank Governor Mustafa Ghaleb Makhif and British Ambassador Stephen Hickey discussed the noticeable increase in the bank’s reserves.

The bank said in a statement, "The Governor of the Central Bank of Iraq, Mustafa Ghaleb Mkhaif, received the UK Ambassador to Iraq Stephen Hickey today, Thursday, and the meeting dealt with several matters, including the noticeable increase in the foreign reserves of the Iraqi Central Bank.

The statement added that "the ambassador emphasized that the remarkable increase in the foreign reserves of the bank supports the economic situation in Iraq and puts it in a good and stable stage."

The statement pointed out that "the governor and the ambassador visited the new building of the central bank, which was designed by the late architect Zaha Hadid and viewed the stages of development,  as the ambassador indicated that the new central bank statement would be a qualitative addition to the capital, Baghdad."  LINK

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Samson:  Foreign investments might flow into Việt Nam's stock market from the second half of 2021: BVS

7th April, 2021

Bảo Việt Securities Company (BVS) expects Việt Nam's stock market might attract up to US$1.4 billion from index tracking funds, if Việt Nam is officially upgraded to a secondary emerging market by FTSE.

In an assessment and classification result released at the end of March, FTSE acknowledged efforts of the State Securities Commission of Việt Nam in improving the legal corridor, and as the revised version of the Law on Securities went into effect in January, it is expected to pave the way for improving the market's quality. 

However, in practice, Việt Nam's stock market continues to fail to meet the criteria for clearing operations under the Delivery vs Payment (DvP) model due to the requirement of depositing enough money in Clause 2, Article 7 of Circular 203/2015/TT-BTC, according to FTSE. Therefore it continued not to meet the two criteria, including "Settlement Cycle (DvP)" - rated at Restricted, and the criterion "Settlement - rare incidence of failed trades" - was not rated.

As the market met seven out of nine conditions for being upgraded to the secondary emerging market offered by FTSE, the Vietnamese stock market continues to be on the watch list for upgrading to secondary emerging market of FTSE for the evaluation in September. Despite that, BVS still maintains a positive stance on the prospect that Việt Nam will be upgraded to a secondary emerging market by FTSE in its 2022 upgrade assessment. 

In case of officially being upgraded to a secondary emerging market, BVS estimated that Việt Nam's stock market will attract up to US$1.4 billion from funds tracking or benchmarking indices like the FTSE Global All-Cap, FTSE All-World and FTSE Emerging Markets. Based on historical data of actual movements of global markets, at least three months, from September to December, before a stock market is officially upgraded to emerging market by FTSE, that market usually receives strong cash flows from foreign investors and enters an upwards trend, BVS said. 

With the expectation that the Vietnamese stock market can be upgraded in two assessments of FTSE in 2022, BVSC expects that foreign cash flows may flood into the country's stock market from the second half of 2021. Under FTSE's set of criteria, large-cap stocks are the most likely to benefit from the trend.  BVSC believes that with a positive macroeconomic outlook, being upgraded to secondary emerging market is a positive signal for the improvement of the market quality and will help the country's stock market attract investment flows.   LINK

Samson: Does Q1 economic picture satisfy Việt Nam's expectation?

5th April, 2021

Việt Nam has delivered its economic data in the first quarter. The overall picture is still optimistic with the gross domestic product (GDP) expanding nearly 4.5 per cent – among the best performers in the world. However, is this result good enough for the Southeast Asian country to securely triumph over its target set for the whole year?

The first quarter growth, though in the same range as the last quarter of 2020 which also stood at 4.48 per cent, was up from the 3.68 per cent recorded in the first quarter of last year. The renewed outbreak of COVID-19 in some parts of the country, including the capital city of Hà Nội, adversely affected the first-quarter's performance which fell below the Government’s expectation of 5.12 per cent and was lower than the 5.7 per cent expected by Bloomberg’s economists.

Despite that, Việt Nam has been widely praised for its economic achievements given all the uncertainty about the prolonged pandemic and uneven recovery globally. Việt Nam is still set to outperform most of the region. Key indicators in the first three months have partly reflected Việt Nam’s good recovery.

Exports remained the country’s key economic growth driver with a value of US$77.4 billion during January-March, a rise of 22 per cent year-on-year. Việt Nam ran a trade surplus of more than $2 billion in the first quarter. Pledged foreign direct investment (FDI) surged by 18.5 per cent year-on-year to $10.3 billion while disbursed FDI increased by 6.5 per cent to $4.1 billion.

Industrial production was expected to expand 6.5 per cent during the period, especially the main drivermanufacturing – electronic equipment, phones and accessories – climbing 9.5 per cent. The number of new businesses fell by 1.4 per cent and their total registered capital rose by 27.5 per cent. Other sectors including agro-forestry-fishery, services sector, disbursement of public investment and State revenue improved significantly. Meanwhile, inflation was kept at a low level, rising by just 0.29 per cent in the first three months.

Both domestic and worldwide economists have maintained a positive forecast for Việt Nam’s economy since the end of last year. Many international organisations delivered a GDP forecast of around 7 per cent for Việt Nam in 2021. Meanwhile, Vietnamese Government has set the yearly growth target of 6.5 per cent, higher than the official target of 6 per cent set by the Parliament.

This optimism is based on Việt Nam’s performance in 2020 with impressive accomplishments in implementing the dual goals of combating the pandemic and maintaining economic growth. Việt Nam was among very few countries with positive growth in 2020. Adverse impacts on the economy and society were also minimised during the pandemic.

The year 2020 was seen a turbulent year when every country had to brave unprecedented challenges arising from COVID-19 to save people’s lives and diminish the impact on the economy. This year, economists have agreed the world is on track to recover, with strong growth in major economies which plummeted last year due to the disease and restriction measures. In its March report, Fitch ratings expect global GDP to expand by 6.1 per cent, revised up from 5.3 per cent in its December forecast thanks to robust fiscal support in major economies. GDP outturns are projected at 6.2 per cent in the United States, 8.4 per cent in China and 4.7 per cent in the eurozone. 

However, the recovery is also perceived with a conservative stance as it depends largely on the readiness and effectiveness of vaccines, as well as countries’ resilience to financial and inflation risks. The recovery in the current context is also associated with sustainable and green development, restructuring the economy and promoting innovation and digital transformation.

In Việt Nam, a period of three months is not long enough to fully reflect the challenges facing the country. Việt Nam has been doing very well in controlling the pandemic but the risk of fresh outbreaks is still high which could be seen in the resurgence of the virus in some northern provinces early this year. Besides, the vaccination process cannot be fast and as the Government has said, the prevalence of vaccination must wait until next year. Strong recovery in some key sectors such as tourism and aviation is still a challenge as it depends heavily on the disease control in both home and foreign markets.

Although inflation in the first quarter was low at 0.29 per cent – the lowest for Q1 within 20 years, there is still inflation risk when oil prices climbed by more than 30 per cent compared to the end of last year and commodity prices are on the rise in global markets. Such a possibility may put pressure on monetary policy which must both support economic recovery (through low interest rates) and ensure macroeconomic stability, especially volatility in the stock market and real estate market. 

In this context, consumption growth somewhat slowed and uncertainty in the global supply chain are also unrevealed problems in the long term. (The Suez Canal shutdown exposes another weak link in the global supply chain.)

The resurgence of the virus in some provinces early this year weighed on national Q1 GDP growth (below the Government’s expected rate of 5.12 per cent). Thus, to reach the year-end target of 6.5 per cent, GDP in the next quarters must increase by more than 7 per cent on average, which is a big challenge.

After the Q1 economic data, some international organisations have revised down their forecast for Việt Nam’s growth. The United Oversea Bank (UOB) lowered Việt Nam’s GDP growth to 6.7 per cent in 2021 from 7.1 per cent. Meanwhile, economists at Singapore’s Maybank Kim Eng revised Việt Nam’s economic growth from 6.8 per cent to 6.5 per cent. However, most forecasts agreed with the latest virus wave being quashed and most restrictions now being lifted, Việt Nam’s economy should bounce back strongly over the coming quarters.

The new Government will take office this month and the transition will result in a certain delay in implementing policies. Hopefully, the new Government will quickly start working and take more drastic measures to improve the investment and business environment, push reform and economic restructuring, promote innovation and speed up disbursement of public investment. Public investment still plays important role in boosting growth amid the pandemic and has large room for development.

If Việt Nam can take advantage of the global economy’s recovery momentum and existing free trade agreements with other countries, the GDP target of 6.5 per cent is feasible.  LINK

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Samson:  Fitch revises Việt Nam's outlook to positive, affirms rating at 'BB'

2nd April 2021

Fitch Ratings has revised Việt Nam's outlook to positive from stable and affirmed the long-term foreign-currency issuer default rating (IDR) at 'BB'.

A report released on Thursday by the rating agency says the positive outlook reflects Việt Nam's growth and public finances' resilience to the COVID-19 pandemic shock, and continued strengthening of external finances due to persistent current account surpluses and rising international reserves.

Việt Nam was among the few economies in the Asia Pacific region and the 'BB' rating category to maintain positive growth in 2020, at 2.9 per cent. The relative strength of Việt Nam's performance was largely due to its success in bringing the coronavirus outbreak swiftly under control, despite the pandemic's impact on domestic economic activity and tourism inflows, alongside strong policy support and export demand.

“The rollout of Việt Nam's vaccination programme is off to a slow start, but we nevertheless expect GDP growth of about 7 per cent in 2021 and 2022, in line with a broader global economic recovery sustaining export growth and a gradual normalisation of domestic economic activity based on our expectation of continued success by the authorities in containing domestic coronavirus infections,” Fitch said.

Việt Nam's external finances have strengthened further despite the pandemic. Exports rose by about 7 per cent in 2020 in US dollar terms, and the current account recorded a surplus of about 3.6 per cent of GDP. Strong export performance reflects a surge in demand for high-tech components associated with strong sales of IT equipment in the US and other advanced economies as well as continued benefits of trade diversion, associated with rising costs in China and the US-China trade war.

Fitch forecast Việt Nam's current account to remain in surplus at 1.2 per cent and 2 per cent of GDP in 2021 and 2022, respectively, compared with an average deficit of 1.7 per cent for the 'BB' median.

Foreign-exchange reserves rose to US$95.2 billion by end-2020 likely due to a combination of factors, including a current-account surplus and foreign currency purchased by the State Bank of Việt Nam (SBV).

“We project foreign-exchange reserves will continue to cover around 3.5 months of current external payments in 2021 and 2022, compared with a forecast 'BB' median of 5.2 and 4.7 months, respectively. Nevertheless, Việt Nam's external liquidity ratio, measured by the ratio of the country's liquid external assets to its liquid external liabilities, also improved further to 388 per cent in 2021, more than double the forecast of the 'BB' median.”

The bulk of the strong FDI inflows in 2020 went into the manufacturing sector. Net FDI in 2020 was $15.4 billion (about 4 per cent of GDP), close to the previous year's level. Fitch expected FDI inflows to stay healthy as Việt Nam is likely to benefit from the ongoing trade diversion and also its entry into trade agreements such as the EU-Việt Nam Free Trade Agreement and the Regional Comprehensive Economic Partnership.

According to Fitch, Việt Nam's economic prospects will remain susceptible to shifts in external demand due to the economy's high degree of openness. Việt Nam was designated as a currency manipulator by the US Treasury in a report late last year, which complicates its economic relationship with the US.  “Nevertheless, we expect the two countries to engage in discussions in the coming months to reduce tensions, and in the near term, we do not expect this development to have a significant impact on Việt Nam's external finances,” Fitch noted.

The pandemic had a smaller impact on Việt Nam's public finances than 'BB' peers. Fitch estimated the general government deficit widened modestly in 2020 to 3.5 per cent of GDP (7.2 per cent for the BB median), as spending was targeted mainly at alleviating the impact of the pandemic.

The Ministry of Finance (MoF) said the credit rating agency’s upgrade of Việt Nam’s outlook reflected the growth resilience of the country, which was among the few economies in the Asia Pacific region and the “BB” rating category to maintain positive growth in 2020, at 2.91 per cent.

Apart from Moody's Investors Service recently raising the outlook for Việt Nam to “positive” from “negative” – an unprecedented move in its ranking globally since the start of the COVID-19 pandemic, Fitch Ratings’ upgrade of Việt Nam’s outlook demonstrates credit rating organisations’ belief in the Government’s effective policies, strong growth prospects, and increasingly solid fiscal space, according to the MoF.   LINK