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Samson:  Vietnam : Banks raise short-term deposit rates to more than 8%

September, 24/2019 - 15:34

Saigon Commercial Bank (SCB) has just announced interest rates of up to 8.21 per cent for six-month online deposits

HÀ NỘI — Commercial banks have recently raised their interest rates for six-month deposits to a record high of more than 8 per cent per year. The rate was previously reserved for long-term deposits of more than a year.

Saigon Commercial Bank (SCB) has announced interest rates of 8.03 per cent for six-month online deposits, rising to 8.21 per cent for deposits valued at VNĐ10 billion (US$435,000) and above. This adjustment gives SCB the highest deposit rate for six month terms.

The bank's rate also rises to 8.76 per cent for 13-36 month deposits of VNĐ10 billion upwards. Nam Á Bank is also listing an 8 per cent rate for six month deposits. The bank’s rate for 7-9 month deposits is at 8.05 per cent per year, while its highest rate of 8.7 per cent applies for 36-month deposits.

Viet Capital Bank, Eximbank and VietBank have also set interest rates for six month deposits at 7.5-7.7 per cent per year. However, interest rates for six-month deposits at State-owned banks Vietcombank, Vietinbank and BIDV remain stable and low at 5.5 per cent per year. Rates for long-term deposits of 12-36 months stand at only 6.8 per cent per year.

It is estimated nearly 20 commercial banks, mainly small and medium ones, are listing deposit interest rates at more than 8 per cent per year in a bid to raise capital to meet international banking Basel II standards set by the State Bank of Việt Nam (SBV).

Viet Capital Bank, which has the highest interest rate on the market of 10.2 per cent per year for 60-month deposits, has asked the SBV for permission to apply for Basel II earlier than expected by the end of the third quarter this year. The SBV's deadline for all banks to apply Basel II is January 2020.

The SBV expects interest rates to remain stable until the end of this year after its decision to cut several key interest rates by 0.25 percentage points from September 16 to help credit institutions access capital at more affordable costs, in turn enabling the institutions to improve liquidity and keep interest rates stable.    LINK

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Samson:  Vietnam : Deputy PM holds talks with World Bank Vice President

24th September, 2019
Deputy Prime Minister Vương Đình Huệ held talks with Senior Vice President and chief economist of the World Bank Pinelopi Koujianou Goldberg in Hà Nội on Monday.

The economist is in Việt Nam to attend the Vietnam Reform and Development Forum 2019.

Deputy PM Huệ thanked the guest for promoting ties with Việt Nam and supporting its macro-economic development policies. Apart from policy consultation, the WB has provided Việt Nam official development assistance and preferential loans worth nearly US$24 billion, about $18 billion of which have been disbursed. He expressed his desire to discuss the strategic partnership between Việt Nam and the WB, priorities in socio-economic development strategy for 2021-25 and the impact of the global economy on Việt Nam, especially amid US-China trade tension.

As the Vietnamese economy is small, and its involvement in the global economy is limited, it is necessary to improve competitiveness and move up in the global value chain, he said, adding that he wished to listen to the WB’s forecasts on the issue and get suggestions to help Vietnamese firms join the global value chain more deeply. The host also sought the WB’s recommendations on issues regarding agriculture, rural development and farmers, urban and regional economic development, and regional economic co-ordination.

Goldberg suggested Việt Nam export processed and high-value products and focus on technological innovation to further join the global value chain. Another important point is reforming tertiary education and vocational training, with a focus on training soft skills for students and workers. Both sides also looked into opportunities and challenges arising from the Fourth Industrial Revolution, policies to facilitate the private sector’s involvement in sci-tech development and improving workers’ income.   LINK

Samson:  Việt Nam's growth moderate this year but remains robust in Asia
25th September, 2019

ADB representatives at the report launch on Wednesday. The bank retained its growth forecasts for Việt Nam at 6.8 per cent in 2019 and 6.7 per cent in 2020

The Asian Development Bank (ADB) forecasts a moderate deceleration for Việt Nam’s growth this year and next, but says Việt Nam is still a standout in Asia with stable development thanks to resilient domestic demand and sustained inflows of foreign direct investment (FDI).

In its Asian Development Outlook 2019 Update released on Wednesday, the bank retained its growth forecast for Việt Nam at 6.8 per cent in 2019 and 6.7 per cent in 2020, after exceptionally high growth of 7.1 per cent last year.

Việt Nam’s growth prospect outperformed ADB’s projection for the average growth of developing economies in Asia (excluding Hong Kong, Taiwan, Singapore and Republic of Korea), which was revised down from 5.7 per cent to 5.4 per cent in 2019, and 5.6 per cent to 5.5 per cent in 2020.

Forecasts for average inflation have been revised down to 3 per cent from 3.5 per cent for 2019, and to 3.5 per from 3.8 per cent for 2020. “Despite a slowdown in export growth due to the escalation of the trade conflict between the United States and the People’s Republic of China and the consequent downturn in global trade, the Vietnamese economy remains healthy thanks to continued strength in domestic demand and sustained inflows of foreign direct investment,” said ADB Country Director for Vietnam Eric Sidgwick.

Việt Nam’s GDP grew 6.8 per cent in the first half this year, slightly down from 7 per cent in the corresponding period of last year. Exports of goods and services slowed by more than half, from 15.7 per cent in the first six months of 2018 to 7.1 per cent this year, due to weakened external demand.

However, the adverse effect of the export slowdown was cushioned by continued strength in domestic demand. Private consumption expanded 7.2 per cent in the first half this year, the same rate as a year earlier. Meanwhile, domestic investment grew 7.1 per cent, bolstered by an improved business environment, strengthened investor confidence and strong FDI inflows. “[The] prospect for domestic consumption continues to be positive, supported by rising incomes, buoyant employment and moderate inflation,” Sidgwick said.

The report also upheld continued government efforts to improve the business environment, along with recent upward revisions to sovereign credit ratings, would spur both private and foreign investment.

If the US-China trade conflict continued to escalate, more manufacturers may consider Việt Nam as an alternative base, providing fresh impetus to FDI inflows, it said. Additionally, the regional Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the recent signing of the free trade agreement with the European Union promised to further open market access for trade and investment. “FDI inflows should therefore continue to be strong in the near term, as evidenced by US$13.1 billion in FDI commitments in the first eight months,” it said.

Nguyễn Minh Cường, principal country economist for Việt Nam at ADB, noted foreign capital had been pouring into domestic companies with foreign equity contributions rising 80 per cent this year. “It’s strong growth, indicating there may by a shift in foreign investment due to the impact of the US-China trade conflict. But we need more time to see the level of displacement and places where foreign capital is located, whether it runs into high quality, value added or labour intensive sectors,” Cường said.

Dim outlook for agriculture

In the first half, all sectors witnessed slower growth but agriculture fell hardest. Prolonged drought and a fresh outbreak of African swine fever dragged growth in agriculture down from 3.8 per cent in the first half of 2018 to 2.4 per cent this year.

The agriculture sector was important in Việt Nam, not in terms of its contribution to growth but its social impact, especially on farmers, Sidgwick said. “They [farmers] are worrying a lot more about farm production which is being affected by issues related to climate change… They find it hard to predict the weather; extreme weather such as floods and droughts make their lives much more difficult.”

Cường said Việt Nam was doing well to diversify its export markets but suggested farmers applied advanced technology in agriculture and improve product quality as the demand from consumers for safe products was rising and many countries were employing high safety standards as non-tariff barriers. Meanwhile, the outlook for industry and services remained positive, according to the report.

The manufacturing purchasing managers’ index remained above 50 in the first eight months, which bodes well for the industry. Services are seen to continue growing with further expansion in retail and wholesale trade to meet buoyant demand and higher tourist arrivals, assuming they reach the target of 15 million by year-end.

The report also highlighted significant risks to the forecast. Further escalation of the US–China trade tensions and the continuing global economic slowdown could shrink global trade, which would adversely impact Việt Nam’s trade performance and economic growth. “Việt Nam has done very well but looking ahead, I think the risk is much higher than it has been and continued resilience is required, but I think the Vietnamese Government is well aware of that,” Sidgwick said.

In the middle of this month, the ASEAN+3 Macroeconomic Research Office (AMRO) also released its forecast for Việt Nam’s growth, which it expected to expand 6.6 per cent in 2019.    LINK

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Samson:  Fitch Ratings gives Vietnam Electricity ‘BB’ rating
25th September, 2019

Electricity demand in Việt Nam is expected to continue to increase at an average rate of  9.5 per cent per year

Vietnam Electricity's (EVN) long-term foreign-currency issuer default rating stands at 'BB' with a positive outlook, according to Fitch Ratings.

The rating reflects the agency's outlook on Việt Nam (BB/Positive), which was revised to positive from stable on May 9 this year.

Fitch has also affirmed EVN's senior unsecured rating of 'BB' and standalone credit profile (SCP) of 'bb'.

EVN's ratings are equalised with those of the sovereign rating under Fitch's Government-related entities' rating criteria. This is due to Fitch's assessment of a strong likelihood of State support in light of the group's strategic importance to the power sector in Việt Nam.

EVN's SCP reflects its position as the owner and operator of Việt Nam's electricity transmission and distribution network, and its near 58 per cent share of Việt Nam's power generation capacity.

Fitch sees EVN's status, ownership and control as 'Very Strong'. The State fully owns EVN, appoints its board and senior management, directs investments, and approves tariff hikes in excess of 5 per cent.

“The support track record and our expectations of State support for EVN are 'Strong' as the company has received guarantees, step-down loans, loans from State-owned banks at preferential rates, subsidies for strategically important projects, and tax incentives. We expect support to be available if needed, even though the government intends to lower direct support for state-owned enterprises and contain sovereign debt levels," Fitch said.

According to Fitch, electricity demand in Việt Nam is expected to continue to increase at an average rate of 9.5 per cent per year, driven by rising industrialisation, urbanisation and affluence. Việt Nam has a solid national electrification ratio of about 99 per cent, with the ratio reaching almost 100 per cent in urban areas. Management has said all electricity consumers are billed regularly and collection rates are between 99 per cent and 100 per cent across EVN's five power-distribution companies.

Hydropower accounts for about 42 per cent of Việt Nam's power-generation capacity. Years with productive hydropower generation have lifted EVN's profit margin, but periods of lower rainfall have forced the company to rely excessively on expensive coal.

About 65 per cent of EVN's borrowings are denominated in foreign currency, exposing the company to substantial currency risk. Lower gains in electricity sales volume also subject EVN to financial stress due to the company's high capex plans. However, Fitch expects EVN to adjust its investments if there is a structural decline in demand. The rating agency believes EVN's financial profile could deteriorate rapidly in the absence of regular tariff increases.   LINK