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North Kinh Do Food Joint-Stock Co., a Vietnamese snack-food producer, raised its full-year pretax profit forecast by 67 percent to VND100 billion dong (US$5.6 million), according to an e-mailed statement Wednesday.

The company, based in the northern province of Hung Yen and partly owned by Citigroup Inc., plans to issue 2.5 million shares and give them to shareholders as dividends, and list 2.8 million shares on the Ho Chi Minh Stock Exchange after it obtains official approval, according to the statement. Source: Bloomberg

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Sept. 28 (Bloomberg) -- President Barack Obama and fellow Group of 20 leaders are trying to end what Obama adviser Lawrence Summers has called the “financial balance of terror.”

World leaders, meeting in Pittsburgh last week, adopted a framework for more durable economic growth as they sought to prevent a replay of the worst crisis since the Great Depression. They also acknowledged the growing clout of China and other emerging economies by giving them a bigger voice in decision- making.

The aim is to reduce U.S. dependence on overseas capital to finance consumption, while cutting the reliance of China and other creditor nations on American consumers to buy their goods. Summers, head of Obama’s National Economic Council, has singled out the current arrangement as a risk to prosperity since it leaves each major economy a hostage of the other’s policies. “Because our global economy is now fundamentally interconnected, we need to act together to make sure our recovery creates new jobs and industries,” Obama told reporters in Pittsburgh Sept. 25 after hosting his first economic summit.

To help ensure that happens, G-20 countries agreed to give the 186-member International Monetary Fund a role assessing their efforts. The oversight function will be among the topics discussed by policy makers as they head this week to Istanbul for the annual meetings of the IMF and World Bank.

Slower Growth

After expanding at a 4.6 percent annual pace in the five years through 2008, the world economy might be in for a spell of slower growth unless G-20 countries follow complementary policies, said Edwin Truman, a senior fellow at the Peterson Institute for International Economics in Washington.

The U.S. is counting on the crisis and its aftermath to convince countries like China that it’s in their own interest to shift away from exports toward domestic demand as Americans save more and spend less, Truman said. The U.S. savings rate rose to a 14-year high of 6 percent in May before falling to 4.2 percent in July.

“U.S. consumption is all but certain to be very stagnant for the next few years,” said Desmond Lachman, a former IMF official who’s now at the American Enterprise Institute in Washington. “You’ve got to find other sources of demand.”

In the meantime, G-20 leaders acknowledged the recovery remains dependent on emergency government measures, and they pledged to avoid pulling back until the time is right. “We will avoid any premature withdrawal of stimulus,” their communiqué said.

Stocks Decline

That promise may encourage investors to take on more risk after signs of economic weakness prompted the biggest weekly declines in European and U.S. stocks since July, said Sophia Drossos, co-head for global foreign exchange strategy at Morgan Stanley in New York.

“The G-20 outcome could lead to a reversal of the selloff,” she said.

Demand for U.S. durable goods unexpectedly fell in August and loans to households and companies in Europe grew at the slowest pace on record, reports showed last week.

The Standard & Poor’s 500 Index has dropped 2.2 percent since Sept. 18, and Europe’s Dow Jones Stoxx 600 Index slipped 2.4 percent in the same period.

Developing-nation equities suffered their steepest weekly decline in more than two months last week, with the MSCI Emerging Markets Index ending 1.2 percent lower.

Lopsided Trade Flows

G-20 leaders pledged to correct the lopsided flows of trade and investment blamed for contributing to the crisis: U.S. consumers borrowed money to finance purchases of Asian-made cars and flat-screen TVs. Asian exporters, meanwhile, invested their surplus cash in U.S. Treasury notes, pushing down borrowing costs and further fueling the credit binge.

Some economists cast doubt on the pledges by the G-20, since no sanctions will be used to enforce them and a similar push in 2006 by the IMF petered out.

“Unless the major surplus and deficit economies actually decide that they really want to go down this route, it’s hard to imagine anything will happen,” said Kenneth Rogoff, a former IMF chief economist who now teaches at Harvard University.

Obama, Chinese President Hu Jintao and European leaders including German Chancellor Angela Merkel face plenty of hurdles as they seek to place the world economy on a more stable footing.

The U.S. must cut a $1.6 trillion federal budget deficit, while China contends with a record $2.1 trillion in foreign exchange reserves representing years of accumulated trade surpluses.

Central Bankers

Central bankers, who did not attend the summit, may be wary of any suggestion that they sacrifice their independence in the name of worldwide coordination. And global institutions such as the IMF and the Basel, Switzerland-based Financial Stability Board may lack the horsepower to carry out the added responsibilities they’re being given. Chinese officials said they recognize that the country must shift its economic priorities.

“China also understands that its economic-growth model has some flaws,” Ma Xin, director-general of international cooperation at the National Development and Reform Commission, China’s top planning agency, said in Pittsburgh.

Change may take time, Ma suggested. He said that his nation’s “low” consumer spending is something that has “accumulated over many years and it is a structural problem.”

Treasury Secretary Timothy Geithner pointed to the increase in the U.S. savings rate as an “encouraging sign.”

‘Measured Optimism’

After “a long period of time living beyond our means, you see people already changing behavior,” the Treasury chief said in Pittsburgh. “That’s one reason why we can stand here today and express some measured optimism about our capacity to put in place a more sustainable recovery.”

There are other signs that imbalances are shrinking. The U.S. current-account deficit narrowed in the second quarter to $98.8 billion, the least since 2001. Credit Suisse AG predicts Chinese imports may rise 30 percent to $313 billion in the fourth quarter as the government’s stimulus program spurs domestic demand.

“While the global rebalancing to date has been significant and broad-based, it remains to be seen whether this process will continue,” said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York.

Giving emerging markets such as China, India and Brazil a greater stake in global decision-making may ensure that it does.

Supplants G-8

The broader G-20 will supplant the Group of 8, a club of the most highly developed nations plus Russia, as the guardian of the global economy after last week’s summit. The G-20 accounts for about 85 percent of global gross domestic product. The risk is that the larger group will find it more difficult to make decisions, said Tim Adams, who served as the U.S. Treasury’s top international official in the administration of George W. Bush.

“The bigger the grouping, the harder it is to get consensus,” said Adams, managing director of the Lindsey Group, a Washington-based economic advisory firm. “You can’t have the agenda taken over by the favorite hobby horses of each country.”

The third summit of G-20 leaders in the past year also plotted a road map for revamping the banking industry after the two previous meetings, in Washington and London, focused on fighting market turmoil and reversing the spiral into recession.

Deferred Bonuses

Leaders agreed that banks must avoid “multiyear guaranteed bonuses” and that a “significant portion of variable compensation” must be deferred, paid in stock, tied to performance and subjected to clawbacks if earnings flop. They stopped short of endorsing a French proposal to introduce specific caps on pay.

Awards must also be curbed if they are “inconsistent with the maintenance of a sound capital base,” the G-20 said. Regulators should be allowed to modify the compensation practices of key firms. Banks will also have to increase the quality and quantity of capital they hold by the end of 2012. The regulatory overhaul is “for real, but there will be plenty of argument over the detail of how it’s done,” Leon Brittan, vice chairman of UBS Investment Bank and former European Union trade commissioner, told Bloomberg Television.

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(Bloomberg) -- U.S. stocks rose, sending benchmark indexes up the most in five weeks, as takeovers in the drug and technology industries added to evidence that mergers and acquisitions are rebounding from the slowest pace in six years.

Affiliated Computer Services Inc. jumped 14 percent after Xerox Corp. made its biggest purchase by agreeing to buy the company for $6.4 billion. Abbott Laboratories advanced 3.8 percent on plans to purchase Solvay SA’s pharmaceutical unit and gain control of the TriCor cholesterol drug. Cisco Systems Inc., the largest maker of networking equipment, had the steepest gain in two months as Barclays Plc predicted revenue will increase.

The Standard & Poor’s 500 Index added 1.7 percent to 1,062.56 at 11:53 a.m. in New York. The Dow Jones Industrial Average gained 138.68 points, or 1.4 percent, to 9,803.87. About 333 million shares changed hands on the New York Stock Exchange, 27 percent less than at the same time a week ago as trading slowed for the Yom Kippur holiday.

“We’ve seen a pickup in acquisitions and it’s a very big plus,” said Hugh Johnson, who manages more than $1.6 billion as chairman of Albany, New York-based Johnson Illington. “It’s always good news when you see money come into the market.”

All 10 of the S&P 500’s main industries advanced today, trimming the decline in the index to 0.8 percent since it reached an almost one-year high on Sept. 18. The benchmark gauge for U.S. equities has climbed 57 percent in the past six months, pushing valuations on an earnings basis to the highest level since 2004. Companies in the S&P 500 traded at 20.2 times their profits on Sept. 22, data compiled by Bloomberg show.

M&A

Xerox, the world’s largest maker of high-speed color printers, said it’s buying Affiliated Computer for $63.11 in cash and stock for each Affiliated Computer share, 34 percent more than the closing price on Sept. 25. The purchase will extend Xerox’s reach in the services market as sales of its traditional printing equipment decline.

Affiliated Computer jumped 14 percent to $53.73 for the S&P 500’s biggest gain. Xerox posted the biggest loss in the index with a 16 percent slide to $7.49.

Abbott added 3.8 percent to $49.13. The company’s purchase of Solvay’s pharmaceutical unit will also give Abbott a bigger presence in emerging markets and lower its dependence on the arthritis drug Humira.

Cash Flow

As the economy emerges from the worst recession in 70 years, cash flow may rise from the $1.5 trillion reported by the Commerce Department for the year ended in June, according to data compiled by Credit Suisse Group AG and Bloomberg. Cash relative to share prices will climb to the highest in at least two decades next year compared with yields on corporate bonds, the data show.

The previous high in 2005 preceded the two busiest years ever for takeovers.

Europe’s Dow Jones Stoxx 600 Index jumped 1.6 percent. Germany’s DAX Index advanced 2.4 percent after Chancellor Angela Merkel won re-election with enough support to govern with the pro-business Free Democrats.

The MSCI Asia Pacific Index fell 1.5 percent, led by Japanese exporters as the yen strengthened to an eight-month high.

Cisco rose for the first time in five days, jumping 5.2 percent to $23.80. Barclays raised its recommendation on the company to “overweight” from “equal- weight.”

Insurers Rally

A measure of insurers in the S&P 500 rallied 3.2 percent. Insurance Services Offices Inc. said U.S. property and casualty insurers, a group including Allstate Corp. and Travelers Cos., returned to an underwriting profit in the second quarter, making more on premiums than they paid in expenses and claims.

Americans holding $3.5 trillion in cash are giving money managers increasing confidence that the stock market rally under President Barack Obama will continue through the end of the year. Even after reducing money-market accounts by 11 percent this year, investors have cash equal to 73 percent of S&P 500 companies’ net assets, according to data compiled by the Investment Company Institute and Bloomberg. At the peak of the bull market in 2007, the measure of buying power was 62 percent.

MEMC Electronic Materials Inc. lost 2.3 percent to $16.90. The maker of silicon wafers for solar modules and semiconductors was cut to “hold” from “buy” at Citigroup Inc.

Gander Mountain Co. surged 35 percent to $5.15. The sporting-goods retailer said it will go private, buying out stockholders who own fewer than 30,000 shares for $5.15 a share.

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By Gonzalo Vina and Brian Swint

Sept. 5 (Bloomberg) -- Group of 20 finance ministers agreed to maintain economic stimulus measures after U.K. Prime Minister Gordon Brown warned against a premature end of emergency spending and rescue programs.

“It would be an error of historic proportions if we were to repeat the errors of the 1930s,” Brown told finance ministers at the opening of a meeting in London today. “The risks still very much remain. To start now reversing the extraordinary measures would be a serious mistake.”

Ministers agreed to continue emergency aid to their economies as they plan exit strategies for withdrawing it, according to a German official, who spoke on condition of anonymity because the talks aren’t complete.

The policy makers arrived in the U.K. as a report in the U.S. signaled recovery will be sluggish. Unemployment reached a 26-year high in August even as the pace of job losses slowed. Such mixed signals are preventing them from declaring victory over the recession and peeling back record-low interest rates as well as $2 trillion in fiscal stimulus.

U.K. Chancellor of the Exchequer Alistair Darling and German Finance Minister Peer Steinbrueck were among the officials who began talks in London yesterday, saying it was too soon to unwind measures that Brown estimated were worth $5 trillion. They promised to start outlining how they will eventually do so.

Timing

“The time to start implementing an exit strategy is when you have seen the job through,” Darling said in an interview yesterday. “One of the biggest risks is saying the job is done, now we can throttle back. We have made those mistakes before.”

The International Monetary Fund raised its forecast for global growth next year to 2.9 percent from the 2.5 percent it predicted in July, a G-20 government official said. The Washington-based lender also reduced its projection for the global contraction this year to 1.3 percent, from a 1.4 percent drop, the official said on condition of anonymity, citing a paper prepared for the G-20.

Still, officials should start discussing how to remove the “enormous liquidity” in financial markets before it spurs inflation and government borrowing costs, Steinbrueck said.

“It’s necessary to prepare for a situation when the economic and financial crisis hopefully will be overcome,” Steinbrueck told reporters. “One can’t talk about the concrete point in time just yet.”

Crisis policies will have to stay in place for another six months, Russian Finance Minister Alexei Kudrin said in an interview in London yesterday.

Coordinating Plans

Countries should ultimately coordinate steps when the time comes to withdraw stimulus, French Finance Minister Christine Lagarde said. Failure to unite would risk fanning inflation, leading to uneven debt burdens and may distort markets.

“It should be done together,” Lagarde said. “What the timing will be for each country will depend on the fabrics of the economy, on the status of where it is, on its size. We must have this coordination amongst ourselves.”

Central bankers are also planning for the exit -- without rushing toward it. European Central Bank President Jean-Claude Trichet yesterday used a speech in Frankfurt to outline how the ECB’s stimulus measures will eventually be taken back. Many of its loans to banks will “naturally unwind” as they mature and demand for additional cash wanes, he said.

‘Premature’

“Notwithstanding some recent signs of improvement in the economic outlook, it is premature to declare the financial crisis over,” Trichet said. “Stressing the importance of the exit strategy should not be confused with its implementation.”

The G-20’s policy makers are meeting through today to shape an agenda for a Pittsburgh summit of their leaders in three weeks. They will release a statement about 4 p.m. in London.

The G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.

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By Bob Willis

Sept. 6 (Bloomberg) -- The U.S. trade deficit was probably little changed in July as imports and exports both grew, signaling a revival of commerce as the global slump eased, economists said before reports this week.

The gap between imports and exports increased 1.5 percent to $27.4 billion from $27 billion the prior month, according to the median of 63 estimates in a Bloomberg News survey ahead of the Commerce Department’s Sept. 10 report. Labor Department data released the next day may show the cost of imports rose in August for the fifth time in six months on higher fuel prices.

Rising demand for U.S.-made goods from trading partners such as China, Mexico and the European Union is combining with domestic stimulus measures to help to pull the economy out of a recession. Finance chiefs from the Group of 20 nations meeting in London last week vowed to sustain efforts to boost the global economy.

“Importers and exporters alike had the wind taken out of their sails last year and are only just now starting to pick up the breeze of recovery,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. In New York.

The U.S. trade gap may have widened again last month as the “cash-for-clunkers” program sparked a surge in purchases of vehicles made overseas. Rising oil prices probably also added to the cost of imports. With economists predicting the U.S. economy will grow at an average 2.1 percent rate in the second half of this year, imports will probably climb further.

The $26 billion trade deficit in May was the smallest since November 1999.

Import Prices

Import prices probably rose 1 percent in August from the prior month, led by oil and other commodities, economists surveyed by Bloomberg forecast a Labor Department will report on Sept. 11. From a year earlier, import prices probably fell 16 percent, according to the survey.

With demand picking up, crude oil on the New York Mercantile Exchange averaged $71.14 a barrel in August, up from $64.29 in July and an average $69.70 in June.

Alcoa Inc., the largest U.S. aluminum producer, is among companies profiting from rising demand for commodities. Alcoa last week raised its 2009 forecast for global aluminum consumption because of demand triggered by China’s 4 trillion yuan ($590 billion) in stimulus spending.

Chief Executive Officer Klaus Kleinfeld said he expects China’s consumption of the metal to rise 4 percent this year, compared with an earlier prediction of zero growth.

China ‘Back’

“China is back,” Kleinfeld said in an interview. “They had a lot of shovel-ready projects” planned for 2011 that are being started now in response to the global economic slowdown. “Also, the perceived deficiencies in the social network have been improved with the stimulus program, and that directly leads to people looking to upgrade from motorcycles to cars.” shocks.”

The Paris-based Organization for Economic Cooperation and Development cut its estimate for contraction this year in the world’s leading industrialized countries to 3.7 percent from 4.1 percent, while predicting a “modest” return to growth.

U.K. Prime Minister Gordon Brown yesterday warned against a premature end of emergency spending and rescue programs aimed at pulling the global economy out of its worst slump since the Great Depression.

“It would be an error of historic proportions if we were to repeat the errors of the 1930s,” Brown told Group of 20 finance ministers at the opening of their meeting in London. “The risks still very much remain. To start now reversing the extraordinary measures would be a serious mistake.”

Consumer Confidence

Economists say a gauge of U.S. consumer sentiment is likely to show an increase on prospects for renewed growth. The Reuters/University of Michigan preliminary survey of consumer confidence for this month, to be released on Sept. 11, will rise to 67.5 from 65.7 at the end of August, according to the Bloomberg survey.

U.S. stocks have surged since March on signs the recession is easing. The Standard and Poor’s 500 Index has gained 50 percent from a 12-year low reached on March 9, and the Dow Jones Industrial Average has gained 44 percent. The S&P 500 closed at 1,016.40 Sept. 4 in New York; the Dow closed at 9,441.27

A Commerce Department report on Sept. 11 is forecast to show inventories at U.S. wholesalers fell in July for an 11th straight time, while at a slower rate than the month before.

Bloomberg Survey

==============================================================
                       Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
==============================================================
Cons. Credit $ Blns       9/8       July     -10.3      -4.0
ABC Conf Index            9/8     Sept. 7     -45       -44
MBA Mortgage Applicatio   9/9     Sept. 5    -2.2%      n/a
Trade Balance $ Blns      9/10      July     -27.0     -27.4
Initial Claims ,000’s     9/10     29-Aug     570       560
Cont. Claims ,000’s       9/10     22-Aug     6234      6200
Import Prices MOM%        9/11      Aug.     -0.7%      1.0%
Import Prices YOY%        9/11      Aug.     -19.3%    -15.9%
U of Mich Conf. Index     9/11    Sept. P     65.7      67.5
Whlsale Inv. MOM%         9/11      July     -1.7%     -1.0%
Federal Budget $ Blns     9/11      Aug.     -111.9    -159.1
==============================================================

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Banks in Vietnam cut their dollar lending rates on the interbank market in the past week due to a growing surplus after firms switched to borrowing in Vietnamese dong under a government stimulus package, bankers said.

The State Bank of Vietnam said on Monday banks cut their dollar lending rates for nearly all terms in the week ending August 27. Rates on 12-month loans dropped to 1.7 percent from 2.8 percent the previous week. Many companies that needed dollars earlier this year have switched to borrowing in dong because of a government rate subsidy package, leaving banks with a surplus of the foreign currency, the official Securities Investment newspaper said. It said central bank measures to limit the use of the dollar in domestic markets had also helped reduce demand. On August 20 the central bank and the Industry and Trade Ministry agreed to tighten control over foreign exchange as dollar rates rose on the unofficial market and the country's exports were forecast to fall 6.4 percent this year to US$58.6 billion. On the unofficial market, the dollar rose to 18,390/18,430 dong on Monday from 18,370/18,390 last Friday. Commercial banks lent businesses about VND398 trillion ($22.3 billion), equivalent to 81 percent of the government’s loan-subsidy program, as of August 27, according to a statement on the government’s website. Last week the value of subsidized loans rose 0.43 percent from a week before, accelerating from 0.25 percent the previous week, central bank data shows. Governor Giau told a seminar last week the central bank would maintain its looser monetary stance, with the annual credit growth target lifted to 30 percent from the 25-27 percent set earlier by the government. Money supply would be targeted to expand 30 percent in 2009, accelerating from 20 percent growth last year, Giau said in a statement seen on Monday. “Inflation is on a rising trend in the last months of the year due to the impact of the easier fiscal and monetary policy,” he said, forecasting inflation this year at 6 percent to 8 percent. Consumer prices surged 22.9 percent in 2008. The central bank said state-run banks raised their dong deposit rates slightly, offering to pay 8.2-8.4 percent on six-month deposits against 8.0-8.4 percent a week ago, but that was below the 8.5-8.9 percent offered by partly private banks. Last week bankers said commercial banks extended their campaign to raise dong funds by increasing interest rates and in one case offering gold prizes. Source: Thanh Nien, Reuters

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A worker packages cooking oil bottles at a factory in Ho Chi Minh City Further fiscal stimulus is needed as the US$8 billion package this year has worked its way through the economy, showing good results, experts say.

If the economy is not completely out of the woods by the end of the current stimulus package, its continuation should be considered though the amount can be smaller, economist Vu Dinh Anh said Friday in a report on Vietnam Television’s website Cao Sy Kiem, a member of the National Advisory Council for Monetary Policy, said more stimulus measures would be necessary even after the economy has recovered. “Local businesses need to descend the ladder step by step and there should not be any abrupt end in stimulus spending,” Kiem said in an interview with Tien Phong newspaper Wednesday. Although the government’s program to subsidize 4 percent of the interest rate on loans taken by local businesses has shown real effects, it can only meet about one third of the credit demand, he said, noting the program is also set to close in the next four months. Vietnam’s economy accelerated in the second quarter as the stimulus helped drive credit growth and buoyed construction activity. The nation’s commercial banks have lent more than VND397.7 trillion ($22.3 billion) to businesses as part of the government’s loan-subsidy program as of August 27, a 0.43 percent increase from a week earlier, according to a central bank report Friday. “The government’s interest-rate subsidy program has helped the banking system and companies avoid bad debt and bankruptcies,” Tran Du Lich, a member of Vietnam’s National Assembly Committee for Economic Affairs, said at a conference in Ho Chi Minh City on August 19. Lich said the National Assembly will early next year discuss the size of another lending program for medium and long-term loans to help companies restructure businesses through the end of next year. The International Monetary Fund has said the global economy is recovering from a severe downturn, but it is too soon for governments to begin winding down stimulus efforts, according to AFP. “The outlook is improving but we do feel that it is very important to stress that it is no time for complacency,” AFP quoted IMF spokeswoman Caroline Atkinson as saying at a news conference Thursday. Kiem said interest rates on loans subsidized by the government are around 6 percent now but they would return to around 10 percent without the subsidies, which would cause many difficulties for local businesses. “What the government should do is to provide more credit,” he said, noting a credit growth target of around 30 percent is viable. The central bank plans to ease limits on credit growth this year as it aims to help the nation reach its economic expansion target of about 5 percent. The State Bank of Vietnam aims to cap expansion in lending at 30 percent, and will try to slow loan growth in the coming years, Governor Nguyen Van Giau said in a statement on the central bank’s website Friday. Credit from banks has grown 25 percent in the eight months through August from the end of last year, Giau said at a meeting in Da Lat on Friday. Vietnam’s economy may grow 5.2 percent this year, he said. Source: Thanh Nien, Bloomberg

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Vietnam’s largest banks will lower their interest rates on dollar deposits to 1.5 percent in June from around 2 percent now in a move to help avoid dollar hoarding in domestic markets, the central bank said.

All state-run banks plus Vietcombank, Vietnam’s largest partly private lender, have also agreed to set the ceiling for dollar lending rates at 3 percent, the State Bank of Vietnam said in a statement seen on Saturday. “The governor of the SBV is asking Vietnam Banks Association to seek consensus with other commercial banks to lower interest rates and (help) stabilize the forex market,” it said. The new rates come into effect tomorrow. The interbank 12-month dollar lending rates rose to 2.29 percent on Friday from 2.20 percent a week ago. This is still below the rate of 2.45 percent on April 29, according to Reuters data. The central bank said its inspectors will also step up large-scale checks from next month to deal with corporate dollar hoarding, which has pushed the exchange rate beyond regulated levels and led to a dollar shortage for the past several months. The Dow Jones newswire quoted Hanoi-based bankers as saying the SVB is implementing measures to make dollar holders sell greenbacks to banks, and encourage enterprises to borrow dollars instead of buying them. Earlier this month the government asked authorities, including the police, to help regulate foreign exchange transactions as part of efforts to reduce dollarization in the economy and control dollar rates on the black market. The central bank will accept the country’s recently issued dollar-denominated bonds as collateral in its dollar lending operations to help ease the tightness in dollar supply, bankers said on Friday. The central bank said it would accept foreign currency denominated “valuable papers” as collateral for the first time, without elaborating. Bankers said these papers would primarily include Vietnam’s US$230 million dollar bonds issued in March and they would be accepted in the central bank’s dollar lending operations. “This will accommodate the supply of short-term funds to banks which suffer from liquidity shortfall,” the bank said in a statement seen on Friday. Importers have been complaining they were unable to buy dollars at the official exchange rate due to dollar shortage at the banks. “The new rule would create a new mechanism for the central bank to intervene to solve the dollar shortage issue but given the amount of domestic dollar bonds, it will not be much,” a banker in Ho Chi Minh City said. The central bank said earlier this month that banks had plenty of dollars that they can lend but a shortage of dollars to sell as exporters preferred to keep their export earnings in the greenback on fear of a faster depreciation of the dong. Vietnam devalued its dong currency twice last year and the currency remains under pressure because of general economic uncertainty, an expected turnaround in the trade balance to a deficit and the fact that the dong has weakened less than many of its peers recently. The government estimated earlier this week that the trade deficit in May would widen to $1.5 billion from $1.18 billion in April. But State Bank Governor Nguyen Van Giau said last week he saw no need to adjust the dong’s exchange rate against the dollar on the grounds that the dollar was depreciating against other major currencies. The central bank allows interbank dollar/dong transactions to trade up to 5 percent on either side of the official reference rate. It set the rate at VND16,938 per dollar on Saturday. Source: Reuters, Thanh Nien

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Nobel laureate Paul Krugman said Vietnam needed to bide its time while 'the bigger economies get their act together' Paul Krugman’s advice for Vietnam: don’t lose sight of financial regulation as private business takes off and the “invisible hand” of the market grows stronger.

The Nobel Prize-winning economist said strict regulation of the financial sector and government safety nets would be key to greasing the wheels of Vietnam’s transition to a market-based economy. Speaking at a seminar in Ho Chi Minh City Thursday, The New York Times columnist and Professor at Princeton University said the global economic crisis was “stabilizing” but that there were no clear signs o a full recovery. “Things are getting worse, but they’re getting worse more slowly,” he said, citing less rapid US job losses and a slowdown in the fall of industrial production and exports in key economies. “I don’t think we’ve hit bottom, but the bottom is not too much further below us,” he said. “My big concern is that we don’t hit the bottom and bounce, we hit the bottom and stay there. It’s not obvious where recovery comes from.” He said there was not much Vietnam could do to help itself recover other than to stay smart, hope and wait. Shadow banking Krugman spoke at length of how the deregulation of the US financial sector allowed the shadow banking system to set off the financial crises that transformed into a global economic recession. Institutions that provide the services of banks without banking regulation, including but not limited to hedge funds, money funds and investment banks, have become notorious for their role in the meltdown. This system of institutions, known as the shadow banking sector, held trillions of dollars in the US by 2007. With so much money, the vulnerable and unregulated system in which investments are risky and unprotected, became an integral part of US and global finance. Krugman blamed deregulation that began in the Reagan-Thatcher era for the development. “We had a whole set of precautionary measures coming out of the great depression that were designed to prevent a recurrence of the banking crisis.” Then the world watched in dismay as the banking crisis of 2008 spawned global panic. “We were persuaded after about 1980 that we should have the same kind of free market principles for finance that we had for wheat or airline services,” said Krugman. “It turned out that our grandfathers were right and we were wrong.” The Nobel laureate stood by one of his trademark lines about talking to economists: “Don’t trust anyone under 50,” he said, explaining that anyone brought up in the new school of economics had not been taught the lessons our grandfathers learned. He went on to repeat another one of his mantras: “anything that does what a bank does, anything that has to be rescued in crises the way banks are, should be regulated like a bank.” He said the government officials who oversaw this deregulation, not just bankers, have a lot to answer for. “They liberalized, they deregulated, even as the banking sector was going crazy… in the US, this is bipartisan. The Clinton administration gave the bankers a lot of what they wanted, the Bush administration even more.” Krugman told the mostly-Vietnamese audience to not let the same thing happen here. “If you let a deregulated financial system run wild, it will do very bad things to your economy.” Slap in the face In discussing Vietnam’s situation, Krugman also warned against some of the market’s more exotic trappings. Asked about whether Vietnam should embrace derivatives, he was clear: “Don’t touch them.” He was skeptical of financial innovation in general. Most innovations – other than ATMs and overdraft protection – were geared toward helping institutions evade regulation, he said. Turning back to his rules for the financial sector, he suggested that banks be restricted from operating out of their main line of business. He said any deregulation “needs to be done with great care because you’ll find that when banking system goes wrong it does a lot of damage.” Now that damage has been done, he said the fate of highly trade-dependent, small economies like Vietnam were tightly bound to the world crisis, with their recovery linked directly to a real global recovery. So, what can Vietnam do toward that recovery? “Not a lot under the circumstances,” said Krugman. “Pray that the bigger economies get their act together.” He said things would have to change in New York and London before they changed in Vietnam. Though Vietnam was not responsible for the crisis, Krugman said the country was being “slapped in the face by the invisible hand.” Wryly, he said: “I miss that US$3 trillion that we spent on tax cuts and the war,” positing that if the US hadn’t wasted the funds, the crisis would be less severe. Reported by Jon Dillingham NO QUICK FIXES Thanh Nien Daily spoke with leading economists, entrepreneurs and journalists on the sidelines of a seminar presented by Nobel Prize-winning economist Paul Krugman in Ho Chi Minh City Thursday. Economist Pham Chi Lan Many reliable international economic magazines are saying the crisis has not hit bottom and nobody knows how large it is… for developing countries like Vietnam, the crisis arrived later but will stay longer. I personally think official predictions that Vietnam’s economy will recover by the end of this year are unrealistic. The Ministry of Labor, Invalids and Social Affairs said 300,000-400,000 people have lost their jobs, while trade associations have reported nearly 5,000,000. As the unemployment rate is a critical criterion in assessing the crisis, transparent information is more essential than ever. Krugman’s careful judgments can help governments and policy makers be more objective. They should keep their eyes on the rough road ahead. Vietnam’s US$8 billion stimulus package accounts for about 10 percent of its GDP. However, several representatives at the current National Assembly session are questioning where this money came from and how it will be used. Here, we [need] a clear target and transparent supervision system for stimulus packages. Gian Tu Trung, president of the PACE Institute of Directors This crisis has changed our view of the future… This is a right time for us all to reposition ourselves… I hope Paul Krugman’s presentation will bring a new perspective on all this. Understanding the aim of your journey will definitely help you choose the best path to take to get to the destination. John Yeomans, director of Deloitte Consulting/ICS Pte Ltd. In terms of the different economic systems around the world, you have some that are more under control than others and some that are more free. What we can learn from the seminar and recent history is that there is no perfect system and so my view is we need to look at different systems around the world and pick the best from each. So the policy makers should adapt in making their policies to best suit their situation. Vu Thanh Tu Anh, director of research at the Fulbright Economics Teaching Program I have drawn two important things from the seminar: Firstly, the government’s role of ensuring sound regulations for the financial system, especially for an economy like Vietnam’s, is crucial. Secondly, every country under any political system should have an effective social security system, especially during the economic crisis, as the poor are the most vulnerable to unemployment and other consequences. David Pilling, Asia editor of the Financial Times The government’s role in regulating the economy is crucial and undeniable. However, let’s take the example of China. If people’s creativity is allowed to flourish, it would usually create better results. In this case, the government should ease regulations for the private sector to fairly compete with the state-owned enterprises in the economy. Vietnam has allowed room for the private sector to develop and this should be maintained in the future. However, this is not a case for some to take undue advantage and commit corruption. Reported by Vinh Bao

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The market has been benefiting from increased liquidity in the last couple of weeks as a result of returning interest in Vietnamese shares.

The drop we saw in 2008 and the early part of the year has made Vietnamese shares cheaper, which has helped fuel the return of interest in the market. Some Vietnamese companies have also been more proactive in disclosing information and increasing transparency, allowing investors to increase their understanding and conviction in some of the companies that they have invested in. It is no secret that the market has moved higher in terms of u the recent runup. Our view is that the sustainability of the market’s rally should be determined by the fundamentals of the stocks themselves. Should we see more companies upgrading or becoming more bullish on their respective earnings outlook going forward, then that should indicate that the market’s renewed strength should be sustainable. Mark Canizares, head of equities at Ho Chi Minh City-based Manulife Vietnam Fund Management Source: Bloomberg

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Vietnam central bank has no plans to devalue dong

Tellers count dong notes at a bank in Hanoi. The State Bank of Vietnam said there is no plan to devalue the dong or change the benchmark v interest rate. There is no plan to devalue the dong or change the benchmark interest rate, the central bank governor said.

Australia & New Zealand Banking Group Ltd. predicted recently that Vietnam would devalue its currency by 4 percent within three months to boost exports and narrow a gap between so-called official and free-market rates. The dong traded between banks at VND17,783 against the dollar, 1.8 percent weaker than at the end of last year. The State Bank of Vietnam controls the currency by setting a daily reference rate, and allows the dong to trade 5 percent either side of that rate. “We don’t have any plans to devalue the dong in the way we did in December,” Governor Nguyen Van Giau said in an interview on the sidelines of the opening of the National Assembly Wednesday in Hanoi. On December 25 it set the reference rate 3 percent weaker. The gap between the official and black-market rates widened by about 2 percent in April, according to Indochina Capital Vietnam Holdings Ltd. Importers have been buying dollars on the “parallel market” because banks do not have enough, the ANZ report said. Measures the central bank has taken to make dollars more easily available to importers would eventually narrow the gap between official exchange rates and the free-market rate, Giau said. In the past year the dong has been devalued twice and the government has significantly widened its trading band, allowing the currency to slip some 9 percent against the greenback. Many expect the slide to continue this year. However, the Asian Development Bank (ADB)‘s country director said on Monday Vietnam does not need to devalue its currency in the short or medium term because the weakness of the dong is more about perception than supply and demand. The government should also avoid further loosening monetary policy because that would risk upsetting macroeconomic stability in a country that is structurally prone to inflation, which the ADB’s Ayumi Konishi said had the potential to re-emerge. The ADB’s position on the currency jibes with that of the State Bank of Vietnam, the central bank, which said last week it saw no need for a major devaluation although it expected the dong to depreciate by up to 6 percent this year. “When we look at foreign exchange demand and supply situation, particularly for trade related demands, there is no reason that the Vietnamese dong needs to devalue further at this particular point in time,” Konishi told Reuters in an interview. “At least in the short and medium term we do believe that the Vietnamese dong exchange rate should be maintained pretty much at the same level, of course, with the flexibility given to reflect the demand and supply situation. “The currency trading outside of the band ... reflects more a perception issue rather than the real demand and supply situation of the currency to start with,” Konishi said. TIME LINE OF VIETNAM’S CURRENCY POLICY March 24, 2009 - Central bank widens trading band to +/-5 percent from +/-3 percent. The mid-point reference rate stays steady, but in trade the dong quickly weakens to the new band’s limit. On the unofficial market it soon moves beyond the weak end of the band. December 31, 2008 - The dong ends the year down 8.2 percent against the dollar on interbank markets. Based on the official mid-point reference rate, the dong ends the year down 5.2 percent. December 25, 2008 - Central bank devalues the dong by 3 percent by adjusting the mid-point reference rate to VND16,989 per dollar from VND16,494 per dollar. November 7, 2008 - Central bank widens the band to +/-3 percent from +/-2 percent in a move widely seen as designed to allow the currency to depreciate so that exports can help the country’s growth. The dong weakens to the new band’s limit. June 26, 2008 - The central bank doubles the trading band to +/-2 percent from +/-1 percent, yielding to market pressure for the currency to fall at a time of sustained double-digit inflation and wide trade deficits. The bank also bans the trading of US dollars and dong via a third currency. June 11, 2008 - The central bank devalues the dong by 2 percent by setting the mid-point reference rate at VND16,461 to a dollar in the face of double-digit inflation and a worsening balance of payments. March 10, 2008 - Central bank widens the band to +/-1 percent from +/- 0.75 percent. Source: Bloomberg, Reuters

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An alliance between banks and insurers for so-called bancassurance will soon take shape in Vietnam, European and Asian experts predicted at a conference in Ho Chi Minh City.

Bancassurance, or the selling of insurance products through a bank, has developed strongly in Europe and is appearing increasingly in Asia, including in Vietnam, they said at the two-day conference organized by the Vietnam Chamber of Commerce and Industry and European Financial Marketing and Management Association ending Wednesday. It was also attended by delegates from Africa. Co Minh Duc, chairman of Prevoir Vietnam Life Insurance Company, told Thanh Nien Daily that bancassurance would reduce wages for insurers and offer banks security since the practice entails insuring all loans. France-headquartered Prevoir does not employ agents like other life insurers to sell its products, instead choosing to introduce their products through banks since it began operations in 2005, he said. The firm has entered into alliances with 12 banks including Asia Commercial Bank, Sacombank and An Binh Bank, as well as the Vietnam Post and Telecommunication. It sold 20,000 policies last year, taking its cumulative figure since coming to Vietnam to 51,000, and had a premium income of US$3.5 million. This year its premium income grew 220 percent in the first quarter to $1 million, according to the chairman, who added Vietnam is a promising market since only 1 percent of its 85 million population have life insurance. HSBC Vietnam said it is expanding its bancassurance business with Bao Viet Insurance which it entered into over a year ago. The bank said the joint venture is doing well by marketing products solely through its eight branches in HCMC and Hanoi. Bao Viet Corporation, parent of Bao Viet Insurance, which has also signed bancassurance alliances with local banks like Techcombank, founded Bao Viet Bank to introduce the practice. The Bank for Foreign Trade of Vietnam (Vietcombank) collaborated with local Southern Asia Commercial Joint Stock Bank and France’s BNP Paribas Assurance Co. last year to set up a VND600 billion ($33.7 million) bancassurance joint venture. Reported by Minh Quang

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The Ministry of Trade and Industry has begun a new crackdown on foreign currency use, the local VietnamNet online newspaper reported.

The move, launched by Minister Vu Huy Hoang on Friday, followed the prime minister’s instruction last week that ordered authorities, including the police, to help regulate transactions in US dollars. According to VietnamNet, Hoang asked the ministry’s Market Management Department to increase inspections and crack down on the advertising and selling of products in foreign currencies. In particular, Hoang instructed the department to strengthen cooperation with authorities in Hanoi and Ho Chi Minh City to enforce the clampdown in those commercial hubs. The department must also corporate with inspectors from the central bank in its inspections. Source: Thanh Nien

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Tellers count dollar notes at an Eximbank branch in Ho Chi Minh City The foreign exchange market has become strained as firms’ demand for dollars has exceeded purchased supplies of commercial banks, forcing many firms to buy the greenback on the black market at higher prices.

The situation has developed over the last three weeks, Deputy Governor of the State Bank of Vietnam (SBV) Nguyen Van Binh said in a report on the SBV's website. Less than a month after the central bank widened its trading band on March 24 to 5 percent on either side of a fixed daily midpoint from the earlier 3 percent, commercial banks have had to apply both buying and selling foreign exchange rates at the ceiling levels, he said. Nguyen Van Binh, Director of the Center for Material and Equipment Imports, said firms now have to wait seven to 10 days for buying the dollars they need from commercial banks. To get dollars, his company has to register the purchase with commercial banks some days earlier and deposit dong, director Binh said, adding that some other firms have even had to buy euros and then exchange them for dollars. However, one commercial bank by itself has not been able to meet his center’s demand for dollars, and it has registered to buy the greenback from three or four banks. The company needs millions of dollars every month to pay for imports. Afraid of missing business opportunities while waiting for dollars from the banks, his company has had to buy dollars unofficially at higher prices. “Dollar prices in the black market are VND200-500 per dollar higher than those offered by commercial banks. Today [May 15], we had to buy dollars at VND260 higher per dollar from the market,” he said. Deputy Director of the Hanoi Trade Corporation (Hapro) Vu Thanh Son said, “We have to wait several days to buy dollars from commercial banks. This has affected our import activities.” Each month, Son’s business spends $5-7 million on imports, and his company’s foreign currency source from exports is not enough. “We have to actively register to buy dollars from banks, and keep good relations with six or seven banks so that they can help us get the foreign currency we need,” Son said. The head of a paper firm, who wished to be unnamed, said his company could not manage enough dollars now to pay for imports under already signed contracts. “Commercial banks have refused our request for dollars because of their thin supply. If we buy dollars from the black market, the higher prices will make us lose money.” Explaining the dollar shortage, deputy governor Binh said dollar supply from exports, foreign direct investment (FDI), remittances and foreign loans has declined due to impacts of the global economic crisis, which has caused worries about dong devaluation, leading to dollar hoarding in the economy. He also said importers, who need dollars for their payments, preferred dong loans to benefit from the 4-percent interest subsidy and then buy the greenback from banks. As exporters have deposited dollars instead of selling them and many residents have switched their dong deposits to dollar deposits on dong devaluation concerns, deposits in the greenback increased at an unusually high rate of 3.35 percent in the first four months of this year, the deputy governor said. “This is an abnormal situation,” he said. The banking system is loaded with foreign currencies for lending but still lacks funds for selling, leading to the strain in the foreign exchange market, he said. Banks are not allowed to sell dollars held in deposits. To deal with the situation, commercial banks should reduce interest rates on dollar deposits as well as rates on dollar loans to spur borrowing and discourage deposits, Binh said, noting that the interest rates on dollar deposits should be 1-2 percent at maximum, compared with the current of 2-3 percent, and interest rates on dollars loans should be 1.5-3.5 percent. SBV is also considering dollar loans under an interest subsidy program, he said. In addition, SBV is implementing a scheme with commercial banks on a large scale under which banks can exchange dollars against deposits with SBV for Vietnamese dong, and the central bank would then sell the dollars to banks that need them. “This would solve the problem of redundant foreign currency funds for lending by commercial banks, and help the central bank have more foreign currency funds to sell, creating liquidity and stabilizing the foreign exchange market,” the deputy governor said. Binh said the dong is expected to fall against the dollar by 5-6 percent in 2009. But he added: “The state is fully able to balance foreign currency demands to serve its socioeconomic development, so there is no reason to expect a big devaluation of the dong.” Vietnam’s foreign currency reserves are now at $20 billion, enough to cover all trade imbalances, he said. In the first four months of this year, Vietnam posted a trade surplus of $2.6 billion. Reported by Ngan Anh

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Interest rates ‘have hit a floor,’ may rise, ratings agency says

The benchmark interest rate has probably reached “a floor” after a series of cuts, and borrowing costs may need to be increased as government subsidies spark accelerating loan growth, Fitch Ratings said.

The State Bank of Vietnam has lowered its key rate to 7 percent from 14 percent in October. Standard Chartered Plc predicted a month ago that policy makers would further reduce the rate to 5 percent by the end of June, in an attempt to bolster economic growth. “Given the government’s needs and that we’re starting to see dong liquidity tightening in the market, rates at the moment appear to have hit a floor,” said Peter Tebbutt, a Hong Kong-based senior director at Fitch, in an interview Thursday in Ho Chi Minh City. “If anything, they may go up a bit.” A government subsidy on loans, intended to help boost economic growth from the 3.1 percent first-quarter pace, has sparked a “new credit boom” in Vietnam, Citigroup Inc. said last month. Lending jumped about 11 percent from January to April, marking a sharp acceleration from a first-quarter increase of 3 percent, according to Fitch estimates. The subsidy program “appears from April’s numbers to be too successful,” said Tebbutt. “It seems to be driving loan growth too much.” The State Bank of Vietnam has apparently resisted government pressure for now to lower interest rates further, according to Sabine Bauer, a Hong-Kong based Fitch director. Defending their ground “The central bank in this regard has proved to be a strong voice,” Bauer said Thursday in HCMC. “In this debate, on the base rate, they have so far defended their ground.” In addition to delaying potential non-performing loans, the Vietnamese government subsidy program may also have resulted in some borrowing being used to invest in property or stocks; in the creation of some fake projects to take advantage of the scheme; or in banks using “circular loans” to profit from it, according to Citigroup. “The banks’ responsibility is to ensure that these are loans made to projects which are viable,” Bauer said. “But having said that, it’s very difficult for them to monitor where the money actually goes.” In a report released last week on Vietnam’s banking industry, Fitch said “moral suasion” has encouraged banks to keep lending rates low, with authorities attempting to ensure a “reasonable level” of loan growth. Still, with the spread between lending and deposit rates narrowing, the dong depreciating, and international demand for Vietnamese goods weakening, credit costs are set to rise, Fitch said in the report. “You have the interest-rate subsidy, you have quite strong loans growth,” Tebbutt said. “Then you could possibly start getting inflation coming back. And you’ve got a government that needs to borrow a lot of money this year, particularly for its fiscal stimulus program. So with everyone borrowing, rates will go up.” Source: Bloomberg

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Vietnam has managed to avoid the sharp falls in exports experienced by other Asian nations, taking advantage of its focus on lower-end products such as garments. Vietnam posted a trade surplus for the first four months of the year, swinging from a deficit in the same period a year earlier, as import demand tumbled while garment exports increased.

The country recorded a surplus of US$801 million through April, compared with a shortfall of more than $11 billion in the same period a year earlier, the General Statistics Office said in Hanoi Friday. Exports declined 0.1 percent to $18.64 billion, while imports plunged 41 percent to $17.84 billion. Sluggish first-quarter economic growth, the slowest on record, cut into demand for raw materials from overseas. Vietnam has also managed to avoid the sharp falls in exports experienced by other Asian nations, taking advantage of its focus on lower-end products such as garments and on commodities such as rice. “People still need to have staples at the table, and they still need to have clothes for their kids,” Myron Brilliant, a vice president at the US Chamber of Commerce in Washington, told reporters Thursday in Ho Chi Minh City. “Vietnam is in areas where consumers are still buying products.” Garment shipments rose 2 percent to $2.59 billion, according to Friday’s report. Vietnam is among the world’s top 10 garment exporters, Deputy Prime Minister Nguyen Thien Nhan told an investment conference in HCMC Friday. FIRST MONTHLY DEFICIT IN 2009 With a sharp drop in exports of precious metals and gems in April, Vietnam would record the first trade deficit this year, the General Statistics Office estimated. Overall exports would come to around US$4.5 billion in April and imports would be $5.2 billion, the office said. The precious metal and gem stones category, consisting mainly of gold re-exports, earned only a paltry $15 million in April, the statistics department said. In March it earned $1.1 billion and in February $1.3 billion. Over the past two weeks, gold prices in Vietnam have been as much as $20 a tael more expensive than on the international market, gold traders said. A tael equals 37.5 grams. The domestic price of gold had been lower since the start of the year, prompting the record surge in gold re-exports. The central bank banned gold imports in May last year and had restricted exports, although it relaxed the rule to let a selected number of banks export the metal in February and March to take profits, bankers and gold traders said. Source: Reuters Self-sufficient “For a lot of the big retailers in the US, Vietnam is their second-largest platform, after China,” said Virginia Foote, president of financial advisory company Vietnam Partners LLC, in an interview Friday in HCMC. “Vietnam is hanging on to second, and that’s not a bad place to be.” Rice exports jumped 44 percent by value to $1.16 billion. Vietnam’s target is to maintain a “strong, self-sufficient export-oriented agriculture industry,” Nhan said Thursday. “Vietnam remains the world’s second-largest rice exporter,” the US Foreign Agricultural Service said in a report this month. “Large-volume contracts are often signed within the first two quarters of the year.” Oil exports slumped 45 percent by value to $1.98 billion, even while increasing 20 percent by volume. The average global price of crude oil tumbled 56 percent during the period. Footwear shipments slipped 11 percent to $1.24 billion, while seafood exports fell 7 percent to $1.06 billion. ‘Less vulnerable’ “Vietnam has been successful in having a fairly diverse export portfolio,” said Foote. “They’re less vulnerable. In this environment, that’s been very helpful.” Exports of precious stones and metals surged to a record $2.54 billion in the first four months from negligible levels a year ago. The sale of gold abroad has been driven by Vietnamese taking advantage of higher international prices for bullion, HSBC Holdings Plc said in a note. Almost all Vietnamese gold exports result from bullion obtained through past imports rather than from local output. “The gold export figures have been coming down quickly,” said Jonathan Pincus, an economist with the Vietnam Program at the Harvard Kennedy School in HCMC, in an interview Friday. “One would think that that’s it, that’s been played out.” Imports of machinery and mechanical products slumped 27 percent to $3.37 billion, while steel purchases from abroad tumbled 68 percent to $1.16 billion, according to Friday’s report. Foreign exchange “One of the reasons that imports are falling so rapidly is that people can’t get access to foreign exchange, as banks and exporters are holding it because of concerns about the exchange rate and fears that if they sell foreign exchange now they won’t be able to get it back later,” said Pincus. “And a lot of it is just a slowdown in investment,” he said. “It’s a signal that a lot of investment projects are being postponed or scaled down.” Vietnam is likely to post a trade deficit for the full year of as much as $6 billion, wrote Prakriti Sofat, a Singapore-based economist at HSBC, in a research note Friday. Imports will “show more life as base effects become less favorable and the policy stimulus feeds through the economy,” Sofat wrote. “It is important to bear in mind that Vietnam remains in the early stages of development, meaning that the country needs to import large quantities of capital goods, keeping it in a structural deficit.” Source: Bloomberg

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