By Patricia Lui
May 28 (Bloomberg) -- Vietnam is heading for a ``currency crisis,'' similar to that of Thailand's baht in 1997, because the central bank has kept the dong too strong as inflation soars and the trade deficit widens, said Morgan Stanley.
Twelve-month non-deliverable forwards show traders are betting the currency will drop 39 percent against the dollar in the next year. Vietnam's current-account deficit, foreign- exchange reserves and inflation are at levels ``misaligned'' with the dong, wrote Stewart Newnham, a Hong Kong-based analyst at the bank, in a research note today.
``There is a run on the dong,'' wrote Newnham. ``Many of the classic fundamental conditions are in place including an overvalued currency, a dangerously unbalanced economy and low foreign-exchange reserves.''
The dong was at 16,229 per dollar as of 5:40 p.m. in Hanoi, down 1.3 percent this year. The State Bank of Vietnam sets a daily reference rate, and the currency is allowed to trade 1 percent either side of it. The 12-month non-deliverable forward contract has slipped 22 percent this week to 22,550 per dollar.
Nguyen Van Giau, the governor of the State Bank of Vietnam, declined to comment today on the Morgan Stanley report when contacted by Bloomberg.
The central bank said yesterday it has the ability to ensure an orderly exchange rate, Nguyen Quang Huy, director of the banking-management department, said in a statement on the bank's Web site. Demand for U.S. dollar is accelerating, caused by Vietnam's highest inflation since 1992, Huy said.
The government plans to continue carrying out a ``stable exchange rate policy'' within a trading band, Huy said, reiterating existing policy.
Asian Financial Crisis
Even so, Newnham says the dong may be devalued similar to the baht in 1997 when Thailand's currency was devalued 45 percent against the dollar as speculators betted it was overvalued. The devaluation touched off an unprecedented financial crisis in the region as funds fled on risk aversion.
Vietnam's non-performing loans are likely to rise as property prices fall, said Newnham. The nation's benchmark Ho Chi Minh stock index has slumped 55 percent this year.
``The dong could face similar downside risks,'' said Newnham. ``A devaluation episode could trigger a contagion throughout the region.''
Vietnam's Inflation Rises to 25.2% in May on Food, News Reports
By Nguyen Dieu Tu Uyen
May 27 (Bloomberg) -- Vietnam's inflation accelerated to 25.2 percent in May, the Vietnam News reported, citing data from the General Statistic Office.
Consumer prices rose 3.91 percent from a month earlier, the fastest month-on-month increase since 1995, the newspaper said.
The index gained on higher food prices, including so-called rice fever, as the cost of the staple soared, the report said, citing Nguyen Duc Thang, deputy director of the GSO's trade and price department.
The Southeast Asian nation in April reported that consumer prices gained 21.4 percent from a year earlier, the most since at least 1992.
Vietnam's Dong Falls as Fitch Downgrades Outlook; Bonds Rise
By Nguyen Kieu Giang and Van Nguyen
May 29 (Bloomberg) -- Vietnam's dong declined for a sixth straight day after Fitch Ratings downgraded the nation's credit outlook because of accelerating inflation. Bonds rose.
The currency has dropped 1.4 percent this year as the nation's trade deficit more than tripled in the first five months. Consumer prices gained 25 percent in May, the most since at least 1992, due to rising rice and energy costs. Fitch said today that inflation is a ``serious'' concern for Vietnam, which hasn't done enough to temper price gains.
The dong dropped 0.04 percent to 16,235.50 per dollar as of 4:15 p.m. in Hanoi, from 16,229 yesterday, according to data compiled by Bloomberg. The currency headed for a third monthly loss, falling 0.7 percent.
``The dong will get weaker against the U.S. dollar because the trade deficit has increased demand for dollars,'' said Lawrence Wolfe, director of business development at Ho Chi Minh City-based Dong A Securities Co.
Vietnam's trade deficit widened to $14.42 billion from $4.25 billion in the same period a year ago, according to figures released by the General Statistics Office. Exports rose 27 percent to $23.4 billion, while imports climbed 67 percent to $37.82 billion.
The State Bank of Vietnam set a daily reference rate for the dong of 16,077 a dollar compared with 16,069 yesterday, signaling the central bank wants the currency to strengthen from the current spot rate. The currency is allowed to trade 1 percent on either side of the rate set each day.
Trading Band
Responding to an article in the Wall Street Journal yesterday that Vietnam was about to adjust the band, the central bank said the trading limit was to stay for now.
The trading band has remained unchanged at plus or minus 1 percent and the central bank will announce the time when it plans to change it, Le Xuan Nghia, director of the banking development strategy department, said yesterday.
The central bank will manage a stable rate, allowing the currency to rise or fall 2 percent in 2008 as per the prime minister's instruction, the central bank's Huy said in the statement on the Web site.
Fitch, Banks
Fitch lowered its outlook to negative from stable and affirmed Vietnam's BB- long-term foreign currency rating, which is three levels below investment grade, according to a press release. Standard & Poor's downgraded the outlook on Vietnam's foreign-currency debt to negative earlier this month.
Vietnam's policy response to accelerating inflation ``has been both too slow -- as official pronouncements have not been followed up by immediate action -- and too small,'' Fitch said. Any sharp slowdown in economic growth would have ``negative effects on the quality of banks' assets,'' the agency said.
Morgan Stanley said yesterday that Vietnam is heading for a ``currency crisis,'' similar to that of Thailand's baht in 1997 because the central bank has kept the dong too strong as inflation soars and the trade deficit widens.
``To revive investor confidence, it could be a rather long road,'' said Dong A Securities' Wolfe. ``The first thing is they have to defeat inflation. Only when people see inflation is under control will they have more confidence to bring money into the country.''
Forwards Market
Non-deliverable forwards contracts in the dong show traders are betting the currency will decline about 28 percent against the dollar in the next 12 months to an implied rate of 22,550. Forwards are agreements in which assets are bought and sold at current prices for future delivery.
``It is a bit alarmist to say that Vietnam is in a currency crisis,'' Wolfe said in an interview. ``Non-deliverable forwards are an indicator of the current sentiment. The government is still able to manage the exchange rate here.''
Vietnam's five-year government bonds gained, halting six days of declines.
The yield on the notes fell 1 basis point to 14.89 percent, according to a daily fixing price from 10 banks compiled by Bloomberg. The rate has climbed 1.7 percentage points in a week. A basis point is 0.01 percentage point.
0 nhận xét:
Post a Comment