9:43:02 PM | 2/16/2008
There are quite a few opinions that SBV seems to have lots of confusion in managing the monetary market and stabilising prices in line with economic growth and inflation control during the past time. What is your opinion on these statements?
There is a strong supply of foreign currency at the year end, causing pressure on the exchange rate between USD and VND, forcing it to fall below VND16,000. SBV faces considerable pressure. If dong is spent buying back foreign currency to balance supply – demand and save the exchange rate, there is a risk of increasing inflation (because the amount of dong in circulation increases). On the other hand, if foreign currency is not drawn back, the exchange rate could continue to drop to lower levels and would not support exports in the long term, further widening the trade gap.
As a matter of policy, SBV only interferes when necessary, and has no intention of buying back foreign currency immediately after its rapid flow into just for immediate market balance. In the last year, SBV loosened the exchange rate twice (between USD buying – selling price of banks and average exchange rate on the inter-bank market), from 0.25 percent to 0.5 percent and most recently, 0.75 percent. Loosening the exchange rate allows banks more flexibility in buying and selling foreign currency. In the short term, however, SBV has no intention of further loosening the exchange rate.
The 2007 CPI exceeded economic growth and many people think that is partly due to monetary causes, as the strong increase of dong in circulation boosts prices of commodities. However, SBV has not used up its quota to supply dong into circulation as approved by the Prime Minister.
Vietnam stock market has witnessed gloomy days for a long time. In your opinion, will SBV reconsider Directive 03 on lending against stock collateral?
The stock market’s recession in a long period, as defined, is partly due to the rapid increase in share supply (enterprises race against each other to issue shares to raise capital, more and more enterprises are listed and state owned corporations schedule IPOs). SBV is cooperating with State Security Commission (SSC) in putting forward measures to manage the market in a harmonious manner. We are determined not to save the market at the cost of issuing regulations supporting speculation. In the coming time, SBV will reconsider Directive 03 in which further loans for security investments will be considered, but strict management continues to be exerted so that risks can be limited.
In this market recession, will SBV consider delaying IPO schedules for state-owned banks?
After the Bank for Foreign Trade of Vietnam’s IPO (Vietcombank), IPOs of three remaining banks, including Industrial and Commercial Bank of Vietnam (Incombank), Bank for Investment and Development of Vietnam (BIDV) and Housing Bank of the Mekong Delta (MHB), will be conducted in line with the state equitization roadmap. However, the IPO schedule will be fixed for a favourable market situation so that more benefit can be reaped for the banks and the government. In the case of Incombank, though wishing to conduct IPO in March 2008, it should consider choosing another favourable time.
In more than a decade, this is the first time Vietnam has allowed establishing new joint stock commercial banks. Will this boom cast negative effects on Vietnam finance and security markets?
SBV has agreed in principle to the establishment of four new joint stock banks (JSB) and is considering the applications of five other JSBs. The establishment of new banks is a demand of the economy and SBV will be cautious in examining and approving applications and granting licenses. From license receipt to official operation, it takes banks time to prepare personnel, infrastructure and capital. The market, therefore, is not likely to be stirred up by the bank boom.
Quynh Chi
Vietnamese
