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HOSE executive criticizes monetary policy
Le Hai Tra, Member of the HCM City Stock Exchange’s (HOSE) Management Board, says Vietnam must not control inflation by sacrificing the stock market.
No State Securities Commission (SSC) or HOSE official had asserted their concern over the State Bank of Vietnam’s new monetary policy, until Mr. Tra wrote in Dau tu chung khoan that Vietnam must not curb inflation by sacrificing the stock market
According to Mr. Tra, it is understandable why curbing inflation is now the top priority of the Government and State Bank, as high inflation has too serious impacts on the majority of Vietnamese people.
However, Mr. Tra says the implications of such an extreme monetary policy, under which the central bank has primarily acted by withdrawing money from circulation, are long-term and potentially destructive.
The tightened monetary policy will badly affect production and business. In order to persuade investors to buy their shares, businesses have to make a profit of at least 25% (so investors can get better turnover from shares than they can bank deposits).
Mr. Tra wrote that he read somewhere an opinion that asserted it is necessary to sacrifice the stock market to curb inflation. However, he thinks the central bank has overdosed the national economy with the anti-inflationary measures; the effect of which can be unimaginable consequences. Vietnam should take a lesson from China, which had to deal with a stock market that wallowed for nearly half a decade
Meanwhile, commercial banks have called on the State Bank of Vietnam to reconsider their circulation withdrawals, saying they cannot arrange enough capital to buy compulsory treasury bonds
Director of a joint stock bank said banks will have to accept a loss, as they have to mobilize capital from the market at interest rates of 9-10% per annum and buy bonds at only 7.8%.
However, in reply to the banks’ call, an official from the central bank said they will not reconsider their decisions
A source said that the central bank will further tighten the monetary policy in the time to come by limiting loans in foreign currencies.
Meanwhile, HSBC forecast that the central bank will raise the compulsory reserve ratio to 15% by mid 2008, while the recapitalization interest rate will be raised by another 0.5-1% to 8-8.5%.
VNN
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