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Global financial firms still believe in Vietnam’s bright future
While pointing out the big challenges and problems facing the national economy, global financial firms still believe that Vietnam is a good investment address in the long term.
It was quite a surprise that Greg Terry, President of Morgan Stanley South East Asia, in a recent interview with Thoi bao Kinh te Vietnam, said that Morgan Stanley was continuing to seek investment opportunities in Vietnam, while several days ago, the global financial firm released a report which said that Vietnam may witness the same things that happened in Thailand in the 1997 crisis.
Regarding the report’s gloomy picture of Vietnam’s economy, Mr Terry said that the report shows the viewpoint of the analysts, the authors of the report. In some cases, reports like that do not definitively reflect the official viewpoint of the whole banking group.
However, he said, it is clear that the world is now facing economic decreases which have big impacts on Vietnam. It is also clear that the government of Vietnam now has to take measures to fight inflation and settle other problems it is facing.
As the government of Vietnam has shown that it is capable of leading the national economy to high economic growth rates, it will surely come up with suitable measures to fight inflation and the global economic recession.
Morgan Stanley remains the biggest financial investor in Vietnam, and it will stay firmly in the first position, despite the current difficulties of Vietnam’s national economy.
The group has spent over $200mil to hold 10% of stakes in PetroVietnam Finance Company. It has also purchased 49% of stakes in Huong Viet Securities Company – the largest deal so far conducted by a global group in Vietnam.
Mr Terry said that Morgan Stanley believes that its strategy to become an early investor in Vietnam’s financial market is a correct strategy. Despite its short-term difficulties, Vietnam is still believed will become the next Asian tiger, worthy of being an important market for Morgan Stanley and its clients in the long term.
He added that he personally thinks that there are wonderful opportunities for investors to make capital investments in some companies at this moment.
Meanwhile, David G. Fernandez, Chief Economist of JP Morgan Chase, thinks that the biggest problems now for Vietnam are the high inflation and trade deficit. However, he thinks that the problems will be settled by the end of 2008.
The inflation rate has hit its peak and will go down gradually towards the year’s end. It is true that the trade deficit was high for the first five months of the year, but the trade deficit will also go down gradually towards the end of the year, he said.
JP Morgan Chase has found out that the high inflation originates from high food prices. Meanwhile, rice prices in the world are decreasing sharply, which will lead to sharp rice price decreases in Vietnam.
Moreover, the government of Vietnam is trying to cut public investments, and once it does this, the high inflation will be restrained, while the trade deficit will also decrease. For example, once it cuts a lot of state-funded projects, the demand for steel will decrease, which will result in steel import decreases, thus narrowing the gap between exports and imports.
Vietnam’s trade deficit reached over $10bil in the first five months of the year, and the deficit will increase by $4bil in the second half of 2008.
Regarding the rumour about the possibility of the devaluation of the VND, Mr Fernandez said that this will not occur, because devaluation of the VND would be a mistake.
Even if foreign portfolio investment was withdrawn from Vietnam, this would not force the devaluation of the VND. In fact, with the foreign currency reserves of up to several tens of billion dollars, the government of Vietnam has sufficient strength and capability to deal with the bad situation.
Mr Fernandez thinks that raising deposit interest rates is the best solution for inflation, as it would control the hot credit growth. Indonesia did that in 2005 and was successful with the move.
The most important thing now is to stabilise the VND by pumping a big volume of foreign currencies into circulation.
He does not think that using financial aid from IMF or WB is a good idea. In general, countries always have to pay a heavy price in return for the aid.
VNN
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