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Vietnam faces limited impact from global turmoil, fund says
Vietnam will experience less impact from the turmoil in the global financial industry than most other nations because its economy is not as tied to world markets, according to a fund manager.
“Vietnam’s lack of integration with the global financial world, lower exposure to problem investments and institutions, and lower leverage ratios should keep it on the sidelines of the financial storms,’’ Don Lam, chief executive officer at Vinacapital Investment Management Ltd., said in a letter to investors dated September 22.
“Domestic consumption will continue to grow as the country modernizes.’’
The US government last week proposed spending US$700 billion to buy out troubled financial assets.
Brazilian President Luiz Inacio Lula da Silva told the United Nations on Tuesday the US crisis threatens the world economy and French President Nicolas Sarkozy called for a summit on the issue.
“Although we expect that there will be some spillover of the current global economic challenges into Vietnam, we believe that the effects will be much lighter than experienced in other economies,’’ Ho Chi Minh City-based Lam wrote.
“Vietnam’s fledgling financial services industry and eight-year-old stock market do not trade derivatives.’’
The Vietnamese currency is not traded outside the country, and the level of foreign investment in local companies is restricted, buffering the economy from the effects of global financial turmoil.
Vietnam’s Ho Chi Minh Stock Exchange was founded in 2000 and the country joined the World Trade Organization last year.
Main exports
Vietnam’s exports, which jumped 39 percent in the first nine months of the year from a year earlier, are also partly insulated from the fallout, according to Vinacapital.
Vietnam’s main exports by value are crude oil, garments, footwear and seafood.
The turmoil in financial markets has contributed to “clouds gathering over the outlook for China’s export sector,’’ JPMorgan Chase & Co. said this week.
Thailand’s Commerce Ministry said it’s concerned about the US credit crisis, after reporting that Thai exports grew in August at the slowest pace in five months.
A worldwide economic slowdown will hurt Vietnamese shipments abroad “to some extent,’’ Lam wrote.
But “the effects are limited when compared with other Asian countries due to Vietnam’s relatively cheap exports that are often substitutes for more expensive exports from other countries,’’ he said in the note.
Vietnam’s economy is giving “very positive’’ signals that it is starting to recover from a downturn earlier in the year, Vinacapital Investment Management Ltd. said, in the letter posted on the website of the money manager, which oversees three UK-listed funds.
Inflation rate
Vietnam’s inflation rate fell for the first time since January 2007, the General Statistics Office reported this week.
Vietnam’s inflation appears to have peaked, in part eased by lower global food and other commodity prices, wrote Matthew Hildebrandt of JPMorgan Chase & Co. in Singapore, in a note sent on Tuesday.
Foreign investors have recently retreated from their positions in Vietnamese stock markets, Vinacapital said.
The Ho Chi Minh Stock Exchange’s VN Index has declined 16 percent this month, though the measure is still up 24 percent from the 366.02 level it fell to on June 20.
“With continued uncertainty, the market will likely continue to soften,’’ wrote Lam.
“But we do not believe it will fall below the low set in June.’’
Thanhnien
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