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Wall Street ripples will lap Vietnam shores
The financial turmoil in Wall Street is bound to have trade and financial repercussions in Vietnam, experts say.
The recent bankruptcy of Lehman Brothers, the fourth largest investment bank in the US, and the problems of global brokerage giant Merrill Lynch has raised concerns in Vietnam about the impact on the domestic economy.
“There will be certain impacts on our economy, especially the banks and the stock markets, as well as trade activities,” Nguyen Dai Lai, Deputy Head of the State Bank of Vietnam’s Department of Bank Development Strategy, told Thanh Nien Daily.
Local banks may face more difficulties in seeking partners but such impacts would be minor and indirect, said Vietnamese economist Nguyen Quang A. He noted that Vietnam’s financial market was not fully opened and liberalized, so Vietnamese banks had invested abroad. He also pointed out the bankrupt US banks had no branches in Vietnam.
The psychological influence of the turmoil in the US has already been seen in Vietnam’s stock market, said Andy Ho, Managing Director of Vietnam Opportunity Fund (VinaCapital). Vietnam’s benchmark VN-Index tumbled 7.8 percent last week.
“The US crisis has also affected the pace of capital inflows into Vietnam, while adding to investor concerns that have turned
Vietnam’s stock market from one of the best performers in the world in 2007 to one of the worst in 2008,” said Donald Hanna, Managing Director of Citigroup Global Markets.
Trade activities could also be hit by the turbulence in the US, Vietnam’s biggest export market, accounting for some 20 percent of the nation’s export revenue.
“In the case of Vietnam, the US has been the single largest export market for several years... Vietnam’s exports are thus vulnerable to a demand-contraction in major economies. This is further exacerbated by the falling US dollar, which has already served to dampen import demand in the US,” said Secretary General of the U.N, Conference on Trade and Development Supachai Panitchpakdi.
Vietnam had a record trade deficit in 2007, reaching nearly US$11 billion or 15 percent of gross domestic product. The deficit could be further exacerbated this year by the slowdown in Europe and the US, he said.
Economist Le Dang Doanh said foreign direct investment channels may be slightly affected, as most of the foreign direct investment inflow originates in neighboring economies, including Singapore, Taiwan, Republic of Korea and Japan.
It is even possible that some worried investors may flee Wall Street and come to Asia and Vietnam as safer destinations, Lai said.
To deal with the situation, Vietnam should strengthen management of the stock market and commercial banks, continue to limit credit growth and intensify risk management, economist Quang A said.
In addition, it should diversify export markets, reducing reliance on traditional markets such as the United States and European Union, and seek more new ones, said the UN’s Panitchpakdi.
Thanhnien
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