|
Central bank may cut key rate further as inflation eases: HSBC
The State Bank of Vietnam may make further cuts in the benchmark interest rate by as much as 2 percent in the “coming months,” HSBC Holdings Plc said in a research note.
The central bank Monday cut the base rate to 13 percent from 14 percent, effective Tuesday, joining central banks elsewhere as a credit squeeze threatens to tip the world into a recession. In Vietnam, the rate had been hiked to 14 percent from 12 percent in June.
The “surprise move,” as HSBC called it, came after State Bank of Vietnam (SBV) governor Nguyen Van Giau told the International Monetary Fund and the World Bank last week the country would follow a “tight” monetary policy.
The bank was able to cut rates sooner than expected because of a deteriorating external environment and slower growth in Vietnamese prices, HSBC said.
“The recent decline in headline inflation clearly gave the bank some policy flexibility,” wrote Prakriti Sofat, an economist at HSBC in Singapore, in a note sent Monday. “Rates will probably go down by another 100 to 200 basis points over the coming months, especially as headline inflation declines.” One hundred basis points make up 1 percent.
The note didn’t elaborate on the time period and Sofat declined to comment further when reached by telephone Tuesday.
Vietnam’s year-on-year inflation rate slowed in September to 27.9 percent from 28.3 percent in August, the first deceleration since January 2007.
Rate cuts
Many banks, including the Bank for Foreign Trade of Vietnam (Vietcombank), Asia Commercial Bank and Technological and Commercial Bank, Tuesday cut deposit rates by 0.5 to 1.5 percent. Other banks said they are also pondering similar cuts.
Southeast Asian Bank cut its 12-month rate for dong deposits to as low as 12 percent compared with the peak of 19.2 percent in June.
Most state-owned banks have cut annual loan interest rates to 18.5 percent and, for their top clients, to as low as 17.2 percent.
“This easing in policy rates and onwards to lending rates will work to ease the pressure on local corporates and support economic growth – with the government no doubt hoping it would be able to achieve its 2009 growth target of 7 percent,” Sofat wrote.
Vietnam’s gross domestic product grew 6.5 percent in the first three quarters of the year from a year earlier, according to the General Statistics Office in Hanoi.
The rise in Vietnamese interest rates in recent months and a focus on keeping credit expansion in check has meant local companies have had difficulty securing financing for the past several months, the UK-listed fund Vietnam Holding Ltd. said in a note posted this week on its website.
But Nguyen Do Viet, external manager of Nam Cuong Company, a major real estate developer in northern Vietnam, said even the lowered interest rates are out of reach of most property developers and traders.
They would only consider borrowing when the rates fall to 15-16 percent, he said.
Dong sees biggest drop
The Vietnamese dong saw the biggest drop in almost four months after the central bank’s rate cut increased the liquidity of the local currency in the banking system.
The currency fell 1.1 percent to 16,849 against the dollar as of 3:21 p.m. in Hanoi, according to data compiled by Bloomberg. That’s the biggest decline since June 27. The dong slid by the maximum the government allows, based on the official reference rate of 16,519 set Tuesday. The currency can trade up to 2 percent either side of that level.
The central bank’s moves “will increase the liquidity of dong in the banking system,” said Nguyen Manh, Hanoi-based head of treasury at Bank for Investment and Development of Vietnam.
“Demand for US dollars has also increased among foreign investors,” he said.
Thanhnien
|
