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Global slowdown may have silver lining for Vietnam
A slowdown in global economic growth would have some benefits for Vietnam that may contribute to a stock-market rally, according to PXP Vietnam Asset Management Ltd.
The Ho Chi Minh City Stock Exchange’s VN-Index Tuesday rebounded 17.66 points, or 4.75 percent, to close at 389.33. The measure declined 16 percent last week, the biggest fall since a five-day slide that ended on October 5, 2001.
The International Monetary Fund last week forecast global economic growth will slow to 3 percent in 2009, from 3.9 percent this year and 5 percent in 2007, as a result of ailing banks and a drop in property values.
“A global slowdown should act to moderate the difficulties – high inflation and a widening trade deficit – that got Vietnam here in the first place,” wrote Kevin Snowball, Ho Chi Minh City-based chief executive officer of PXP, in a note to clients dated Monday. Vietnam’s year-on-year inflation reached 28.3 percent in August, the highest since at least 1992, before slowing in September to 27.9 percent. The country’s trade deficit widened 87 percent in the year to September to US$15.8 billion, according to preliminary figures from the General Statistics Office in Hanoi.
Earlier ‘collapse’
The pace at which the trade gap is widening slowed from 109 percent year-on-year in the year to August. The September deceleration in inflation was the first since January 2007. A slowdown in bank credit growth, imports and expenditures by state companies have helped cool the Vietnamese economy, Credit Suisse Securities (Thailand) said last month.
The mid-year investor focus on worsening economic indicators in Vietnam meant the VN-Index “collapsed several months before everything else did,” Snowball wrote. Vietnam is “well ahead of the crisis curve that the rest of the world is plunging into,” and has “a generally stronger macro structure” than earlier in the year, HCMC-based fund manager Dragon Capital said this month.
“A sustained bounce from the bottom is more justifiable in Vietnam than elsewhere given its relative global financial isolation,” Snowball wrote.
The country has “zero exposure to toxic assets” and many foreign-invested projects in the country aren’t wholly dependent on rising demand, instead taking production market share from competing countries, Dragon Capital said.
Recent suggestions in the Vietnamese media that Vietnam may be regarded as a global safe haven are “naive,” wrote Snowball of PXP. “But you’ve got to love the optimism.”
Thanhnien
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