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US asset bailout a short-term shot in the arm for Vietnam market
Investor sentiment towards the Vietnamese stock market should get a short-term boost from last week’s approval of the US$700 billion bailout by US Congress, analysts said.
But after a few days, investors’ attention will refocus on domestic matters, analysts said.
US President George W. Bush said on Saturday that benefits from the recently passed financial bailout would take time to show up in the US economy.
A day after Bush signed the $700 billion rescue package into law, he sought to assure the US public the government would be careful in implementing the legislation aimed at easing a credit crisis that has created turbulence in global financial markets.
The Senate approved the measure on Wednesday, while the House of Representatives gave its green light on Friday after earlier rejecting a version of the bailout bill.
Vietnam’s Institute of Informatics and Applied Economic Research Director Dinh The Hien expects the US bailout package will improve the liquidity of US financial markets. But Hien warned news of the rescue package would only boost investor confidence in the Vietnamese stock market for a couple of days.
“Vietnam’s stock market is being driven by two factors – listed firms’ efforts to boost their share value and investors’ money,” Hien told Thanh Nien. “But both are struggling to be positive. Many companies struggle to borrow money from banks to carry out their business plan because of high lending interest rates.
“They also hesitate to raise money through issuing more shares on the stock market, which will likely drain their stock’s liquidity. Investors, meanwhile, are not eager to invest in stocks because their confidence has been shaken by the market’s sharp falls this year. Therefore I expect the VNIndex will end the year at around 500 points.”
The VN-Index, gauge of 160 leading companies and four closed-end funds on the Ho Chi Minh Stock Exchange, lost 51 percent this year and becomes one of the world’s worst performers. The index closed Friday at 452.14 points.
Hien also said the $700 billion package will boost the US dollar and cause gold and oil prices to retreat. “Most countries around the world, including Vietnam, hope for rises in the dollar, which will boost exports,” he said. “But the US government won’t allow a sharp rise in its currency, which will dent its economy.”
Hien expected the price of gold on international markets to trend downwards for the rest of this year, to below $900 per ounce at the end of December. Spot gold traded at $828.15/832.15 an ounce by 2:39 p.m. EDT (18:29 GMT) Friday, down from $838.00/841.00 an ounce late Thursday, according to Reuters.
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FINANCIAL MARKET REMAINS STABLE: CENTRAL BANK
The State Bank of Vietnam said on its website domestic banks were still operating properly because they had limited contact with foreign lenders, many of which have been caught up in the global credit crisis. Vietnamese banks withdrew their money from overseas banks and distributed the money between top banks in Hong Kong and Singapore, the central bank reported.
Foreign bank branches, joint venture banks and Standard Chartered Bank and HSBC’s foreign-owned banks in Vietnam are still operating properly because their parent banks aren’t affected by the financial meltdown, the central bank said.
The overnight interest rate on interbank market remains stable at 14 percent per year. Lending interest rates at state-owned banks is around 18.2 to 19.5 percent per year, and 20.2 to 20.5 percent per year at commercial banks. |
Thanhnien
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