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Vietnam has ‘zero exposure to toxic assets,’ says fund manage
Vietnam has “zero exposure to toxic assets” and is shielded from any halt in global economic growth because its foreign-backed projects aren’t wholly dependent on rising demand, a fund-management company said.
Many companies invest in Vietnam as an alternative to other possible locations, Ho Chi Minh City-based Dragon Capital said. Foreign-investment commitments into Vietnam surged almost fivefold during the first nine months to US$57 billion, while actual capital inflows rose 37 percent to $8 billion, according to the General Statistics Office in Hanoi.
“If severe world recession breaks out, Vietnam is bound to suffer through the export link,” wrote Scott Robertson, chief economist at Dragon Capital, in a note sent Wednesday.
Vietnamese exports jumped 39 percent through the first three quarters of the year, according to preliminary estimates from the General Statistics Office. Asian policy makers have warned of a deepening slowdown in their economies as demand from the US, Europe and Japan weakens amid turmoil in global financial markets.
The effect on Vietnam “will be less pronounced than observers might assume given all the foreign invested-projects coming on-stream, which cannibalize production from other countries rather than chasing new demand,” Robertson wrote, without citing examples.
Taiwan’s Compal Electronics Inc., the world’s second-biggest contract manufacturer of laptop computers, said last year that it chose Vietnam over China – where it already has a production site – for its next plant.
Japanese digital-camera maker Olympus Corp. said in 2007 that it would build a plant in Vietnam, with the Nikkei newspaper reporting that it would close a factory in China to move some operations to Vietnam.
Asset prices
If global circumstances permit and Vietnamese interest rates fall, Vietnam may see a fourth-quarter rebound in asset prices, Robertson wrote. The Ho Chi Minh Stock Exchange’s VN- Index has declined 50 percent this year, hurt by the rise of Vietnamese inflation to the highest levels since at least 1992 and by a surging trade deficit.
Vietnamese inflation decelerated in September for the first time since January 2007, and the trade deficit widened at a slower pace through the first nine months of the year than through the first eight months, according to figures from the General Statistics Office.
“Vietnam seems to be well ahead of the crisis curve that the rest of the world is plunging into,” Robertson wrote. The country has “a generally stronger macro structure” than earlier in the year, he said in the note.
If Vietnamese inflation slows for “a couple more months,” the State Bank of Vietnam may cut its base interest rate, helping to support economic growth, Robertson wrote.
VinaCapital Investment Management Ltd., another HCMC-based fund manager, said last week, “Vietnam’s lack of integration with the global financial markets, lower exposure to problem investments and institutions, and lower leverage ratios should keep it on the sidelines of the financial storms” roiling the world economy. Leverage refers to the proportion of debt to capital.
Thanhnien
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