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Capital inflows still keep out Vietnam
The “double deficit”, i.e. the state budget and trade deficits, which lead to high inflation and put pressure on the dong/dollar exchange rate, are the most important factors why foreign capital still does not flow into Vietnam.
While, neighbouring countries now have to find the ways to restrain the capital inflows from developed economies, there are no signs of investments flowing into Vietnam.
Capital going to developing countries
Anoop Singh, a senior executive of the International Monetary Fund (IMF) in charge of Asia-Pacific, has advised the governments to prepare for the capital inflows, even though their volume has not exceeded that seen in the pre-crisis period.
IMF believes that it is now the right time for the governments to remove their demand stimulus packages in order to create best conditions for receiveing foreign investment capital most effectively.
Since the beginning of the year, foreign investors have made a net purchase of nearly two billion dollar worth of stocks in Thailand, and they are now rushing to inject money in bonds. Therefore, the Government of Thailand had decided to again impose the income tax of 15 percent on the investments in Thai bonds.
The Government of Thailand is considering applying other measures to restrict the foreign capital inflows, especially when the baht has been appreciating, reaching the highest level since July 1997.
Economists believe that the foreign capital inflows to Asia will keep strong in 2011, especially when the interest rates in developed economies are being kept at low levels, and the prospects for the rising economies is very bright. It is estimated that the average GDP growth rates inthe rising economies is higher by 4.4 percent than in the developed economies.
According to the Institute of International Finance, the total private capital inflows into therising economies would reach $825 billion this year, which is much higher than $581 billion in 2009.
The large capital inflows have caused worries to developing countries, because this puts pressure on the local currencies, and once they appreciate, this will make their export products less competitive in the world market.
Listening to the news, waiting for opportunities
Vietnam’s bond market, which is financial investors’ favourite playground, remains very quiet.
Trinh Hoai Giang, Deputy Chair of the Vietnam Bond Association, said that the absence of foreign investors on the bond market shows the worries about the risks in the national economy, such as the exchange rate fluctuation and high inflation.
Foreign finance analysts believe that foreign investors would remain hesitant about injecting money in Vietnam until there are signs of the Vietnam dong’s depreciation.
Besides, the high interest rates and high inflation which are threatening the growth, are also the factors that make investors hesitate to spend money on Vietnam’s securities.
Nevertheless, according to Vietnamese securities companies, foreign investors still keep a close watch over Vietnam’s market in preparation to join it.
What is worth noticing, according to analysts, is that the foreign capital inflows seem to shun close investment funds.
No big investment fund has been established since 2008, and though some big investment fund management companies in Vietnam are raising capital, the money does not go into the funds.
According to Louis Nguyen, Managing Director of Saigon Assets Management, the money still does not flow in, especially, it does not go to investment funds, because the funds have not been able to prove their business efficiency over the last two years.
VietNamNet, sgtt
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