In the first week, when the system of Vietnamese credit institutions implemented the decision to cut operating interest rates from the State Bank of Vietnam (SBV), the market changed considerably, even became completely different than before.
With these changes, the system had completely moved into the ‘surplus’ stage in the short term.
Firstly, as BizLIVE updated in the recent newsletters, after a pause from the session on August 22, 2019, SBV returned to issue bills to withdraw money. The massive amount of withdrawal in just one week reflected the excess mentioned above.
Specifically, in this week, the results of the SBV treasury bill auction on the open market showed that updated to September 20, all five sessions attracted a large number of participating credit institutions with a total balance of nearly 69 trillion dong.
That was a large scale seldom seen in just a week, even at a record for buying foreign currencies in April 2019.
This withdrawal of money was seen on the source channel. SBV repurchased foreign currencies since which the size of foreign exchange reserves calculated by an investment organisation amounted to about $70 billion.
Secondly, in line with the re-issuance as mentioned earlier of treasury bills, SBV’s treasury bill interest rate continued to decline for the second time since the middle of this year, from three percent per year to 2.75 percent per year and on this week, down to 2.5 percent per year, at seven-day term.
In spite of lower interest rates, credit institutions stuffed the above-mentioned significant capital, contributing to reflect the short-term capital surplus. SBV’s bills became an investment channel.
Notably, there were always a large number of credit institutions participating in the temporary deposit there, with 13 to 14 members per session. In other words, the phenomenon of capital surplus was quite extensive.
Thirdly, as above, the channel to buy foreign currencies reopened. Previously, this activity showed signs of temporary suspension and excess of foreign currencies, causing the exchange rate of USD/VND to continuously penetrate the ‘blocking threshold’ of the buying and selling price list of SBV of 23,200 dong.
At the end of August and early September, there was plentiful foreign currency supply, stagnation, and exchange rate plunged on the interbank market. The system needed reciprocal dong to regulate. The scarcity of VND capital was clearly shown. The dong exchange rate continuously increased on interbank (overnight interest rate exceeded five percent per year).
Recently, the market reflected the purchase of foreign currencies cleared, SBV re-bought and synonymously supplied dong. The size of treasury bills, which was very large, also indirectly reflected the net buying of foreign currencies and the new amount of dong supply.
The amount of dong provided quickly cooled interest rates in the interbank market.
Fourthly, the dong interest rate on the interbank continuously decreased sharply in all terms from last week until this week. The new development also contributed to reflect the capital status of the system entering a short-term redundancy period.
At the end of August and early September, the dong interest rate in the interbank market soared, the overnight interest rate exceeded five percent per year. Then, by the end of this week, the average overnight interest rate dropped sharply to around 2.2 percent per year
A sharp decrease compared to double ground level of two weeks earlier. Noticeably, VND/USD interest rate swap points in the interbank market became fragile, even negative points appearedsomething rarely seen since the beginning of the year.
Generally, the above developments showed that the operation of source regulation and participation of SBV was reasonable and flexible again, the related flows had been cleared.
Among these flows, a tremendous source of foreign currency into Vietnam had been recorded clearly from the middle of the year until then.
The latest updated, till the mid-month, Vietnam will continue to raise the trade surplus to quite large with nearly $5.57 billion.
Meanwhile, the market continuously received large and separate deals besides trade surplus. Such as the foreign investor poured an additional $500 million into Vingroup’s supermarket system; the Korean investor promoted a $700 million plan to develop POS system in Vietnam; once again selling large-scale capital from BIDV for foreign investors were also expected to flow, and so on.
There was only one week left for the authorities to release new and updated data on the trade surplus, foreign capital flowing in through direct and indirect investment figures, on the closing time of Q3/2019.
