According to Saigon Securities Incorporation (SSI)’s Vietnam’s monetary and financial report in February 2018, the monetary market in the first two months had many macro factors that were maintained in good condition.
In this period, foreign investment in the form of capital contribution and share purchase increased 102.5 percent year-on-year to $1.25 billion.
Most notably, the sale of Sabeco shares at the end of 2017 helped the state budget gain 110 trillion dong, equal to $4.8 billion, creating an unexpected foreign currency supply for the market.
The FDI disbursed in the first two months of this year swelled 9.7 percent year-on-year to $1.7 billion.
The trade balance ran a surplus of $1.08 billion in the first two months of 2017, following seven consecutive months of trade surplus since July 2017.
The abundant supply of foreign currency and stable exchange rate continued to facilitate the State Bank’s foreign currency purchase, increasing the foreign currency reserves to nearly $60 billion only in the first two months of 2018, compared to more than $50 billion at the end of last year.
Along with the foreign currency purchase, the State Bank injected a large amount of dong. So, despite the peak of payment in the first two months of the year, the banking system still maintained abundant liquidity status.
This is shown on the Open market operation (OMO) where the State Bank only lends more than 20 trillion dong, plummeting from the common amount of more than 100 trillion dong in the previous years.
After the Lunar New Year 2018, as the liquidity of banking system was abundant, the State Bank issued T-bills to withdraw 80 trillion dong.
Thanks to abundant liquidity, banks have strengthened their investment in government bonds, causing the demand for bonds to swell, and the bid value is four times higher than the offer value.
The winning ratio reached 93 percent, equal to the fact that more than 29 trillion dong bonds were issued, up 10.4 percent year-on-year.
The fact that bid winning interest rates fell sharply after Tet caused interest rates to go down about 1.4 percent from the end of 2017, equal to 3.05 percent (5-year term), 3.4 percent (7-year term) and four percent (10-year term).
In 2018, the State Treasury planned to issue 200 trillion dong government bonds, up 25 percent from the total actual issuance value in 2017 at 159.9 trillion dong.
SSI noted that the value of bonds matured in 2018 significantly decreased compared to 2017 and the budget revenue from State-owned enterprises (SOE)’s equitisation increased.
According to SSI, till the end of February 2018, most of signals in the monetary market are still positive.
The rapid increase of inflation in the first two months of the year has not had any significant impact as inflation expectations in the following months will be low or decrease.
Foreign capital flowing through various channels have generated positive momentum for the economy, supporting exchange rate and system liquidity, generating large pushes for the stock market.
However, a noticeable risk is that the reversing foreign capital flow may generate adverse impacts, following new developments in the US concerning the trade war and the possibility that the US is likely to raise interest rates faster.
