According to the weekly capital market report for the week of May 13th to 17th recently announced by Saigon Securities Company (SSI), the State Bank of Vietnam (SBV) net withdrew 22.838 trillion dong via bill channel. About 47.725 trillion dong of seven-day bills were issued but only 25.887 trillion dong bills matured in the week. There were 98 billion dong injected via Open Market Operation (OMO).
Although the SBV net withdrew a total of 22.740 trillion dong via the OMO market, according to SSI, the liquidity on the interbank market remained fairly abundant. The interest rates fell by 0.3-0.4 percentage point compared to the end of the previous week, reaching 3.267 percent per annum on overnight term and 3.333 percent per annum on one-week term. The dong-US dollar interest rate difference declined to 0.8 percent per annum.
The mobilisation interest rates on market one were maintained at 4.1-5.5 percent per annum on six-month term, 5.5-7.5 percent per annum on terms of six to less than 12 months, and 6.4-eight percent per annum on 12-month and 13-month terms.
Citing data from the financial statements of 17 banks listed on three stock exchanges, SSI said that the total mobilisation (customer deposits and issuance of valuable papers) as of March 31st 2019 was 5,170 trillion dong, up by 3.1 percent compared to the beginning of the year, and lower than the credit growth rate (3.4%). If excluding the reduction of mobilisation and lending of Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), the mobilisation growth in the first quarter (Q1) of 2019 was 3.7%, lower than the lending rate (4.4%).
“Thus, from having similar growth rate to lending in Q1 2018, capital mobilisation decreased in Q1 2019 although the mobilisation rates increased by 0.5-0.7 percent per annum compared to the same period of 2018. If this trend continues, along with the stricter requirements on capital safety indicators and liquidity of the management agency, deposit rates can hardly fall”, said SSI.
However, with the credit growth limit of about 12-14 percent this year, SSI believed that the credit growth may slow down in the near future and create the space for mobilisation to catch up in order to limit liquidity tension and the pressure of interest rate increase. In addition, interest rates in the domestic may also fall if the US Federal Reserve (Fed) changes the policy.
Strong fluctuation of the US dollar/dong exchange rate
Regarding the exchange rate movements, on the international market, the British pound experienced a bad week when it depreciated by up to 2.4 percent against the US dollar to 1.269 US dollar per British pound due to the failure of the new negotiation, which erased the hop that the Brexit would be passed in the British Parliament in July.
The prolonged standstill caused an increased in businesses leaving the US and also hindered the economic growth of the European Union. The euro also depreciated by 0.7 percent in the last week, reaching 1.116 US dollar per euro. The Dollar Index (DXY) continuously increased and ended the week at close to 98.
The US China trade war escalated when China announced a new tax package to the 60 billion US dollar goods from the US from June 1st. subsequently, the US President Trump signed a decree to prevent the use of equipment by foreign firms that is suspected of threatening national security. It is considered to aim at China’s Huawei. Almost immediately, China also cancelled the order of 3,200 tonnes of pork from the US.
The continuous mutual responses and the strengthening of the US dollar have made the Chinese yuan under a great pressure of devaluation. The US dollar/Chinese yuan exchange rate is currently 6.919, down by up to 1.4 percent over the previous week, approaching the important psychological threshold of 7.0.
In the country, the US dollar/dong exchange rate fluctuated sharply in the week, down by 40-50 dong per US dollar in the middle of the week, but increased by 30 dong per US dollar due to the pressure from international developments.
Closing the week, the US dollar/dong exchange rate rose up by 20 dong per US dollar at banks, reaching 23,255/23,375 dong per US dollar; unchanged on buying rate and up by five dong per US dollar on selling rate on the free market, reaching 23,320/23,340 dong per US dollar. The central reference rate increased by seven dong, reaching 23,054 dong per US dollar, up by one percent compared to the end of 2018.
SSI acknowledged that domestic fundamentals such as the foreign exchange reserves and foreign currency supply and demand are fairly stable, but international pressures can still make the US dollar/dong to fluctuate. “However, we believe that the exchange rate this year will still fluctuate within the controlling target set from the beginning of the year,” SSI said.
