State Bank keeps hands off appreciating dong
by Ha Phuong and Thien Ly
A number of leading banks last week quoted a single rate for buying and selling US dollars, and the figure was set at the floor of the officially-permitted trading band.
On Friday, the State Bank of Viet Nam set the daily inter-bank rate at VND16,160 per dollar. Given a trading band of +/-0.5 per cent. This means that commercial banks are allowed to exchange currency within a range of VND16,079-16,241.
Vietcombank, on Friday, pushed its selling rate down to the floor rate of VND16,079, a figure equal to that at which they were buying US dollar, a move that guaranteed no profit on foreign exchange transactions.
The situation repeats a pattern from earlier this year when the dong appreciated at a time of strong inflows of foreign currency into the then-overheated stock market. The State Bank intervened at that time by buying up US$7 billion in the first half of 2007, and the dollar rebounded on the local market.
This time, however, the central bank shows no signs of wanting to buy up the greenback to stop its declining trend on the local market.
A State Bank official who asked to remain anonymous said that the State Bank would not consider any "serious" or "official" intervention.
He explained that only banks strong in import-export and securities payments were suffering from an abundance of dollars. The State Bank was taking the position that banks should try to balance their accounts by trading US dollars among themselves as many banks still were not holding large foreign currency reserves.
The intervention of the central bank was not yet necessary, he said, attributing depreciation of the US dollar against the dong to the Fed rate cut and the overall decline of the dollar against other world currencies.
The State Bank would only intervene, he said, when dong liquidity decreased or banks lacked sufficient domestic currency to buy up dollar. No banks have yet reported these situations, the official said.
ANZ Bank forecasts USD/VND exchange rate by the end of this year at 16,240. As a rule, in the closing months of every year, the US dollar becomes stronger as importers seek foreign exchange to pay for imports. However, some people predict that the pressure to weaken the US dollar would continue, as major IPOs were likely to guarantee sizable foreign capital inflows.
Dealing in real estate?
It’s been nine months since the Law on Real Estate Transactions took effect but still the guidelines to implement the law have not been issued. With the domestic real estate market experiencing a surge of new sales following a long-term slump, the delay is eating into the profits of developers, they say.
According to the HCM City Department of Planning and Investment (DPI), 239 companies last year registered each month to deal in property. In the first few months of this year, that figure climbed to 263.
But because of the delay in the property law’s guidelines, these companies have not been able to receive licences.
Mai Hieu Thao, general director of the HCM City Electricity Investment and Trading Joint Stock Co, said the company registered with the city investment department to begin trading but was barred from going ahead since the guidelines had not been issued. However, it has been allowed to provide consulting services, he added.
Another joint stock company with three members said it faced the same problem.
DPI director Thai Van Re conceded that the agency has had to refuse many applications for real estate trading and property-related services.
The current law does not include detailed provisions on how these companies should operate, he said, adding that the city was waiting for the guidelines also. In Ha Noi, the situation is the same.
Le Hoang Chau, vice chairman of the HCM City Real Estate Association, said the delay has resulted in losses for companies and has adversely affected the real estate market.
Vo Dinh Quoc, deputy general director of the ACB Property Company, agreed, adding that buyers looking for new homes are also being hurt because of the central government’s lag on the guidelines.
Banks will be banks
Local banks are stepping up their efforts to seek foreign strategic partners to improve their business efficiency and competitive ability. Having a foreign bank as a partner can help improve technology, development strategies, management skills and personnel training.
Most foreign banks are experienced retail banks, an area in which local banks are considered to be weak.
Foreign banks are eyeing local banks as well, partly because of the potentially lucrative customer network of clients of the Vietnamese partner.
Asia Commercial Joint Stock Bank (ACB) and Britain-based Standard Chartered Bank (SCB), for example, became partners in 2005, with the latter holding a 8.56 per cent of ACB. Recently, SCB acting as an ACB agent, has successfully issued ACB bonds worth VND2,250 billion ($140 million).
ACB and SCB are mapping out a strategy to make ACB a leading retail bank in Viet Nam. In addition, SCB has assisted ACB in technology renovation and bank administration. SCB will also help ACB issue the remaining VND4,250 billion ($265 million) bonds between now and the first quarter of 2008.
In another partnership, Singapore-based United Overseas Bank Limited (UOB) has become a strategic partner of the Phuong Nam Commercial Joint Stock Bank (Southern Bank) after buying 10 per cent of the latter’s total shares.
The UOB has helped train Southern Bank’s staff in modern products and services.
Bank deputy general director, Dam Ngoc Anh, said the partnership helped the bank improve its administration and diversify financial services.
The Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) and its strategic partner, the Australia and New Zealand Bank (ANZ), will work together on a bank and credit cards joint-venture company late this year. The JV company would act as an agent responsible for issuing cards for the two banks.
Dang Van Thanh, chairman of Sacombank Executive Council, said Sacombank and ANZ would fully tap each other’s transaction networks and technology to provide the best in customer services.
Sacombank has also launched co-operative programmes with another strategic shareholder – the World Bank’s International Finance Corporation (IFC). The two signed a VND500 billion (US$31 million) contract to provide loans for Vietnamese clients to buy houses.
All of these domestic-foreign ties are expected to make important contributions to the Vietnamese retail banking market in the future. — VNS
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