Vietnam Currency Discussion Board

[tenac]

Investment funds cannot buy VND for transactions
06/01/2008

Foreign investment funds complain that they cannot purchase VND at this time to serve their disbursement needs for investment deals.

Trinh Viet Cuong, Representative from Japanese owned Asiavantage investment fund, said that since November 2007, his fund has been queuing up to buy VND for the second time in the year (the first one was in April, 2007).

A representative from another foreign fund said that he had to pay an additional fee of 0.4% of total transaction value to successfully purchase VND.

In general, investment funds always keep their money in several hard foreign currencies, while not keeping VND for fear of high inflation, and they only convert the money into VND when they need VND to make transactions.

“Previously, we could decide when to buy VND, but we cannot do that these days, because banks can refuse to serve us. Therefore, we have to buy VND at the time set by banks and at the exchange rates set by banks,” said Mr Cuong from Asiavantage.

Mr Cuong related that in order to purchase 3mil shares of Hoang Anh Gia Lai Group, Asiavantage had to seek to buy VND one month before the transaction time for fear that it cannot arrange enough VND right after the negotiations between the fund and Hoang Anh Gia Lai wraps up.

“We had to buy VND even when we knew that the VND/US$ exchange would go down,” he said, adding that the fund incurred the loss of several billion VND.

VinaCapital and Dragon Capital have not facing such big difficulties like Asiavantage, because they can sell the shares they hold to get VND and restructure their portfolio investment. However, Dominic Scriven, Managing Director of Dragon Capital, acknowledged that it is now not easy to buy VND as previously.

According to Vu Thanh Tu Anh, Lecturer at Fulbright Teaching Programme, the fact that investors find it difficult to buy VND has been anticipated. The State Bank of Vietnam has been trying to tighten the monetary policy in order to reduce the VND in circulation, the move that aims to curb inflation.

Mr Anh, on one hand, acknowledged the necessity of the monetary policy tightening, on the other hand, said that the over-tightening would cause shocks to the stock market and real estate market, which may slow down the economic growth.

Source: VIR