Capital inflowing into stock market
27/Aug/2008 Intellasia | 25/Aug/2008 Lao Dong
Aug 27, 2008 - 7:00:00 AM
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When gold price slashes and the stock market recovers, residents no longer want to buy US dollars for savings. People are rushing to switch from US dollars to dong to deposit into banks in a bid to be entitled to high deposit interest rates.
Forex transactions in the free market have been quiet, which drags the forex rate down gradually. Those who want to sell US dollars are often forced by brokers to sell US dollars at low prices. This is the main reason why the US dollar in the free market has recently been bought at prices lower than that listed at banks.
Capital of investors is returning to the stock market. In fact, VN Index regains and approaches 550 points. Profits obtained from securities investment increase by more or less than 50%.
Meanwhile, if anyone spent money buying US dollars for savings in May and June, they are now suffering from losses. Compared to the highest forex rate of 19,000 dong a US dollar two months ago, the US dollar is now traded at only 16,600 dong a US dollar.
As for US dollar deposits, interest obtained from US dollar deposits over the last two months has been half of interest gained from dong deposits. Notably, banks have recently sharply cut foreign currency deposit interest rates to 6% a year from the highest level of 8% a year for 12-month terms. Thus, it can be seen that the forex rate is on downward tendency and US dollar deposit interest rates are moving downward. According to banks, demand for foreign currency of importers will be the basis for banks to consider whether they should cut US dollar deposit interest rates and input costs.
The forex rate listed at the Vietnam Bank for Foreign Trade (Vietcombank), the Vietnam Export and Import Commercial Joint Stock Bank (Eximbank) on August 23 was only 16,550— 16,610 dong a US dollar for buying and selling prices respectively, down by 40 dong a US dollar compared to a day earlier. In the interbank market, the forex rate announced by the central bank on the same day also reached 16,498 dong a US dollar. Almost all commercial banks listed the forex rate below the allowed ceiling trading band. Additionally, commercial banks no longer need to buy foreign currency from the central bank.
According to the central bank, the forex market is gradually stable. The central bank will continue regulating the forex rate flexibly based on signals in the market.
Standard Chartered Bank said that Vietnam's trade deficit significantly improved in June and July, reaching less than US$1 billion each month compared to the average figure of US$2.7 billion from January to May. On the other hand, the export growth has brought various benefits to the economy. The country's export in June and July reported over US$6.2 billion each month, a year-on-year increase of 53.7% and 46.1% respectively. This is the first time since November 2006 that export exceeded import. Vietnam's export will expectedly continue strongly growing this year despite instability of the global economy. This will generate abundant supply of foreign currency for Vietnam.
The forex rate is forecasted not to present many changes in the remaining months.
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