Speaking at a seminar on macroeconomic and stock market in 2012 held by KimEng Securities Co on May 8, Vo Tri Thanh – deputy director of the Central Institute of Economic Management said in the government’s solution group to support enterprises there will be three most important measure groups.
The first is to support credit for enterprises. Regarding the interest rate issue, the State Bank of Vietnam (SBV) has capped the lending interest rate at 15 percent per year for four prioritised areas including agriculture, rural area, exports and small and medium sized enterprises (SMEs). However, according to Thanh, this lending interest rate cap can only be maintained for 5-6 months due to the obstacles in the banking sector.
On the conditions to access cheap capital source, the central bank has also facilitated banks and businesses to meet each other to restructure the debts and guarantee for enterprises.
The second is to reduce and exempt taxes in 2012 for enterprises. Thanh said that the government’s coming bailout package worth 29 trillion dong is really necessary by this time to help support expenses for business operations after a long period of stagnation. At the same time, it is supposed to help raise the confidence of investors on the stability of the economy after the banking system has exposed weaknesses in the final months of 2011 and early 2012.
The third is to have solutions from the government to improve the market confidence. According to Thanh, this is a very important job when the rotation of capital is now very slow. Thus, once the trust is improved, cash flow will spin faster, which helps the economy overcome stagnation duration” Thanh said.
Commenting on the stock market situation in the near future, Thanh said there will be more supporting signals for the market.
On policy, from the beginning of the year so far, the governmental agencies have issued several important documents to reform and support the stock market such as the prime minister signed two Decisions No 252 and No 253 for the development of the stock market and the State Securities Commission (SSC) said that T+3 method will be applied from September 4.
In particular, the macro economy has many upward signs as indicated in three factors.
First, the country’s economic growth rate in the first quarter of this year was about 4 percent while according to forecasts of HSBC or Asian Development Bank (ADB), Vietnam’s economic growth rate in 2012 would be about 5.1 percent or 5.7 percent. “With the forecast data as above, the country’s economy in the next quarter would be definitely better,” Thanh said.
Second, although the economy in Q1/2012 showed sign of stagnancy and inventory increased highly, some factors have begun to be better such as the index of industrial production (IIP) surged 7.1 percent over the same period last year (in comparison with the rise of 5-6 percent of previous months), credit growth in Jan-April was still at negative of 1 percent but it had upward signs in April. After a trade surplus in the first quarter of this year, in April, the country returned to trade deficit. This is considered a good sign, which showed that enterprises have started to import machineries and productions increased again.
Third, the capital sources from government bonds have been allocated since the end of Q1/2012 (2012-2015 period would be 180 trillion dong and it would be 45 trillion dong for 2012). Therefore, from May, the disbursement will be quicker. This is expected to provide a small boost to the economy, Thanh said.
In addition, the wave of merger and acquisitions (M&A) equitisation this year is expected to sharply develop, which will also promote the cash flow into the market.
However, Thanh also warned negative signals that may affect the market such as risk of bad debts, the process of restructuring and the confidence of investors.
“In July and August, after having macro economic data in the first half of this year, policy makers can make some adjustments on operating policies for the last half of this year and this would be a great chance for the stock market” Thanh stated.
On the sidelines, Thanh said 5-8 weak banks will be handled in May, inflation in May is forecast to be at below 10 percent (Thanh predicted the inflation can be less than 9.5 percent by the end of May). Therefore, it is much more likely that by the end of May and early June the interest rates would further fall.