Car sales increasing, contractionary policy not applied to rich people | Look At Vietnam - Vietnam news daily update

LookAtVietnam - Contrary to all predictions that cars would sell more slowly due to higher sale prices caused by the dong devaluation, and the high inflation rate, cars still have been selling very well.

Bad news thought to badly affect car market…
In general, February is a time when automobile dealers launch sale promotion campaigns to boost sales in the low season which comes after the Tet holiday. However, the economic law cannot be applied this year. Car dealers have even raised sale prices, and justified their actions with the dollar price increases.
In mid February 2011, right after the State Bank of Vietnam announced the 9.3 percent dong devaluation, Toyota Vietnam pioneered the sale price increase movement by raising the sale prices by 34-174 million dong per car. The new prices became effective on March 1.
Following the move, other automobile manufacturers, including GM Daewoo (Vidamco), Truong Hai (Kia), Ford Vietnam and Honda Vietnam also announced the increases of sale prices of their products. The price increases are relatively sharp from tens of millions dong to hundreds of millions dong.
The sharp price increases are believed to make people who dream of owning cars rethink their purchase plan.
While the news about the dollar appreciation was still shocking car dealers and people, they received another shocking news: the petrol price has been raised by 2900 dong per liter. This means that car owners will have to pay 300,000 dong more for every 100 liters of petrol used. The petrol price increase has been described as pushing the dream of purchasing cars farther away from many people, because it will be more costly to “feed” the cars.
Meanwhile, people have been warned that the petrol price may increase further in the future, because the latest 2900 dong per liter increase proves to be nothing if compared with the price increases in the world market, and that petroleum distributors need to raise the prices further to cover their expenses.
Another difficulty believed to be keeping people away from purchasing cars is that banks are tightening credit and they do not intend to increase consumer credit or fund car purchases. Commercial banks have been told not to expand loans to non-production sectors. Even when banks’ doors are open to people, they will not be able to access loans, because the lending interest rates have become overly high, reaching 22-23 percent per annum.
…but cars still selling well
Believing that the demand for cars would drop sharply as a result of the bad news, car dealers decided to reduce the numbers of imports in February. The General Statistics Office GSO released a report showing that the import revenue of cars under the mode of complete built units (CBU) in February 2011 dropped sharply in comparison with the previous month and with the same period of last year.
In February 2011, only 4500 cars were imported which had the total import turnover of 76 million dollar. The figures represent a sharp reduction of 1600 cars in comparison with January and a sharp reduction of 27 million in import turnover. Meanwhile, if compared to the same period of 2010, the number of imported cars and import turnover decreased by 17.8 percent and 20.5 percent, respectively.
As such, in the first two months of the year, the number of imported cars only reached 10,600, while the import turnover only reached 179 million dollar. Analysts believe that the imports will decrease further in the next few months.
However, contrary to all predictions, the demand for cars remains very high despite sale price increases.
The Vietnam Automobile Manufacturers’ Association VAMA on March 9 released a report showing that the association’s members sold 7889 cars in February, an increase of 56 percent in comparison with the same period of 2010.
According to VAMA, the sales showed a 24 percent decrease in comparison with January 2011. However, experts said that it is unreasonable to compare the sales in February with the sales in January. In principle, the demand in the month before Tet month (January) is always higher than the month after Tet (February).
The sales increases can be seen in all the three main types of products. Especially, the sharpest increase was seen in the sale of sedans, at 63 percent, while trucks and buses have increased 54 percent and SUVs 49 percent.
Toyota and Truong Hai are still leading in the numbers of cars sold. Toyota sold 2223 cars, just 300 cars higher than Truong Hai’s.
The third position in car sales belonged to Vinamotor (887), followed by Vidamco (666), Ford and VInaxuki (550) and Honda (371).
C. V

Dollar hits new high in Vietnam | Look At Vietnam - Vietnam news daily update

Dollar hits new high in Vietnam | Look At Vietnam - Vietnam news daily update: "The dollar has gained around VND1,000 over the past week

The US dollar surged to a record high of VND22,200 on the unofficial market on Friday, one week after the central bank devalued the dong by 9.3 percent.

News website VnExpress reported that even though market activity remained almost the same without any significant changes in supply and demand, the greenback continued its climb against the local currency. The dollar has gained around VND1,000 over the past week.

The central bank’s devaluation last week aimed to narrow the gap between official and unofficial rates.

The official rates at commercial banks on Friday, however, were still far behind the black market rate of VND22,200. Vietcombank, for instance, quoted the dollar at VND20,885.

Le Duc Thuy, Chairman of the National Financial Supervisory Commission, was quoted in a Lao Dong (Labor) newspaper report as saying that the recent devaluation may be the only adjustment in 2011.

Thuy said he saw no reason for another devaluation of the dong through the end of the year.
Source: Thanh Nien

Builders hopeful property market will recover in 2009

With the government loosening the credit policy and interest rates plunging, some property developers expect the real estate market to recover this year and are poised to begin new housing projects.
Tran Van Thanh, general director of Vietnam House Joint-Stock Company, said he believed the market would be better this year because of the credit loosening.
The State Bank of Vietnam has lowered its benchmark rate to 7 percent from 8.5 percent, effective Sunday, the sixth rate cut since October.
Thanh said his company plans to begin construction of 1,630 apartments in Ho Chi Minh City’s District 9 by the third quarter of this year.
Dang Hoang Vu, general director of Thanh Binh Real Estate and Trade Company, said it is looking to raise VND600 billion (US$34 million) to build 1,500 condominiums in District 9 and 100 villas in Cu Chi District.
Site clearance is complete, he said, adding the first one targeted medium-income earners, with each apartment costing VND700 million to 1 billion ($40,000-57,000).
Nova Real Estate Investment Corporation (Novaland) last December commenced work on a $500 million project in District 7.
Sunrise City will have 1,800 luxury apartments and a 60,000-square-meter shopping mall.
Nguyen Xuan Chau, general director of Novahomes, a unit of Novaland, said the company is working on a strategy to promote the condos, adding they could be sold at $2,500-3,000 a square meter.
Le Hoang Chau, chairman of the HCMC Real Estate Association, said the association has asked the central bank not to slap penalties on its members who fail to repay bank loans in time.
It had also asked the bank to lower interest rates to the current rate, he said.
According to a central bank report, by November 2008, banks’ outstanding loans to the property sector was VND115 trillion (nearly $6.6 billion), 73.9 percent of which in Hanoi and HCMC.
Chau said since most property companies in HCMC are small- or medium-sized, they would find it very difficult to survive if banks do not give them a helping hand.
Tax concerns
The director of a real estate company in HCMC, who wished to remain unnamed, said property developers would face difficulties this year since official land values have been doubled in some areas.
“This will make site clearance more difficult and land-use taxes will double. For instance, a 10-hectare project in District 2 will be taxed VND20 billion ($1.14 million) compared to VND10 billion before.”
Vietnam does not allow formal land ownership but grants land use rights, which confer the same rights as freehold property.
Thanh Binh Real Estate and Trade Company’s Dang Hoang Vu said an increase in land values and the new capital gains tax on property would put developers under great pressure.
With the introduction of the new Personal Income Tax Law on January 1, people owning more than one house will have to pay a flat 2 percent tax when they sell a house or 25 percent on the profit on the sale.

VND/US$ exchange rate to hold its course

The greenback price has been increasing since November 7, when the State Bank of Vietnam decided to raise the forex trading band to +/-3% from +/-2%. However, no price fever has occurred, with banks’ foreign currency trading activities going smoothly.

The pressure on official exchange rate

The inflation rate of the first 10 months of 2008 was the highest level in the past 10 years (21.64% over the end of 2007). Meanwhile, the trade gap in the first 10 months of was $16.3bil. Export turnover has been decreasing for the last few months ($6.547bil in July, $6.018bil in August, $5.27bil in September and $5.1bil in October).

Vietnam’s export items are all facing big difficulties due to the global financial crisis, while 63% of the country’s GDP is accounted for by exports. Therefore, boosting exports is an important task, and the exchange rate policy is a tool to assist in this work.

Since March 10, 2008, the exchange rate announced by the State Bank of Vietnam has been hovering around VND16,025-16,515/US$1, which is believed is not encouraging exports.

Greenback price increases because investors anxious

The dollar price on the black market began rising on October 23, 2008, before the central bank announced the wider trading band at +/-3%. While commercial banks’ rate was at VND16,820/US$1, the rate on the black market hit the VND17,000/US$1 threshold. On November 7, Vietcombank’s rate was VND16,841/US$1, while the rate on the black market was VND17,300/US$1.

It is likely that for some additional days, the exchange rate on the black market will remain higher than the rates offered by commercial banks.

Analysts say that it is because domestic investors fear that foreign investors will sell stocks, collect dollars to transfer abroad. The decision by the central bank to widen the forex trading gap makes people think that the dollar price is on the rise.

However, economists have pointed out that the exchange rate on the black market does not have much effect on the exchange rate in general. In Vietnam, the exchange rate is decided by the official market, or the market in which banks and businesses make transactions.

VND/US$ exchange rate will not see big changes

According to Le Duc Thuy, former Governor of the State Bank of Vietnam, only the REER (the real effective exchange rate) should be used as the basis to set exchange rate policies, the policies should not be simply drawn up based on supply and demand. However, it is highly possible that in some more years, Vietnam will not float the exchange rate. Vietnam fears that risks may occur with foreign debts if it floats the exchange rate.

It is expected that the central bank will follow the flexible exchange rate policy in the last months of the year. The central bank has affirmed it is capable of extinguishing any foreign currency fevers that might break out. The dollar supply among the public proves to be relatively big. Meanwhile, banks have big volumes of dollars as they have taken back deposits from overseas banks. The national foreign currency reserves by October had reached $22bil.

Bankers say that the inter-bank exchange rate may go up further before the end of the year, but will not increase sharply over the current level.

The sale price may reach VND17,200-17,500/US$1, they say.

Trinh Ngoc Lan

Money supplies strong, interest rates expected to drop

With the new decisions released on November 3, the usable capital of commercial banks may reach VND100tril, which is believed will lead to the sharp decreases of lending interest rates.


The Governor of the State Bank of Vietnam (SBV) on November 3 decided to cut the basic interest rate in Vietnamese dong by 1% to 12% as of November 5.

Nguyen Phuoc Thanh, General Director of the Vietnam Bank for Foreign Trade (Vietcombank), said that the usable capital of commercial banks has been in excess the last two months, with the volume increasing gradually from VND30tril to VND40tril and VND50tril recently.

The volume of VND50tril in excess was confirmed by the Monetary Policies Department under the State Bank of Vietnam at the end of October.

Besides the said volume of VND50tril, banks now can get capital from the VND20,300bil worth of compulsory bonds the central bank decided to ‘set free’ sooner than previously expected.

SBV on October 20 decided to make payments for the compulsory bonds before they matured on March 17, 2009. On March 17, 2008, with the aim of limiting the volume of cash in circulation to curb inflation, SBV issued VND20,300bil ($1,250mil) worth of compulsory bonds. Forty-one banks had to purchase bonds.

In addition, according to Dragon Capital, a foreign-owned investment fund management company, in October and November, there will be some $1.3bil worth of government bonds (VND22tril) maturing.

A noteworthy thing of the decisions released yesterday, November 3, was that the compulsory reserve ratios, for the first time in many months, were lowered to 10% from 11% for VND deposits, and to 9% from 11% for US$ deposits. As such, another source of money will be ‘liberalised’, which will bring even more usable capital to banks.

It is estimated that the volume of money to be ‘liberalised’ in accordance with the new decisions will be VND10-12tril. Each of the big banks like Vietcombank, BIDV and Vietinbank may get back VND1,000-1,500bil, while Sacombank or ACB may get back VND560-600bil.

Consequently, the excess usable capital of commercial banks may reach VND100tril in the time to come.

It is estimated that in February and March, the volume of money the State Bank of Vietnam ‘withdrew’ from commercial banks through compulsory reserves and compulsory bonds reached VND40tril.

A question has been raised about how commercial banks will deal with the VND100tril.

Lending interest rates decreasing rapidly

Signs of capital excess appeared in September, but credit growth has been very low since the beginning of the year.

By the end of September, the total outstanding loans of the banking system had just increased by 18.03%, while the ceiling credit growth rate for this year is 30%, which means that there is ‘big room’ for banks to push up loaning.

On November 3, the Vietnam Banking Association called on its members to adjust interest rate policies.

Big banks including Vietcombank, the Bank for Investment and Development of Vietnam (BIDV) and Agribank have begun applying new interest rates which are 1.5%-2% per annum lower than the previous rates. The lowest interest rate now is just 15% per annum, or 3% lower than the ceiling lending interest rate.

(Source: TBKTVN)