The VND/USD remained high in the final half of December. The SBV kept selling foreign reserves to stabilize forex market.

Transcription

1 Tran Thi Thanh Thao Research Analyst T: Thao.TranThiThanh@mbs.com.vn Tran Buu Quoc Institutional Client Services (ICS) Quoc.TranBuu@mbs.com.vn Key interest rates Rates Before Present Basic 9% 9% Refinancing 7% 6.5% Discounting 5% 4.5% Ceiling of deposit rate 6% 5.5% OMO rate 5.5% 5% Abbreviations CDS: Credit Default Swap HNX: Hanoi Stock Exchange MoF: Ministry of Finance NDF: Non-deliverable forward OMO: Open Market Operations ON: Overnight SBV: State Bank of Vietnam ST: State Treasury MBS: MB Securities USD: United States dollar VCB: Vietcombank VDB: Vietnam Development Bank VGB: Vietnam Government Bond VNBSP: Vietnam bank for Social Policies VND: Vietnam Dong Report from 16 th 31 st December, 2014 MONEY MARKET INTEREST RATES Interbank interest rates fluctuated sharply in the recent two weeks but they tend to decrease in the end of December. Credit growth achieved the target in 2014 and it is expected to rise by 13-15% in Interbank interest rates remained high during December because of high demand for short term money in the market. Overnight interbank rates sometimes reached 3.5%, fell slightly in the end of the month. Currently, the interest rates reached 2.75% for the ON, 3.15% for the one week and 4% for the one month. According to the GSO, in the end of 2014, M2 supply increased by 15.99% YoY (16.13% in 2013). Credit rose by 12.62% YoY, higher than the level of 12.51% in Deposit growth also stood at 15.76% in 2014, lower than the growth of 17.23% in Thus, the banking system achieved the credit growth target this year. In 2015, the SBV will continue to enhance lending to support firms operations and increase GDP growth. From that, credit is expected to grow by 13-15% next year. CPI in December went down by 0.24% MoM and rose by 1.84% ytd, resulted from the global oil price slumps and domestic petrol price cuts. Hence, Vietnam has kept inflation under good control in 2014, clearing way for decrease in interest rate this year. Besides, inflation in 2015 is expected to vary low about 4-5%, and therefore we forecast that interest rates would be stable or decline slightly in 2015 to support firms. Chart 1: Interbank interest rates in VND (%) Source: MB & SBV VND/USD EXCHANGE RATE The VND/USD remained high in the final half of December. The SBV kept selling foreign reserves to stabilize forex market. The VND/USD stood high but remained stable in the last two weeks. The SBV did not have any change in benchmark exchange rates and continued selling USD to intervene in the market. The interbank VND/USD rates varied around 21,370-21,405. However, unofficial rates went up strongly,

2 standing around 21,580-21,605. The SBV forecasted that Vietnam Balance of Payment would reach $8 billion of surplus in This factor will support greatly to the stability of the VND/USD rates. Chart 2: VND/USD exchange rate Source: MB, MBS OPEN MARKET OPERATIONS The SBV net injected money considerably via bills and repos in the recent two weeks to support banking liquidity. There was only VND 56.7 billion was net injected via repos in the OMO in the second half of December. Additionally, the number of issued bills stood about VND 56.7 trillion, increasing by 2.2 times over the first half of the month. Whereas, about VND 68.8 trillion of SBV bills matured. Therefore, the SBV net injected about VND 11.5 trillion via repos and bills in the last two weeks. Because credit growth and payment demand often increases rapidly in the end of the year, we expect that the SBV will net inject more money via OMO and bills going forward to ensure good banking liquidity. Chart 3: OMO net injection (trillion VND) BOND MARKET Bond market became active in the end of the year. Bond interest rates kept rising gradually. Demand for the VGBs went up strongly in the last two weeks with high successful rates of auctions. About VND trillion of VGBs were successfully issued with successful ratio of 82%. Most of

3 them were 3-15 year bonds. Besides, demand for guaranteed bond also rose up rapidly. About VND trillion of VDB and VBSP bonds were issued with high successful ratio of 72%. Bond interest rates of 5 year tenor went up slightly and remained stable with other terms. Bond interest rates varied around 5.19% for 3 year tenor, 6.19% for 5 year one, 6.4% for 10 year bonds. The State Treasury planned to issue VND 262 trillion of VGBs this year including VND 26 trillion of Treasury bills. About VND 241 trillion of VGBs, local government bonds and Government guaranteed bond were issued successfully, exceeding the State Treasury s target by 3% if only count the number of 2-15 year bonds and except bills. Thus, State Treasury completed the target of issuing bonds this year to ensure enough fund for financing state budget deficits. The Ministry of Finance plans to issue USD 1 billion of 10-year Government bonds on the global markets to restructure Vietnam s public debts. Previously, in November, the Ministry sold USD 1 billion of international bonds in a rollover of government bonds issued earlier, with an interest rate of 4.8% and a maturity of 10 year. The last international bond issuance instantly decreased Vietnam s interest costs by $50 million, saving VND 1 trillion for the national budget, reported the Ministry of Finance. The proactive rollover reduced debt repayment pressure for the Government, making public debt structure safer. Therefore, as the economy has been stable and bond interest rates are low, another international bond issuance to restructure public debts will further reduce Vietnam s debt burden. Chart 4: VGB yield curve (%) Chart 5: Monthly issued VGBs (VND1,000 bn)

4 Source: MBS, Bloomberg Domestic Open Market Operations Table 1: Recent SBV bill auctions Issued Maturity Winning amount Winning Matured date Date IR (%) 12/29/ /29/ /29/ /30/ /29/ /23/ /29/ /26/ /27/ /27/ /27/ /28/ /27/ /21/ /27/ /24/ /26/ /26/ /26/ /27/ /26/ /23/ /25/ /25/ /25/ /26/ /25/ /19/ /25/ /22/ /24/ /24/ /24/ /25/ /24/ /21/ /23/ /23/ /23/ /24/ /23/ /20/ /22/ /22/ /22/ /23/ /22/ /19/ /19/ /19/ /19/ /20/ /19/ /13/ /19/ /16/ /18/ /18/ /18/ /19/ /18/ /12/ /18/ /15/ /17/ /17/ /17/ /18/ /17/ /11/ /17/ /14/ /16/ /16/ /16/ /17/ /16/ /10/ /16/ /13/2015

5 12/15/ /15/ /15/ /16/ /15/ /9/ /15/ /12/2015 Domestic bond market Table 2: Recent VGB auction on HNX Issue date Issuer Tenor Winning Winning IR Volume (%) Bid Volume 29/12/2014 State Treasury /12/2014 State Treasury /12/2014 State Treasury /12/2014 VDB /12/2014 VDB /12/2014 VDB /12/2014 State Treasury /12/2014 State Treasury /12/2014 VDB /12/2014 VDB /12/2014 VDB /12/2014 VBSP /12/2014 VBSP /12/2014 VBSP /12/2014 VBSP /12/2014 State Treasury /12/2014 State Treasury /12/2014 State Treasury /12/2014 VDB /12/2014 VBSP /12/2014 VDB Source: HNX Table 3: Bond Auctions Schedule on HNX Issuance Issue date Issuer Tenor type Bond type Volume Auction date 31/12/2014 State Treasury 5 Large batch VGBs /12/ /12/2014 State Treasury 3 Large batch VGBs /12/ /12/2014 State Treasury 10 Large batch VGBs /12/2014 Source: HNX

6 Table 4: Outright transactions on HNX Date Remain -ing tenor Code Price (VND) Yield (%) Volume Value (VND bn) 30/12/ TD , , /12/ TD , ,000, /12/ TD , ,500, /12/ TD , , /12/ TD , /12/ TD , , /12/ TD , ,000, /12/ TD , ,000, /12/ VDB , ,000, /12/ TD , ,000, /12/ TD , , /12/ TD , , /12/ TD , , /12/ TD , , /12/ VDB , , /12/ TD , , /12/ VDB , ,000, /12/ TD , ,000, /12/ TD , , /12/ TD , ,500, /12/ TD , ,000, /12/ VDB , ,000, /12/ TD , , /12/ TD , , /12/ TD , ,000, /12/ TD , ,000, /12/ TD , ,000, /12/ VDB , ,000, /12/ TD , ,000, /12/ TD , , /12/ TD , ,000 56

7 23/12/ TD , , /12/ TD , , /12/ TD , ,500, /12/ TD , , /12/ TD , ,000, /12/ TD , ,500, /12/ TD , ,000, /12/ TD , ,000, /12/ TD , ,500, /12/ TD , ,000, /12/ TD , ,000, /12/ CP4A , ,000, /12/ TD , ,000, /12/ TD , , /12/ TD , ,900, /12/ TD , , /12/ TD , ,000, /12/ TD , ,000, /12/ TD , ,000, Source: HNX Regional Bond Market Table 5: Local government bond yelds in December N 2N 3N 5N 7N 10N USA Singapore Vietnam Indonesia Malaysia Philippines Japan China Thailand

8 Chart 6: Vietnam 5 year CDS Chart 7: Yield of international government bonds issued in 2005 (%)

9 PRODUCT This product covers the latest information about Vietnam macroeconomics. Reports focus on important issues such as the money market and the stock market. The product also forecasts figures which have impacts on the stock market and bond market. MBS RESEARCH CENTER We offer economic, equity and stock market research. The Economic Research Team offers periodic reports on macroeconomics, monetary policies and fixed income markets. The Equity Research Team offers reports on listed firms, private equities, sector reviews and the stock market. MBS Research Center also offers regular market commentaries - The Investor Daily. MB SECURITIES (MBS) Established since May 2000, MBS was one of the first 5 securities firms operating in Vietnam. After years of continuous development, MBS has become one of the leading securities company in Vietnam, providing a full range of services including: brokerage, research and investment advisory, investment banking and capital markets underwriting. MBS s network of branches and transaction offices has been expanded and operated effectively in many major cities such as Hanoi, Ho Chi Minh City, Hai Phong and other strategic areas. MBS s clients include individual investors and institutions, financial institutions and enterprises. As a member of the MB Group, including MB Bank, MB Land, MB Asset Management, MB Capital and Viet R.E.M.A.X (Viet REM), MBS is able to leverage substantial human, financial and technological resources to provide its clients with tailored products and services that few securities firms in Vietnam can match. MBS is proud to be recognized as: A leading brokerage firm ranked No.1 in terms of brokerage market share since 2009; A renowned research firm with a team of experienced analysts that provides market-leading research products and commentaries on equity markets and the economy; and A trusted provider of investment banking services for corporate clients. MBS HEAD OFFICE MB Building, 3 Lieu Giai, Ba Dinh, Ha Noi Tel: Fax: Website: DISCLAIMER Copyrights. MBS 2012, ALL RIGHTS RESERVED. Authors have based this document on information from sources they believe to be reliable but which they have not independently verified. The views expressed in this report are those of the authors and not necessarily related, by any sense, to those of MBS. Neither any information nor comments were written for advertising purposes or recommendation to buy / sell any securities. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying recording, or otherwise, without the prior written permission of MBS