Caution and Easing

Source: Pano feed


The State Bank of Vietnam (SBV) set the credit growth goal at 13-15 per cent in 2015. Both the stock market and the real estate market are excited about development opportunities in 2015, driven by strong foreign investment cash flow and loosened monetary policies of Vietnam. What matters to the SBV is how to channel capital flows into manufacturing areas and prevent money flows from creating stock and property bubbles.

Deputy SBV Governor Nguyen Thi Hong said the SBV will offer direct credits to more businesses and to production development. The credit growth of 12 per cent in 2014 met the target of 12-14 per cent set for the year by the SBV at the beginning of last year.

Worried about cash injection into stocks, properties

Real estate and stock investors are excited at the beginning of 2015. Stock and real estate are the worthiest destinations for cash flows in 2015, followed by bank deposits, said Ms Nguyen Thi Ngan Tuyen, Research and Analysis Director at Maybank Kim Eng Securities Joint Stock Company (MBKE).

The Vietnamese stock market experienced a volatile year in 2014 with two strong rallying runs and two falling streaks. Water-treading investors saw 2014 as a golden opportunity to get ahead.

Monetary policies will be further loosened, featured by the target credit growth of 13-15 per cent and the economy is showing signs of recovery but citizens and businesses will still be very cautious with their investments in search of profits. According to investment specialists, 2015 will be a good year for the stock market, particularly in the first two quarters. The real estate market is projected to catch the cash flow after a significant recovery in the third and fourth quarters of 2014. In 2014, real estate transactions in Hanoi and HCM City soared 60 per cent and 200 per cent, respectively. Real estate inventories have decreased a lot, but the volume remains very large. Price fevers are unlikely because many projects have been launched and carried out.

Savings deposits grow stably in 2014 but interest rates are still on the fall. Making a margin of 8 per cent from deposits is very unlikely in 2015. Another safe investment channel, but with lower profitability, is foreign currencies. Assuming the dong devaluation of 3-4 per cent this year plus deposit interest rate of 1 per cent, US dollar deposits are expected to generate a profit margin of less than 5 per cent in the year.

After reviewing investment channels, pundits seem to agree that real estate and securities are two money magnets in 2015. However, excessive cash flow may generate asset bubbles and many follow-up implications.

Without capital for production, growth is meaningless

Production area is in still difficulty. Companies still lack capital for investment capital for production expansion and new projects. The Vietnam Association of Small and Medium Enterprises said that 70 per cent of SMEs do not have access to credit sources. Dr Nguyen Tri Hieu, a financial – banking expert, said credit growth does not have any meaning to 70 per cent of SMEs which cannot borrow money from banks.

According to economic experts, banks will focus more on capital use efficiency rather than credit scale and growth. Economist Vu Dinh Anh said that lessons should be drawn from overheating credit growth in previous years. Banks should focus on the effective use of credits, even in high-risk areas like real estate or securities, to help businesses change technology, access new technologies, create new products with high competitiveness, and approach new markets.

In previous years, social investment sources spurred by banks inflated stock and real estate bubbles. The stock bubble has been deflated but it will take a long time to build a stable and sustainable market. The real estate market still needs more time to digest inventories and handle collapses. But speculators are always ready to go back to search for new fevers at anytime. Fevers do not create sustainable growth, but cause huge risks for the economy.

Against this backdrop, at a recent meeting with bankers, SBV Governor urged them to direct cash flows to production and business activities in 2015, especially in priority areas. Credit growth is targeted at 13-15 per cent in the year.

Mr Nguyen Tien Dong, Director of SBV Credit Department, said the central bank will continue to direct credit flows to production and business activities, particularly priority fields. The SBV is has submitted a draft decree in place of Decree 41, expected to take effect in early 2015. This new decree will be an important impetus to encourage enterprises, economic sectors as well as citizens to expand agricultural production.

Bao Chau

Đăng ký: VietNam News