Vietnam Government has room to handle forex turbulence as PMI peaks

HO CHI MINH CITY - Like most other currencies in the region, the VND was under increasing pressure in November because of a strengthening US dollar. At month-end, the VND had depreciated 1.5% against the US dollar since the U.S election.

Having said that, the State Bank of Vietnam (SBV) has managed to keep the depreciation among the lowest level in the region, and looks confident that it will be able to continue thanks to current foreign reserves of around US$41bn (vs. ~US$30bn at the end of 2015) and continued Greenback inflows (In 11M2016: disbursed FDI of US$14.3bn, +8.3%YoY; a trade surplus of US$2.84bn; and ODA disbursements of US$3.25bn.

In its monthly report, Vietnam Asset Management says big state divestments from listed SOEs in December and 2017 will also bring in a significant amount of US$).

“Furthermore, to lessen pressure on the VND, especially in the last month when US$ demand increased, the SBV extended banks’ foreign currency lending activities for another year to December 31, 2017.

“At the same time, it also issued a large amount of T-bills to reduce VND liquidity in the banking system to strengthen the VND.

“All in all, the VND is expected to continue this less fluctuating pattern under SBV’s management  compared to other currencies in coming months.”
 
PMI PEAKS AT 54 - Vietnam’s Purchasing Managers' Index (PMI) in November reached 54.0, the highest level in 18 months. This was encouraging, says VAM, because ASEAN’s PMI recorded only 49.4, while China's PMI declined from 51.2 in October to 50.9 in November, indicating a contraction in manufacturing.

The solid expansion of Vietnam’s manufacturing this month was largely thanks to a jump in new orders driven by stronger domestic and external demand,” the report says.

“Retail sales of goods and services increased 9.5%YoY in 11M2016 (vs. an 8.3% growth in 11M2015) to USD142.3 billion. Augmentation of new orders should have a positive effect on manufacturing and processing sector in the coming months.” www.vietnamam.com (ATI).