VietNamNet Bridge – On Monday the dong slid by VND100 against the US dollar to VND22,460, the lowest level this year.

The slump was blamed on recent fluctuations in international foreign exchange markets, including China’s devaluation of its yuan by 0.45 per cent, which saw it drop to its lowest level in the last five years.

Speculation that the US Federal Reserve could hike interest rates possibly this month was another factor.

But some market observers believed that the dollar’s rise could be short-lived since it was caused by banks buying the greenback to balance their foreign currency positions.

A day later the dong gained against the dollar though the average daily interbank exchange rate fixed by the central bank edged upwards.

On Tuesday the dollar fell by VND20-25 to VND22,425-22,430. Vietcombank bought the currency at VND22,360 and sold it at VND22,430, down VND20 from the previous day.

On the unofficial market in HCM City, the dollar was bough at VND22,380 and sold at VND22,420, down VND70 from Monday.

The forex rates have still been remarkably stable this year although late last year the State Bank of Viet Nam (SBV) begun a new foreign exchange management mechanism to cope with changes in the market, especially the global market.

Under it, the reference rate, or the inter-bank exchange rate, will be managed more flexibly and could changed regularly, even daily. The central bank manages the foreign exchange market through a relatively stable inter-bank rate and daily trading bands.

Some analysts said the stability in the forex rate is not exactly good for domestic firms because the dong has been appreciating even as many countries recently devalued their currencies.

This has put great pressure on Vietnamese exporters in terms of prices in overseas markets.

The depreciated yuan has brought China’s exports a big advantage by making Chinese products very cheap.

For instance, on May 30 the central parity rate of the yuan weakened by 294 basis points to 6.5784 to the US dollar, the lowest level since February 2011.

This is expected to affect Viet Nam’s exports and imports because when the yuan becomes weaker than the dong, Chinese goods imported into Viet Nam will be cheaper and more competitive than Vietnamese items.

Vietnamese garment exporters could lose out since their foreign orders will go to China when prices there will be cheaper.

The Vietnamese central bank should adjust the forex rate more flexibly in ways that can weaken the dong against other currencies.

Besides, the Government should rethink some other foreign exchange policies including the interest rate for dollar deposits, compulsory reserves and the foreign exchange position.

It is also necessary for the central bank to soon develop a foreign currency market to meet businesses’ and individuals’ demand for foreign currencies.  

Tourism firms demand continued visa waiver

In April the Ministry of Culture, Sports and Tourism urged the Government to increase the visa waiver period for tourists from the UK, France, Germany, Italy and Spain from the current one year to five years and double their period of stay to 30 days to attract more visitors.

The ministry also asked the Government to consider waiving visas for people from 13 more nations, all key tourism markets for Viet Nam, and issue visas online and on arrival to make it easier for visitors.

Tourism industry insiders said though there are still some limitations to the visa waiver policy, it has yielded positive results.

The visa waiver policy was instituted in July last year and comes to a close at the end of this month.

The administration is hoping the visa exemption and some tourism stimulus programmes will attract 1.1 million arrivals from those markets in the next three years, up 50 per cent from 2015.

According to the General Tourism Department, since the waiver until last March the number of tourists from the five countries shot up by 14 per cent to 555,000 against an average annual growth of 5.35 per cent in 2010-14. The additional spending by the visitors is estimated at around US$171 million.

The biggest concern for tourism firms now, as the deadline approaches, is whether the Government will increase the waiver duration.

It is not just domestic firms that are focused on the visa waiver policy. Many overseas tourism businesses too want to know about it, and inquired at international tourism fairs like Germany’s ITB Berlin and the UK’s WTM.

According to the World Economics Forum’s tourism competitiveness in 2015, Viet Nam was in 75th place out of 141 countries in the 2014-2015 Travel and Tourism Competitiveness Index rankings.  

In the open index, the Vietnamese tourism sector was in a high 19th position out of 119 countries in visa procedures.

Experts said the Government should make an early decision on visa waivers to help the tourism sector capitalise on the opportunities brought by the upcoming peak season.

For westerners the holiday period often begins in October and they are prone to making their travel plans very early, even a year ahead.

An early decision by the Government on visa waiver will enable foreign tourism firms to put Viet Nam in their 2016-17 promotional programmes.

But market observers said visas are just one of several hurdles facing the tourism industry.

To compete with foreign rivals and ensure development, local tour operators must develop new products to meet demand and create opportunities for foreign visitors to learn about Vietnamese culture and explore nature.

Cost is also a factor in attracting more tourists, so the prices of the new products should be lower than normal products.

Viet Nam should organise effective tourism promotion programmes in overseas markets, especially the five Western European countries, and information campaigns on tourism stimulus programmes in those markets.

Stock brokerages race to hike capital as derivatives trading looms

Mirea Asset Wealth Management Securities (Viet Nam) Limited Liability Company has increased its chartered capital from VND300 billion ($13.33 million) to $700 billion ($31.11million)

It was among several securities companies that sought various ways to increase their chartered capital to qualify for the participation in the planned derivatives market.

In middle March, the Ha Noi Stock Exchange (HNX) and the Viet Nam Securities Depository (VSD) announced that a derivatives market would be set up by the end of this year.

The derivatives market and its trading system will be designed with three functions: member management, recording transactions and statistics, and risk warning and prevention. It can handle 15,000 payment transactions per minute from at least 600,000 accounts.

The market aims to help investors identify and mitigate risks, and diversify into other investment channels.

The share indexes (HNX30 and VN30) and five-year Government bonds will be the first two products to be traded in the market.

However, to operate in the derivatives market, securities firms have to meet certain criteria.

With a legal capital or equity of over VND600 billion, a securities company can do proprietary trading, that is to invest its own money in securities.

It must have VND800 billion to offer derivatives brokerage services.

Capital of VND900 billion and VND1.2 trillion will enable it to become a direct or general clearing member respectively.

A general clearing member (GCM) is an entity approved by the clearing house to clear principal transactions and client transactions on behalf of GCM clients.

Significantly, these amounts are higher than most securities companies’ existing capital.

To increase their capital, many securities companies have adopted traditional methods like pumping in more money or issuing shares to some big shareholders, while some others have opted for issuing bonus shares.

There is a concern whether all of them will be successful in increasing their capital.  

The director of a securities company in HCM City, who asked not to be named, said his company has been very active in seeking strategic investors to increase its capital and enter the derivatives market, but failed.

The company decided to issue bonus shares to shareholders, but the capital has yet to reach VND600 billion.

Analysts even suspect that some securities firms have used subterfuge to increase their legal capital by a huge amount within a short time.

This involves borrowing money to temporarily inflate the capital and repaying it after being certified by the SSC as meeting capital requirements.

Another method is to issue bonus stocks to shareholders by cooking up the books to show large profits.

To prevent these disagreeable methods, the SSC needs to work with audit companies and relevant agencies to carefully monitor securities companies’ efforts to increase capital.

Thien Ly

VNS