Finance and Banking report in Q3/2012

Total deposits

According to Hanoi Statistics Office, total deposits of Hanoi-based credit institutions in September 2012 reached 851.647 trillion VND, rising 1.09% on month and surging 3.63% from December 2011.

Savings increased 2.5% and 17.11%, payment deposit up 0.2% and 2.95% and valuable paper issuance up 0.15% and down 34.7% respectively.

Ho Chi Minh City Statistics Bureau said that the total deposits of Ho Chi Minh City-based banks till the end of September reached 952.300 trillion VND, rising 0.3% on month and 8.5% on year (in the same period last year, the rise was 19.2%).

Total deposits in foreign currency accounted for 19.8%, down 10.3% on year. Total deposits in VND accounted for 80.2% of the total, rising 14.5% on year, of which, saving accounted for 41.6%, up 21.4%.

Credit growth

In Ho Chi Minh City, total outstanding loans in the city by the end of September were estimated at 774 trillion VND, growing 0.5% on month, up 5% on year (in the same period last year, the growth was 13%).

The total outstanding loans in VND accounted for 74.3% of the total loans, rising 10.7% on year. Total outstanding loans for medium and long terms accounted for 43.2%, down 5%. Short term loans increased 14.1% on year.

In Hanoi, total outstanding loans till the end of September 2012 reached 617.521 trillion VND, growing 1.2% from August 2012 and up 5.35% from December 2011, of which, short term loans rose 1.9% and 5.31% and medium and long term loans increased 0.1% and 5.42% respectively.

Transactions on OMO

In September, as much  as 43.886 trillion VND was pumped on open market operations (OMO) through Reverse Repo operations and as much as 49.763 trillion VND was withdrawn via maturity of Reverse Repo. In September, the State Bank of Vietnam (SBV) made a net withdrawal of 5.877 trillion VND through Reverse Repo operations on OMO.

Also in September, there were no Outright transactions, but about 9.717 trillion VND worth of treasury bill fell due.

This volume of T-bill fell due  for Selloutright transactions with tenor of 182-days made in March 2012.

In Q3/2012, SBV injected 85.817 trillion VND and withdrew 82.279 trillion VND on OMO, leading to a net injection of 3.538 trillion VND via Reverse Repo operation.

In Q3, there were only 2 Selloutright transactions with a selling volume of 3.059 trillion VND. About 50.265 trillion dong worth of 91-day  and 182-day tenor T-bills fell due.

This volume of T-bills was sold in March 2012 by the central bank.

Interbank Transactions

Total interbank trading value in September dropped sharply, reaching only 277.971 trillion VND, or 57.61% of the total trading value in August. The sharp decline in the interbank trading value was due to the central bank’s Circular No 21 being issued to control lending activities on the interbank market, which officially took effect from September 1st.

As per regulations at the  Circular No 21, commercial banks are not allowed to lend to each other for tems of more than 12 months and the interbank loan will also considered credit, therefore, the trading value for 12-month term saw very strong fall, equaling to only 10% of the total trading value for this term in August 2012.

The interest rate for overnight and one week terms, accounting for 70% of the total trading value, was about 5%/year, 1-month term with  14% of the total trading value also did not exceed 10%/year. September also saw the equal trading value between 1-week term and overnight term.

Generally in Q3, the interest rate fluctuations were not much. Only after the arrest of Nguyen Duc Kien on August 21st, the interbank interest rate suddenly surged but it cooled down immediately after the central bank’s strong intervention.

Trading value declined monthly, especially in September after the central bank’s Circular No 21 officially took effect. Changes in the interbank market has been gradually controlled.

Bond market

In September, there were 3 tenders of government bond for tenors of 2 and 3 years, but only 1 tender for tenors of 5 and 10 years. Total offered volume was 9.5 trillion VND.

The proceeds reached 4.66 trillion VND, including  50 billion VND for 5-year tenor bond and 500 billion VND for 10-year tenor bond and the remaining was for 2 and 3-year tenor bonds.

The winning bond yield for tenors was from 9.4%/year – 9.8%/year depending on tenors.

In Q3, there were 11 successful tenders for 2-year tenor bond, 10 successful tenders for 3-year tenor bond, 9 successful tenders for 5-year tenor bond and 3 tenders for 10-year tenor bond.

The very big proportion of the proceeds for 2 and 3-year tenor bond showed the limitation in long term capital mobilization of G-bond.

The winning bond yield of all tenors was less than 10%/year. For 10-year tenor, the winning coupon rate still at 9.5%/year showed that long-term inflation expectation is not low.

Total proceeds for G-bond in Q3 reached 29.06 trillion VND.

Gold was the most profitable asset

Gold price in Q3 surged total 5.4 million VND/tael (+12.9%) to the highest level in more than one year, at above 47 million VND/tael.

With this rise, gold became the most profitable asset  as stock fell, real estate decreased sharply, the forex rate was relatively stable and the bank interest rate was only 9%/year.

Demand of gold increased strongly and transactions were brisk while the supply limited, therefore, the local gold price was often higher than the world counterpart by over 2 million VND, even at 3 million VND/tael.

Forex rate stable, non-US dollar foreign currencies surged

The interbank average forex rate remained stable at 20,828 VND/US dollar since early this year so far.

US dollar price on the market was stable. There were some fluctuations but it lasted for less than 1 week. US dollar price at banks in Q3 was popular at  20,800-21,000 VND/US dollar.

The forex rate between VND and other foreign currencies, except US dollar, fluctuated strongly. In Q3, converting into VND, euro increased 3.52%, CAD surged over 4.8%, AUD up over 3.9%, GBP soared 4.1%, SGD up 4.39% and Japanese Yen up 2.3%.

The reason for the increase of the non-US dollar forex rate was because these economies are better than the US together with the general trend of the world and the US’s QE3 package that weakened the US dollar.

(Source: Cafef)

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