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HSBC and Standard Chartered pioneer dong swaps

By Nick Ferguson | 30 May 2007

Dong interest-rate swaps create new hedging opportunities for Vietnamese market participants.
Vietnamese banks and corporates are set to benefit from the opening of the interbank market for interest-rate swaps now that HSBC and Standard Chartered have completed the first such trade.

The $3 million trade is a five-year swap, with HSBC paying a floating rate at the three-month Vietnamese interbank offered rate in exchange for receiving a fixed dong rate from Standard Chartered.

Vietnam's central bank paved the way for interest-rate and cross-currency swaps with a blanket approval in December 2006, but this is the first trade to come to the market. Before the approval, such swaps were possible, but the central bank only issued approvals on a case-by-case basis.



The blanket approval should create a more liquid market that will allow banks and companies to make better use of interest-rate hedges to manage their exposure.

"While this is the first interbank dong interest-rate swap transaction in Vietnam, there is every expectation that other similar trades will follow," says Anita Fung, HSBC's treasurer and head of global markets Asia-Pacific, and chair of the Hong Kong Treasury Market Association.

Dong currency options are under development at HSBC and several other banks, and their development should open the possibility of structured swaps and a range of other more complex structured products.

This trade is the latest in a string of market-opening transactions that HSBC and Standard Chartered have carried out, particularly in China's derivatives market. The two banks pioneered renminbi non-deliverable interest-rate swaps and swaptions in 2005, non-deliverable renminbi interest-rate swaptions at the end of 2006 and the first such swap based on the new Shanghai interbank offered rate earlier this year.

Barclays remains bullish on Vietnam’s economy15:37' 30/05/2007 (GMT+7)

VietNamNet Bridge – Barclays Capital, the investment banking arm of Barclays Bank, last week issued a relatively positive outlook on the Vietnamese economy, despite inflationary pressure and a potential current account deficit.
The outlook, which calls Vietnam "an improving credit story", forecasts the economy to continue growing by around 8% per annum over the next two to three years, very much in line with forecasts from the Asian Development Bank and International Monetary Fund.
"We continue to believe that the combination of high growth and improvement in Vietnam's balance of payments profile should lead to Moody's upgrading its B3 sovereign rating by one notch by the end of the year", the bank said in its research paper dated on 22 May. Moody's last March placed a positive outlook on Vietnam's sovereign rating, up from stable.
Barclays Capital said that growth, however, may be kept in check this year, in part due to poor weather conditions which already had a detrimental impact on the agriculture sector in the first half of the year, and as a result, on rural incomes and consumption.
However, overall growth would likely accelerate moving forward and GDP will rise by 7.8% for the whole year, thanks to the ongoing strength of exports and investment from the rapid build-up of FDI, as well as the ongoing strength of government spending on infrastructure and other capital projects.
"Whilst tighter credit conditions are projected to keep domestic credit growth increasing at around 20% in both 2007 and 2008 - against 40% in 2005 - such a rate of growth should still be viewed as stimulative in regards to the build-up of investment", said Barclays.
Researchers, though, highlighted inflation as a possible cause for concern, resulting partly from unfavourable weather conditions that will force agriculture prices higher, and the economy running "at above potential".
The inflow of foreign funds and ongoing balance of payment surplus will also add extra price pressures, said Barclays.
The bank also pointed out that Vietnamese central bank has been "willing to tolerate a higher inflation rate" as long as it remains below the real GDP growth rate, for the greater importance of improving infrastructure and promoting economic growth.
Barclays, however, warns that inflation rate may surpass the real GDP growth rate by early 2008, if the central bank does not further tighten the monetary policy in the second half of 2007.
Foreseeing a marked increase in trade deficit particularly due to imports of machinery, Barclays Capital remains "relatively sanguine".
"The widening of the [current account] deficit should be offset by a sharp rise in the capital account surplus, with both inflows of portfolio funds and foreign direct investment set to enjoy a marked rise," the report said, adding that in the first quarter foreign investors were net buyers of $530mil in equities compared with $470mil in the whole of 2006.
Given that the Vietnamese Government has announced plans to issue $1bil of foreign currency denominated bonds in 2007, the bank expects portfolio flows into equities and planned issuance of dong and dollar bonds to total $2bil in 2007.
" [We] believe that a [current account] deficit in the order of 3.5% of GDP is sustainable given Vietnam's external debt profile and balance of payment ratios," read the report.
Despite the deficit, foreign exchange reserves stood at $13.4bil at the end of 2006 and are forecast to rise to $18.4bil by the end of 2007 and $22.8bil by the end of 2008, or 4.3 and 4.5 months of import coverage, respectively.
"Such a ratio compares favourably with similarly rated sovereign credits," the bank said. But analysts also warned that a "sustained period of [stock] market volatility would lead to a reversal in the balance of payments dynamics and cause a sharp decline in forex reserves."
(Source: Viet Nam News)

BUSINESS IN BRIEF 30/510:01' 30/05/2007 (GMT+7) Deutsche Bank AG, MHB work towards IPO
German-based Deutsche Bank AG’s arm in Singapore will provide consultancy services for the Housing Bank of Mekong Delta (MHB) as the State-owned bank prepares for equitisation.
Consultations with the 18.8 trillion VND (1.2 billion USD) asset backed bank are expected to be completed by October, paving the way for the bank to launch its initial public offering (IPO).
MHB provides financial services for homebuyers and small-to-medium sized enterprises and has a network of 140 branches in 32 provinces and cities nationwide.
The bank is among four that the government has ordered to work toward listing on the country’s stock exchange by the end of this year, the others include the Bank for Foreign Trade of Vietnam (Vietcombank), the Bank for Industrial and Commercial Bank of Vietnam (Incombank) and the Bank for Investment and Development of Vietnam (BIDV).
Meanwhile, the Sai Gon Thuong Tin Joint Stock Commercial Bank (Sacombank) has won a prestigious award from Wachovia Bank, one of the four largest banks in the US, for providing exceptional international payment services in 2006.
The award, based on the level of accuracy of international payment transfers was given to Sacombank in recognition of the expertise and professionalism of all Sacombank staff.
</SPAN>
Vietnam, Cambodia work on rubber growing project</SPAN>

Officials from Vietnam and Cambodia gathered at a conference in Phnom Penh on May 29 to discuss ways to remove obstacles currently hampering a rubber-growing project that was signed between the two governments on October 7, 2006.

Participants pledged to work to remove obstacles in order to complete surveys and carry out the project on schedule as agreed upon by their governments, thereby creating jobs for locals in the targeted provinces and contributing to their respective national budgets.

The conference saw the participation of Nguyen Chien Thang, Vietnamese Ambassador to Cambodia; Nguyen Kien Quyet, Chairman of the Board of Directors of the Vietnam Rubber Group; It Nody, Under-Secretary of State of the Cambodian Ministry of Agriculture, Forestry and Fisheries; and Ty Sokun, Director of the General Forestry Department of Cambodia.

Leaders from the provinces of Kampong Thom, Kratie, Mondolkiri and Preah Vihear also attended the meeting.</SPAN>

Industrial production up 16.8 percent in five months</SPAN>

Falling inline with Vietnam’s rapidly expanding economy, industrial production value for the first five months of the year surged to nearly 225.78 trillion VND (14.1 billion USD), a year-on-year increase of 16.8 percent.

The non-State sector led the charge by posting growth of 20.4 percent, followed by the foreign-invested sector with 19.3 percent, the Ministry of Industry reported.

The State-owned sector lagged behind, recording a more modest increase of 7.9 percent.

May alone saw industrial production value registered at around 48.68 trillion VND (3 billion USD), a surge of 2.7 percent over the previous month.

Market experts have pointed to successes in the industries of steel, electric engines, machine tools, electric fans, pesticides, plastics, clothes and motorbike and automobile spare parts as key drivers for the increased output.

The Ministry of Industry did however urge the Electricity of Vietnam (EVN) Group to ensure power is maintained to allow for sufficient supply for production to remain in high gear.
HSBC, Standard Chartered to conduct interest rate swap
HSBC and the Standard Chartered Bank have recently conducted a Vietnam dong interest rate swap (IRS) agreement, marking the first time the such an agreement has taken place in Vietnam.
An interest rate swap is a contractual agreement between two parties under which each agrees to make interest payments to the other at a fixed or floating exchange rate for an agreed period, with the aim of hedging foreign exchange and interest rate risks.</SPAN>

Two more hydropower plants in Lao Cai</SPAN>

The state-owned Song Da Corporation will build two more hydropower plants in Sa Pa district, northern mountainous Lao Cai province.

The 31.5 MW Nam Cun hydropower plant, worth 659.8 billion VND, is expected to provide 139.29 billion KWh, and the 17 MW Su Pan 1 plant will generate 75.02 billion KWh of power annually.

The plants are expected to ease the shortage of electricity in the northern mountainous region.

Deal inked for huge steel complex in Ha Tinh</SPAN>

The Vietnam Steel Corporation (VSC) and India-based Tata Steel Corporation signed a memorandum of understanding in Ha Noi on May 29 to build a steel complex in central Ha Tinh province.

Under the MoU, the two sides will carry out a feasibility study for a 3.5 billion USD complex in Vung Ang Economic Zone. The study will be finished in September 2008.

The complex will house a steel mill with an annual output of 4.5 million tonnes of steel. Tata Steel will own a minimum of 65 percent of the plant’s shares.

It will refine iron ore from the Thach Khe mine, which has a reserve of 500 million tonnes. The feedstock is ready for processing thanks to a recent establishment of the Thach Khe iron joint-stock company, said Dau Van Hung, VSC director general at the signing ceremony.

Tata Steel, the world’s sixth largest steel producer, previously teamed up with VSC, Vietnam ’s biggest steel maker, in two joint-ventures.</SPAN>

PetroVietnam orders deep-sea rig</SPAN>

A subsidiary of State owned oil giant PetroVietnam has signed an agreement with Singapore-based Keppel Fels, to purchase a deep-sea oilrig capable of drilling to 9,000m.

PetroVietnam Drilling Investment Corporation came to terms on the 191 million USD jack-up rig that can operate in water depths of up to 114m, on May 28.

Previously, Keppel Fels supplied another PetroVietnam subsidiary, the PetroVietnam Drilling and Well Service Company, with a similar rig that is now being used in the offshore Te Giac Do (Red Rhino) field in the southern coastal province of Vung Tau.

Keppel Fels is a wholly owned subsidiary of the Keppel Offshore & Marine Corporation, one of the world’s leading designers and builders of jack-up rigs.

Completion of the oil rig is scheduled for October, 2009.</SPAN>

Vietnam targets 500,000 non-State enterprises by 2010</SPAN>

Measures to push development of non-State enterprises were discussed in Ho Chi Minh City on May 28, targetting 500,000 starts-up across the country by 2010.

To this end, participants proposed the government continue its tax reform in a fair and transparent manner and improve administrative procedures towards the "one-stop shop" policy.

Attention should also be placed on logistic services relating to legal and tax procedures, said delegates, adding that more government support in human resources training, information supply and legal assistance for businesses are also needed.

Vietnam is currently home to 260,000 non-State businesses with a total capital of close to 600 trillion VND.

In 2006, capital investment from domestic private enterprises amounted to 132 trillion VND, doubling that of foreign investors.

The development of private enterprises, particularly in processing, retail and services industries, helps generate more than 90 percent of jobs for local workers each year.</SPAN>

(Source: VNA)

PetroVietnam branches tie up for $245 mln gas storage project
Three branches of Vietnam’s state-run oil and gas co, PetroVietnam have entered into a cooperation deal to invest US$245 million in gas cargo facilities and warehousing.

Following the deal signed Wednesday three branches of the company, PV Trans, PV Gas South and PV Gas North will establish a joint stock company to operate the project.
In the first phase, the new entity will invest $45 million, 70 percent of which will be contributed by PV Trans in buying four vessels to carry liquefied petroleum gas (LPG) products.
More that $200 million has been earmarked for the second phase of the project in building a warehouse and more vessels for LPG and liquefied natural gas.
The three companies plan to start the project this year.
The Ho Chi Minh City-based PV Trans, full name of PetroVietnam Transportation Company launched an initial public offering late last year via an auction of 25.7 million shares on the HCMC bourse.
The IPO is a part of its plan to raise its chartered capital to VND1.9 trillion ($118 million) from the current VND720 billion by 2010.
Source: Tuoi Tre – Compiled by Dong Ha

Thanks for the Reads Notazbad. did I read that article right, looks like October for some interesting things to start happening in Vietnam banking?
BUSINESS IN BRIEF 30/510:01' 30/05/2007 (GMT+7) Deutsche Bank AG, MHB work towards IPO
German-based Deutsche Bank AG’s arm in Singapore will provide consultancy services for the Housing Bank of Mekong Delta (MHB) as the State-owned bank prepares for equitisation.
Consultations with the 18.8 trillion VND (1.2 billion USD) asset backed bank are expected to be completed by October, paving the way for the bank to launch its initial public offering (IPO).
MHB provides financial services for homebuyers and small-to-medium sized enterprises and has a network of 140 branches in 32 provinces and cities nationwide.
The bank is among four that the government has ordered to work toward listing on the country’s stock exchange by the end of this year, the others include the Bank for Foreign Trade of Vietnam (Vietcombank), the Bank for Industrial and Commercial Bank of Vietnam (Incombank) and the Bank for Investment and Development of Vietnam (BIDV).
Meanwhile, the Sai Gon Thuong Tin Joint Stock Commercial Bank (Sacombank) has won a prestigious award from Wachovia Bank, one of the four largest banks in the US, for providing exceptional international payment services in 2006.
The award, based on the level of accuracy of international payment transfers was given to Sacombank in recognition of the expertise and professionalism of all Sacombank staff.
</SPAN>

Originally Posted by Spoiledred

Thanks for the Reads Notazbad. did I read that article right, looks like October for some interesting things to start happening in Vietnam banking?
BUSINESS IN BRIEF 30/510:01' 30/05/2007 (GMT+7) Deutsche Bank AG, MHB work towards IPO
German-based Deutsche Bank AG’s arm in Singapore will provide consultancy services for the Housing Bank of Mekong Delta (MHB) as the State-owned bank prepares for equitisation.
Consultations with the 18.8 trillion VND (1.2 billion USD) asset backed bank are expected to be completed by October, paving the way for the bank to launch its initial public offering (IPO).
MHB provides financial services for homebuyers and small-to-medium sized enterprises and has a network of 140 branches in 32 provinces and cities nationwide.
The bank is among four that the government has ordered to work toward listing on the country’s stock exchange by the end of this year, the others include the Bank for Foreign Trade of Vietnam (Vietcombank), the Bank for Industrial and Commercial Bank of Vietnam (Incombank) and the Bank for Investment and Development of Vietnam (BIDV).
Meanwhile, the Sai Gon Thuong Tin Joint Stock Commercial Bank (Sacombank) has won a prestigious award from Wachovia Bank, one of the four largest banks in the US, for providing exceptional international payment services in 2006.
The award, based on the level of accuracy of international payment transfers was given to Sacombank in recognition of the expertise and professionalism of all Sacombank staff.
</SPAN>

October is when the bank is going up for grabs on the stock market. We are hoping the Dong R/V will occur long before then!

I don't know if HardRock posted this here. But it is on Iraqi Rumor section. 221.16 trillion Vietnamese dong (VND)
http://www.rolclub.com/rumors-predic...-rumor-11.html

Originally Posted by SpongeDinars

I don't know if HardRock posted this here. But it is on Iraqi Rumor section. 221.16 trillion Vietnamese dong (VND)
http://www.rolclub.com/rumors-predic...-rumor-11.html

Anyone in the know KNOW anything about this and does it in fact point to a reval as an impossibility?

Originally Posted by SpongeDinars

I don't know if HardRock posted this here. But it is on Iraqi Rumor section. 221.16 trillion Vietnamese dong (VND)
http://www.rolclub.com/rumors-predic...-rumor-11.html

I would like to hear the other side who think dong will rv.