Money18Jul 27-Aug 2, 2015

By Thanh Xuan

The first-ever release of 20-year

maturity sovereign bonds targeting

insurers has been welcomed by mar-

ket participants.

Tran Thi Hue, head of Capital

Mobilisation under the bond issuer

State Treasury of Vietnam (STV),

said dozens of insurers had con-

tacted the STV to place orders.

Earlier this month, the STV an-

nounced that the bonds, totalling

VND6 trillion ($279.7 million)

VND7 trillion ($325.58 million)

with a face value of VND10,000

($4.65) will be available from July

29 until the end of 2015.

In the third quarter alone, VND4

trillion ($186 million) would be

issued.

We are interested and will def-

initely be participating with a signif-

icant amount. This is the first time

that 20-year bonds are available and

the fact that they are issuing them

specifically for insurers makes it

even more special, said AIA Viet-

nams chief financial officer

Ly Nhon.

Nhon explained that life insur-

ers cover long term risks as the du-

ration of life insurance policies can

be as long as the life of the insured,

so having long term assets would

fit well to their liabilities, and the

investment is in line with AIAs

investment strategies in Vietnam,

and more specifically with the life

insurance industry.

We hope that this is the first of

many longer term bonds issued for

life insurers, said Nhon.

Nguyen Thi Thuy Linh, VPBSs

director of the Macro and Financials

team told VIR that there was a highdemand among insurers, who had a

real need for long-term bonds.

In the past, they often asked

the Ministry of Finance to issue 10-

year plus bonds because their funds

are long-term and they need long-

term fixed income for financial

planning, Linh said.

Vietnam Bond Market Associa-

tion (VBMA) chairman Do Ngoc

Quynh said besides the long tenor,

fine macro indicators such as the

inflation rate, exchange rate, and

balance of payments as part of the

governments recent efforts to sus-

tainably develop the economy are

building trust among bond

investors.

Since 2014, the amount of

long-term government bonds suc-

cessfully issued has increased sig-

nificantly. This indicated that the

authorised agencies can be more

confident in releasing the 20-year

product, Quynh told VIR.However, expert analysis warns

that insurers should also consider

the future outlook when negotiating

the bonds interest rate.n

Insurers happywith longerG-bond tenors

By Thu Trang

Domestic gold prices have dropped,

with transactions dreary and in-

vestors seemingly uninterested in

gold at this stage.

Since mid July, Vietnams aver-

age gold price has dropped by

VND1.5 million ($70) per ounce.

The trading margin normally

recorded at VND40,000 ($1.86) per

ounce has now widened to

VND200,000-250,000 ($9.30-

11.63) per ounce, as gold dealers

and banks have noticeably lowered

their buying prices to avoid risks.

In the third week of July, gold

futures for August were reported at

$1,129.60 per ounce on the Com-

modity Exchange (Comex) in New

York, a record low since 2010. Ac-

cording to gold experts, the worlds

gold price has dropped some 12 per

cent compared to the beginning of

the year. The price is expected to

plummet down to $1,000 per ounce

in the near future.

The local gold price has dropped

following the falling world market,

the strengthened dollar, and an ex-

pected Federal Reserve (Fed)s in-

terest rate increase soon.

Hanoi-based Bao Tin Minh

Chau Jewellerys deputy general di-

rector Tran Nhat Nam said the com-

panys gold trading had been rather

quiet recently despite a sharp price

fall, with supply exceeding demand.

Last week, Ho Chi Minh City-

based Saigon Jewellery Companys

gold price quotation was further ad-

justed downwards by VND300,000-

400,000 ($13.95-18.60) per ounce

compared to the previous week.

According to economist Nguyen

Tri Hieu, many factors have taken

their toll on the gold market, includ-

ing the possible Feds interest rate

increase, plunging petroleum prices,

the strengthened euro, and Greeces

continued stay in the Euro zone.

In previous gold price plunges,

many local investors bought gold as

a long-term investment with many

keeping holding in hope that price

would continue to rise. As a result,

they have been left holding on to

gold amid an unpredictable market.

Hieu said the decision to sell or

hold gold at the moment all de-

pended on investors strategy and tol-

erance limit. The gold price moves

cyclically and at some point in the fu-

ture, gold prices could creep up.

He suggested that professional

gold traders should wait for a

bounce back, as selling gold at this

time will no doubt result in a loss.

As for smaller investors who ac-

quired gold as a short-term invest-

ment, selling gold to avoid addi-

tional losses could be appropriate at

present, noted Hieu, adding that as

those small investors or individuals

often have small capital, holding on

to gold while the price falls might

not be ideal and could result in more

losses.

As local investors gain confi-

dence in domestic currency and both

the stock market and the real estate

market have begun to get back on

track, gold investment has gradually

become less popular. Also, the cen-

tral bank has actively reduced gold

speculation among banks, contribut-

ing to the stagnation of the gold

market.

Gold is not regarded as a local

investment channel due to its low

profit margin at present, observed

Hieu.n

By Trang Nguyen

Investor confidence in the banking

sector has gradually improved, and

a new wave of investment in local

banks is expected soon.

In the first half of the year, the

government has taken serious meas-

ures to wipe out as many weak

lenders as possible throughout the

banking system. This effort is being

made in a bid to reduce the number

of banks in Vietnam to a reasonable

amount, as well as trim down soar-

ing bad debts and cross-holdings.

Vietnam Construction Bank,

Ocean Bank and GP Bank have

been completely bought out so far

by the central bank.

Likewise, the pair-ups of big

lenders with small banks, such as

Vietinbank with PG Bank, BIDV

with Mekong Housing Bank, and

Maritime Bank with Mekong De-

velopment Bank, have further re-

duced the number of banks and

cross-ownership in Vietnam.

By the end of May, according to

the central bank, the banking sys-

tems bad debts ratio declined to

3.15 per cent from the 3.49 per cent

level at the beginning of the year.

Banking experts have predicted

Vietnams banks would become the

target of investment among both

local and overseas investors once

confidence in the banking industry

returned.

According to Phi Cong Dung,

director of corporate finance at the

ABB M&A/Merchant Banking, the

local banking sector is seen by for-

eign investors as a leveraged expo-

sure to Vietnams economy, and

with economic conditions warming

up again, the banking sector is an

attractive destination for both port-

folio and strategic investment.

We work with foreign financial

and strategic investors that are inter-

ested in investing in the domestic

banking sector on the right terms,

said Dung in an email. Banks with

a reasonable pricing plan and trans-

parent procedures, coupled with

good corporate management,

through the right transaction struc-

tures, will certainly be able to catch

the attention of foreign investors.

Meanwhile, local investors have

taken the initiative to invest in do-

mestic banks.

Kinh Do Corporation, for in-

stance, has just paid VND1 billion

($46.51 million) to acquire a 17 per

cent stake of Dong A Bank to be-

come the banks strategic partner

and largest shareholder.

BIDV and VPBank are also in

the final stages of negotiation with

their strategic partners.

We believe that we will com-

plete selling shares to a strategic for-

eign investor with an optimal price

some time next year, said BIDV

chairman Tran Bac Ha.

Investor confidence has been

further strengthened with the gov-

ernments easing of the foreign

ownership limit (FOL) in public and

securities companies. According to

some experts, the local authorities

will subsequently remove the cur-

rent 30 per cent cap on the FOL in

the banking sector, in line with the

WTO and ASEAN Economic Com-

munity commitments to fully open

up the door for the banking industry

by 2020.

We think that the government

will eventually ease the FOL in the

banking sector in line with the lib-

eralisation we are generally seeing

in Vietnam, Dung said, adding that

allowing larger stakes woud be an

incentive for foreign investors to

properly transfer technological and

operational expertise.

The participation of foreign in-

vestors in the local banking sector

will surely help clean up Vietnams

financial system, said Vietnam In-

ternational Law Firm (Vilaf) manag-

ing director Dang Duong Anh.

Japanese investors, for in-

stance, have significantly con-

tributed towards the domestic

banks creditability and confidence

after taking over some 10 per cent

or 15 per cent of the banks stakes,

Anh added.

Despite some experts concern

over the possibility of an entire FOL

cap removal, an incremental in-

crease of foreign ownership is on

the cards, as stipulated by WTO and

AEC commitments.

This could effectively mean a

two-tier FOL system. In other words,

we would suggest a gradual removal

of the FOL cap; say an increase to 51

per cent, then 65 per cent, and 75 per

cent consequently in certain com-

mercial and retail banks. Meanwhile,

the state would continue holding the

majority of stakes in a number of

banks which engage in social

lending activities, Dung said.n

Bank confidence brimming

The restructuring of the banking sector has restored investor confidence Photo: Hoai Nam

Gold loses its lustre as prices fall further