Patrick Chang, chief investment officer for equities at Principal Southeast Asia, called Vietnam his top investing idea for 2023, with price falls making it more attractive. … I think at this level, given the market drop, it looks interesting (and) in fact if it weakened further I’d be looking to add,” said Sat Duhra, who manages a dividend fund at Janus Henderson Investors. Both are positive about long-term gains from a credit cleanup and plenty of foreign investors are hopeful. Neither Natixis’ Nguyen nor Bank of America’s Nagutha expects a crisis. It noted that non-bank corporate bonds outstanding represented about 8% of total credit in mid-October. “The banking sector as a whole has low exposure to corporate bonds,” said Ho Chi Minh City Securities Corporation, a securities brokerage and investment bank.

Other banks may be affected by the tightening in the corporate bond market, but analysts reckon risks for the banking system are limited.

Her suspected ties to SCB triggered the run on deposits as well as a broad rush to redeem property firms’ debt, and selling in the sovereign bond market and stock market to cover losses. What kicked stress into overdrive was the arrest last month of property tycoon Truong My Lan, chairwoman of Ho Chi Minh City-based developer Van Thinh Phat Holdings Group, over suspected bond-market fraud. “The SBV is trying to prevent this sector from excessively overheating,” she said. “It’s grown very fast and furious,” said Trinh Nguyen, emerging Asia economist at Natixis, calculating its value had surged from 2% of gross domestic product in 2018 to 15% in 2021 - mostly thanks to debts raised by property firms. Pressure is building because 375 trillion dong ($15 billion) in property debt matures by 2025, according to the National Assembly’s economic committee, and authorities have put restrictions on refinancing it. The epicentre of investors’ pain is the property sector and, in particular, its chunk of a $24-billion corporate bond market that has ballooned, with official encouragement, after a banking crisis a decade ago exposed an over-reliance on loans. Officials have blamed tight credit and the currency’s drop for problems this week with fuel supplies in the big cities. It has also placed the country’s fifth-biggest commercial lender, Saigon Joint Stock Commercial Bank (SCB), under supervision after a run on its deposits last month. It loosened the shackles on the currency, which promptly fell 4% to a record low last month, its steepest monthly drop in more than a decade and a move analysts attribute to foreign investor outflows since the country consistently runs a trade surplus. The State Bank of Vietnam (SBV) is scrambling, raising its benchmark rate by 200 basis points in little more than a month, as it moves to catch up with global hikes. Market concern is focused on the double-whammy of a widening anti-corruption crackdown hitting the property sector that is ensnaring prominent business people, brokers, and developers and freezing the debt market that fuelled their rise.

Commentary by Chartchai Parasuk: An Asean country near crisis.

“There are more pressures that we think will happen in the near term and they will probably need to devalue the currency again or hike rates again.” “It could be a rough six months that Vietnam has to get through,” he said. “It’s not breaking, but it’s taking a lot of pressure,” said Mohamed Faiz Nagutha, Asean economist at Bank of America Securities, referring to the exchange rate, and the country’s economy broadly. Investors remain sanguine about Vietnam’s economy, which is forecast by the International Monetary Fund to remain among the fastest growing in Asia next year.

The selling, spilling over from property stocks and bonds to the wider market, has soured what foreign fund managers had touted as a promising post-Covid bet on a country drawing manufacturing investment from the likes of Apple and Samsung. The Vietnamese dong and the benchmark stock index are heading for their worst annual performance since the 2008 financial crisis, with only the Hong Kong and Russian stock markets poised for more losses globally this year. (Photo: Tapdoanhungthinh via Wikimedia Commons)įinancial markets in Vietnam, Asia’s fastest-growing economy, are in an unsettling slide as a crackdown on property lending, a falling currency and rising interest rates heap pressure on banks and rattle confidence. The epicentre of investors’ pain is the Vietnamese property sector and its share of $24 billion in corporate debt, say analysts.

Stock crack