World-renowned forex educator Mario Singh, who is also founder & CEO of FX1 Academy in Singapore, speaks to Viet Nam News reporter Minh Huong about how forex trading can help Viet Nam's SMEs perform better.
What do you think about Viet Nam's economic performance?
People are very interested in investing in Viet Nam because of the open economy and the good source of young labour among the nearly 100 million population in the country.
There are three things I like about Viet Nam. The first one is the GDP growth rate, which is much higher than in other countries. The growth rate of Viet Nam this year should be the highest among ASEAN countries. After quarter 3, the country achieved a rate of 6.8 per cent, which is on par with the Chinese growth rate.
The second one is the high rate of foreign direct investment flowing into Viet Nam. It draws a lot of investment from Japan and Korea currently.
Finally, the rate of exports is increasing very well. There is a 10 per cent growth in export rate this year over last year. It is especially good in the context that the International Monetary Fund must reduce the worldwide [economic] growth rate from 3.3 to 3.1 per cent.
The plan to issue US$3 billion in international bonds is a good move. If you see, a lot of banks and hedge funds are buying [Vietnamese] bonds, which means Viet Nam is an attractive destination.
The Trans-Pacific Partnership agreement between 12 countries including Viet Nam, Singapore and Brunei in ASEAN is a good start for Viet Nam as it will be one of the two countries doing best in TPP. The other one should be Mexico.
I think Viet Nam still needs a lot of infrastructure investment from the world. The Government should work to draw more investment to spend on power plants, roads and other infrastructure in the next five to 10 years. It is also a good way to draw institutional money.
The local economy is opening. It needs to open more to attract more investment.
Can you make a comparison between Viet Nam and other countries in the region in terms of currency?
I will take Singapore as an example. The capital market in Singapore is very strong. More and more people understand about the forex market. Singapore is now voted as one of the best countries to do business in the world. The Singapore Government is pro-finance, they want all the people to understand the financial market and do business globally.
In the region, I also find that more and more countries are learning more about the forex market — for example Myanmar and Viet Nam — where there are more and more business opportunities.
What will happen in the financial market in the next six months and how will it affect Viet Nam?
In the future, I feel China will continue devaluing the renminbi. They can widen the trading band or reduce interest rates to support GDP growth.
However, the more important thing is the possibility that the [US] Fed will hike interest rates in the next six months. Though the US has the biggest trade deficit in the world, it also has the biggest GDP in the world. The US's GDP is US$16 trillion while China's is only close to $9 trillion. The rate of growth in China is higher than in the US. But in terms of size, nowhere can it compete.
The US dollar has started strengthening again. It was weak for six or seven years. At that time people will see investment pulled back to the US from Asia because of interest rates and the confidence in the US economy.
When the greenback is really strengthening by late 2016, there is a possibility that the investment here in Viet Nam will be pulled out by foreign companies. So Viet Nam should aware of it to be well-prepared for the development in the coming years.
Local SMEs should learn more about the financial market. When people export overseas, they must learn the exchange rate between the greenback and the Viet Nam dong; if not, instead of making more money, they will lose more money.
The Viet Nam dong has fallen by 5 per cent this year against the US dollar as the Chinese devalued the yuan and the greenback was strengthening. The exporter must understand hedging if they want their business to succeed.
What is your assessment of the Vietnamese forex market?
I have been trading in the financial market for the last 10 years. When the whole world is opening up, all the people must understand about currencies before they get into the stock market or the real estate market.
I make trips to Viet Nam and six other countries in the region to talk about the forex market. I talk to businesses and retail investors. The Viet Nam dong is not fully convertible in the global market as it is not yet able to directly swap with other currencies. Instead, it still needs to swap via the greenback.
Meanwhile, China encourages its partners to use the renminbi in trading. In the next 10 years Viet Nam will have more trade relationships with foreign partners. So Viet Nam should do the same thing like China, encouraging partners to trade in the Viet Nam dong so that the country can swap its currency with the currencies of its business partners.
It is all about changing the mindset about currencies so that Viet Nam can have direct currency swap for better international trading and the benefit of local businesses.
It is especially important in the context of the ASEAN Economic Community later this year and the Trans-Pacific Partnership in future.
What advice do you have for SMEs in Viet Nam?
They should understand their business first. Many of them don't pay enough attention to the currency as they think it is not their core business. But they should think bigger when their businesses go further to regional countries such as Thailand, Laos and Indonesia. Even if they don't do business outside the country, they need to understand currencies as the local economy will be affected by the global currency market and directly impact their businesses.
I think it is difficult to have a common currency for ASEAN in the near future because the needs of the countries are so different. In this case, knowledge of the forex market will bring countries together and offer a common understanding.
It is more relevant for businesses in the current time as I think that AEC and TPP will put Viet Nam in a very good position for doing business in the next five years.
I am working with the Viet Nam Chamber of Commerce and Industry (VCCI) to transfer knowledge of hedging to SMEs and retail investors. Exporters and importers must learn how to buy and sell currencies using futures/forward contracts. — VNS