Viet Nam had an economic recovery in 2015 with a gross domestic product (GDP) growth rate of almost seven per cent, despite negative impacts from the world economy, to become one of the fastest growing economies in Asia.
The economic recovery has brought many investment chances in multiple fields, but there are still difficulties in finding effective investment channels this year because of continuing risks.
Economic expert Vu Dinh Anh told a Vietnam News Agency's reporter about those issues.
|Vu Dinh Anh
What comments do you have about investment channels in 2015?
In 2015, Viet Nam had good macro-economic indices, including a GDP growth rate at 6.7 per cent, inflation at 0.63 per cent and a high growth rate in industry and services.
However, the news in investment channels was not that good. The growth rate of the VN Index was half that of 2014, and while gold and foreign currency markets had many possibilities, there were not many opportunities for investors.
The domestic real estate market started warming up in 2014, and improved further in 2015, but good investment opportunities were only available in some areas.
Deposits at banks were considered a stable investment channel, but not particularly attractive as interest rates, especially deposits in US dollars, hovered around zero per cent at banks.
Last year was successful for the local securities market with growth in both the scale and volume of investment. What is your opinion about the development of the securities market last year and the prospects for it this year?
Early last year there were many positive forecasts for the local securities market, but in fact the VN Index, a basic index for the local securities market, only increased by 5-6 per cent on the previous year. That was a low growth rate. However, it was still better than stock indices in neighbouring countries such as Thailand and Singapore that were unchanged or even contracted by 10-15 per cent.
The local stock market has grown in value, now accounting for 34 per cent of the national GDP, because many state-owned enterprises were equitised and joined the stock market, including some large firms. They, as well as local private enterprises, created a huge volume of quality goods for the local stock markets in 2015.
Also, since the State allowed increased room for foreign investors on the stock market from last year, the local stock market has become more attractive to foreign investors. That will create favourable conditions for the development of the market this year.
What were the chances for investment in the local property market in 2015? And where did investment capital for the property market come from?
After a long freeze in the local property market, some segments of that market have warmed in 2014 and 2015. The medium-grade and luxury apartment sectors in cities have brought many opportunities for investors. Higher business transactions in those sectors have attributed to the reduction in inventory on the local property market last year, as well as to the building of reasonable selling prices.
Villas and property products in sub-urban regions have also attracted customers who are purchasing places to live or even investing.
A mostly disbursed stimulus package of VND30 trillion (US$1.34 billion) created many chances for those needing social housing and apartments for low-income people.
I think those sectors will continue to develop well this year because the State has recently loosened credit policies for property markets and have amended laws on housing and property trading that create favourable conditions for foreigners and overseas Vietnamese to buy homes in Viet Nam. That will make the local property warmer this year.
The State Bank of Viet Nam (SBV) had reasonable management policies and controlled the local gold and monetary markets in 2015. What are the chances for investment in the local gold and monetary markets this year?
The local gold and exchange rate markets were stable in 2015. The gold price last year fell by 5 per cent compared to 2014, while the price of the US dollar increased by 3.56 per cent.
The world markets, especially the monetary market was volatile in 2015, but Viet Nam had mechanisms and policies related to gold and exchange rates so as to stabilise the gold and foreign currency markets.
This year, popular organisations in the world have predicted the world gold market to continue in its price reduction. Therefore, investors should follow the fluctuations of gold prices on the local market because they are based on developments in the world gold market. In addition, they should pay attention to the large VND2-4 million per tael gap between the local and world gold price if they want to invest in the gold market.
In foreign currency markets this year, the US dollar could continue increasing against hard currencies on the world market as well as the Vietnamese dong.
This year, the SBV has new operation mechanisms for the exchange rate with the development of a daily reference rate issued every day. The trading band of the new rate continues to be plus or minus three per cent. The ceiling and floor rates remain almost unchanged with today's minor adjustment.
The dollar to dong rate to a major extent now is based on the exchange rate changes in the inter-bank foreign exchange market, as well as monetary developments in countries that are involved with Viet Nam's trade, investment and financing.
The daily-adjusted rate was to be in line with macroeconomic balance and will be the basis for local credit institutions and foreign banks' branches to provide their foreign exchange services.
According to the SBV, such a mechanism will enable it to ensure its management directions, while letting the exchange rate move flexibly as per global monetary fluctuations.
Therefore, the development of exchange rates this year will be different from previous years and investors in the monetary market should pay close attention to the new exchange rate mechanism.
I hope the state will have policies to create good conditions for investors to find a profit on the monetary markets in the future.
Many commercial banks now have trends on increasing interest rates for Vietnamese dong deposits, so people will have to pay more attention to investing in bank deposits. What do you think about this?
The average interest rate for deposits in Vietnamese dong was 5-5.5 per cent annually in 2015. But the trend is for the rate to increase a little since the beginning of this year.
According to State offices, it would be difficult for the interest rate of deposits to reduce further this year, and they may even increase, because inflation is forecast to be 5 per cent higher this year than the below 1 per cent of 2015.
In general, saving deposits are the safest investment channel because investors do not have to think and calculate, but will still have profits.
How would you prioritise these various investment channels?
I would give the highest priority to saving deposits, as most people do not have a deep knowledge about finance, this channel involves less thinking and calculation.
For investors that have more knowledge or experience about investment and finance, I would suggest investing in property, and following that, the stock market, which will have a high demand in developing volume and value this year and in the future.
After property and stock, investors can pay attention to the monetary markets, but I emphasise that this is a complicated market and it is not easy to profit from, so investors must have a good knowledge about finance.
Investment in gold is not very attractive.
There are many other investment channels in the markets, however, for instance certain commodities that will show high profits. — VNS