VinaCapital, one of Vietnam’s leading asset management and real estate development companies, kicked off its 12th annual Investor Conference today at the Park Hyatt Saigon. As Vietnam’s economy continues to flourish and the stock market continues to be the best performer in the region, more international investors have turned their attention to the country.
The dramatic acceleration in Vietnam’s GDP growth from Q1 and Q2 (when the economy grew at a 5.1% and 6.3% annual pace, respectively) to a searing 7.5% estimated rate of growth in Q3 prompted analysts to revise up their full-year forecasts for Vietnam’s 2017 GDP growth.
When the State Bank of Vietnam cut policy rates in July, the move seemed out of sync with the rest of the world’s central banks. It now looks prescient, given the recent loosening monetary bias by Asian central banks. Are more rate cuts in the cards? And will they actually spur GDP growth? VinaCapital’s Chief Economist Mike Kokalari provides his view on where rates are headed.
Recently, central banks in the US, EU and China have all taken actions that indicate that the days of
further loosening of monetary policy are over – and the US Fed guided that it will begin shrinking its
USD4.5 trillion balance sheet later this year. The US and the EU have different motivations for
tightening monetary policy than China has, but one commonality is the potential to affect Vietnam.
While the differences between frontier and developed markets are many, sometimes there are
themes or trends that have done well in the latter and are now taking hold in Vietnam. Budget
airlines are one such trend, and VietJet Air is leading the way.
Vietnam Airlines, the country’s flag carrier, has historically dominated both the international and
domestic markets. Foreign ownership of airlines is limited to 30%, meaning that it is difficult for
overseas carriers to enter the market.