No sudden impacts on Vietnam from FED rate hike

On December 19, FED lifted the benchmark lending rate by 0.25 percentage point to a rage of 2.25-2.5% per year.

Although global stocks have tumbled following FED’s move, the benchmark VN-Index on the Ho Chi Minh Stock Exchange extended its growth at the beginning of the session on December 20. However, selling pressure of large-cap shares resulted in a fall in their prices, making VN-Index dip in red margin. Also, the foreign players net bought VND280 billion (US$12 million) on the bourse, helping the VN-Index experience only a slight decrease of 0.11% to 918.24 points.

In stark contrast, the HNX-Index on the northern bourse rose 0.35% to close at 104.53 points on the day.

According to Ngo Dang Khoa, head of Global Markets at HSBC Bank Vietnam, as FED’s decision came at the expectation of the market, it does not have critical influence on Vietnam’s fiscal and monetary market.

“In 2019, the US dollar is forecast to grow stronger than the Vietnamese dong, which means the pressure on the dollar-dong exchange rate will be mounting. With current flexible monetary policy, the State Bank of Vietnam (SBV) should put in places rational measures to harmonise economic growth and marco-economic stabilisation”, Khoa said.

Meanwhile, experts from the Bao Viet Securities (BVSC) said that the Vietnamese dong is among the currencies that have stiff resistance against FED’s lending rate increases, and Vietnam is the only country in the Southeast Asia that has not taken its cue from the FED.

The SBV protects value of the Vietnamese dong by reducing liquidity of the banking system, and the bank will maintain its strict liquidity management to counter FED’s lending rate gains in 2019.

However, an official of a commercial bank in Ho Chi Minh City said that FED’s move will have certain impacts on VND/USD exchange rate especially in the context of big fluctuations of Chinese yuan and that payments are reaching peak in the end of the year. Thus, enterprises need to carry out effective exchange rate risk preventive tools.