Vietnam’s fiscal and monetary market stable following Brexit

The British pound devaluation will make Vietnamese goods more expensive in the UK market. (Photo: Getty Images)

Vietnam’s stock market lost more than US$1 billion as Brexit wreaked havoc worldwide. But following a sharp decline on June 24th, the market recovered.

At a press conference to review the implementation of fiscal and monetary missions and the state budget in the first half of this year and announce targets for the remaining months, the Finance Ministry said Brexit will not heavily impact the Vietnamese financial market.

Nguyen Mai Phuong, Director in charge of analysis with brokerage firm VNDirect, said domestic listed companies will barely be affected.

“The number of securities trading accounts of foreign investors in Vietnam increased significantly in the first half of this year due to domestic and foreign investors’ increased trust in the market. The market is ready for a boom. Vietnam’s securities market is mainly affected by policies and investor psychology. Trading on June 24th, 2016 declined primarily because of psychological factors”, said Le Duc Khanh, strategy director for the Maritime Bank Securities Company.

Many Vietnamese economists say Brexit will not heavily impact the flow of direct investment capital from the EU and Britain to Vietnam because Britain’s investment in Vietnam remains modest.

To date, the EU’s registered capital for Vietnam is about US$100 billion, of which Britain has 266 projects worth US$3.5 billion.

“In the current situation, investors will shift their capital to safer markets. Vietnam will likely benefit from this situation, if it opens its policies and takes full advantage of integration. Indirect investment capital flows in the stock market may be affected, but direct investment capital in the real economy will be less affected”, said Can Van Luc, a member of the National Financial and Monetary Advisory Council.

According to foreign economists, Brexit will not have a great impact on Vietnam’s economy but will create opportunities for Vietnam’s fiscal and monetary market and investment attraction.

The Finance Ministry said recently that Brexit will not negatively affect Vietnam’s public debt.

Vo Huu Hien, Deputy Director of the Debt Management and External Finance Department, says Brexit has caused the British pound to depreciate about 8%. The Chinese yuan has also depreciated. The Japanese yen is still appreciating.

Hien says in the structure of Vietnam's public debt right now, government debt in Vietnam dong accounts for about 55%, debt in US$ accounts for 16%, and yen debt about 13%.

“The State Bank made appropriate exchange rate adjustments after Brexit, so exchange rate fluctuations have had little impact on public debt. For example, British pounds are just 2% of the debt structure, but the British pound depreciated 8%, benefitting Vietnam. Depreciation of the Euro also benefited Vietnam’s public debt. By contrast, appreciation of the yen increased Vietnam’s debt. But, in general, Brexit hasn’t had a major impact on public debt in Vietnam”, said Mr Hien.