first nuclear power plants, with Ja

by lynk2510 April 10th 2011, 9:10 pm

int Stock Bank (BB-/Negative/B)--our ratings have factored in these and other heightened credit risks that could hurt asset quality.

Growing bank credit has increased the system's risks. We believe Vietnam's government is likely to lower the target for bank credit growth to 20% in 2011. In our opinion, however, the target is still too high, given our estimate of the country's bank credit to GDP of 120% as at Dec. 31, 2010, and the rudimentary nature of credit risk management systems and the country's still-evolving regulatory framework. Bank credit already grew about 28% in 2010, exceeding the government's target of 25%. In addition, Vietnam had several years of high credit growth, especially in 2007 and 2009, including loans to large state-owned borrowers, such as the shipbuilding industry group Vinashin.

Adding to the system's credit vulnerabilities, inflation in the country rose to above 12% year on year in January 2011 from 7.1% in 2009. The government's loosening monetary policy in the second half of 2010, to support economic growth, and rising global commodity prices were responsible for the soaring inflation. If inflation remains high, rising business costs will hinder borrowers' debt servicing ability. On the other hand, overzealous measures by the government in tackling inflation could have a destabilizing effect and undermine confidence in the banking system, like in 2008 when inflation hit a high of 28%.

Borrowing costs in Vietnam have risen sharply. Vietnamese dong (VND) lending rates have increased to 18% for a 12-month loan, from 12% one year ago. In contrast, U.S. dollar lending rates are notably lower at 6%. The wide differential has prompted many businesses to borrow in dollars. Such borrowers, especially those who generate revenues predominantly in dong, increase their exposure to foreign exchange risks. High inflation in Vietnam in the past few years has also weakened confidence in the dong. As a result, residents seek safer haven in gold and dollars. The central bank devalued the dong by 8.5% in February 2011, which is likely to further fuel inflationary pressure.

Vietnam: nuclear still a go

By Ben Bland. 16 March 2011

As a large rain storm hit Hanoi on Tuesday lunchtime, some people cancelled meetings and rushed to take their kids home from school after erroneous rumours circulated suggesting that Vietnam was being hit by “radioactive rain” that had been blown over from Japan. (The World Health Organization has issued a statement insisting that such rumours, which have been spreading around Asia, are unfounded.) Despite the febrile atmosphere caused by the unfolding nuclear crisis in Japan, the Vietnamese government has said that it intends to forge ahead with a plan to build the country’s first nuclear power plants, with Ja
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