Government bonds become darling of foreign investors
Recently government bonds have seen strong foreign buying (Photo: dautuchungkhoan.vn)
Government bonds have recently seen strong foreign buying
despite the facts that the dollar is expected to continue appreciating due to
the US’s plan to raise interest rates a few more times in the near future and
that Vietnam does not have incentives to
attract foreign investment in its bonds.
Market observers also said the government bond market liquidity has improved a
great deal thanks to the investments from abroad.
Foreign investors bought 11 trillion VND (484.6
million USD) worth of the bonds in the
first five months of the year, according to the National Financial Supervisory
Data from VP Bank Securities Company shows that between June 23 and 26 foreign
purchases of government bonds on the secondary market were worth 61.647
trillion VND, an increase of 34.8 percent
over the previous week.
The Saigon Securities Company said
that in the first half of the year foreigners bought government bonds worth 14.9
trillion VND (656.4 million USD), an increase of 1.7
trillion VND (74.9 million USD) over the same period last
The chief of a foreign-invested fund management company, who asked not to be
named, said the biggest concern for foreign investors buying government bonds
was the depreciation of the dong against
However, the value of the dollar had not changed much though the US central
bank has hiked rates several times.
The dollar appreciated slightly against the dong after
the US raised the rate once in mid-June, but soon declined.
Recently the State Bank of Vietnam allowed the dong to
decline slightly to 22,725 VND per
It was facilitated in this by the downward trend in inflation and the exchange
rate since the beginning of this year, thus creating conditions for the central
bank to improve the foreign exchange reserves and to inject liquidity into
the market without resorting to open market operations and not putting
pressure on the exchange rate.
An executive at a major bank in HCM City said that with the many positive
aspects in the economy the dong-dollar
exchange rate is likely to remain steady until the year-end unless there are
unexpected extraneous factors.
To take advantage of this opportunity, he said, the Ministry of Finance is
drafting a plan with many incentives to attract foreign funds into the bond
If they are offered tax and fee breaks, foreign investors would be happy to
enter the bond market, he said.-VNA