Vietnam is growing at rate that is impressive enough to attract "hot money" inflows from developed countries. However, certain barriers could lead that source of capital to flow into other countries.
While Thailand and other Southeast Asian economies are struggling to control "hot money" inflows, curbing stock market and strengthening domestic currency, Vietnam seems to be an exception.
Vietnamese stock market, as measured by VN Index, has fallen by 12 percent this year. Economists predict that dong value would continue being weaker, when the central bank has devaluated three times since November 2009.
Vietnam's economy is certainly growing at a rate that is impressive enough to attract "hot money" inflows from developed countries, where investors are looking for good investment returns from emerging markets. Most analysts believe that the economy of Vietnam would meet the GDP growth target of 6.5 percent as directed by the government.
Nevertheless, concerns about the macro-economic instabilities and difficulties in finding attractive investment opportunities in Vietnam are making "hot money" to head to other countries within the region.
The IMF last month warned that "transparency in government intentions, based on higher quality data published timely should be further enhanced to provide market players predictability".
Of the barriers that financial investors are facing include difficulties in repatriating capital, which have been caused by the regular dollar shortages; very high property valuations; or the difficulties in accessing the stock market, there are only a few foreign and listed funds. In addition, not many local brokerage agencies would make international investors feel comfortable doing business with.
Most large investment banks are pessimistic on Vietnam's investment prospect at this moment. Swiss bank UBS summed up by a rather sceptical warning that "Vietnam is in the midst of the largest credit expansion seen anywhere in the 80-plus emerging countries we cover in the past two decades"
Hong Kong economist Jonathan Anderson warned that if the authorities could handle the situation well and rein the credit growth immediately, Vietnam might avoid risks scenarios "involve either a collapse in the domestic banking system or an external currency crisis".
According to Jonathan, the second risk is more likely to happen, since "Vietnam runs extraordinarily high trade and current account deficits even by EM standards; official FX reserves have declined steadily to very low levels as a share of imports, and the currency has already been under steady weakening pressure throughout the past three years".
Like most other big investment banks, USB is very hesitant in investing in Vietnam. An economist said most big financial organisations are not operating in Vietnam but in other countries such as Indonesia, where the transparency has been greatly enhanced since 1997.
While Thailand and other Southeast Asian economies are struggling to control "hot money" inflows, curbing stock market and strengthening domestic currency, Vietnam seems to be an exception.
Vietnamese stock market, as measured by VN Index, has fallen by 12 percent this year. Economists predict that dong value would continue being weaker, when the central bank has devaluated three times since November 2009.
Vietnam's economy is certainly growing at a rate that is impressive enough to attract "hot money" inflows from developed countries, where investors are looking for good investment returns from emerging markets. Most analysts believe that the economy of Vietnam would meet the GDP growth target of 6.5 percent as directed by the government.
Nevertheless, concerns about the macro-economic instabilities and difficulties in finding attractive investment opportunities in Vietnam are making "hot money" to head to other countries within the region.
The IMF last month warned that "transparency in government intentions, based on higher quality data published timely should be further enhanced to provide market players predictability".
Of the barriers that financial investors are facing include difficulties in repatriating capital, which have been caused by the regular dollar shortages; very high property valuations; or the difficulties in accessing the stock market, there are only a few foreign and listed funds. In addition, not many local brokerage agencies would make international investors feel comfortable doing business with.
Most large investment banks are pessimistic on Vietnam's investment prospect at this moment. Swiss bank UBS summed up by a rather sceptical warning that "Vietnam is in the midst of the largest credit expansion seen anywhere in the 80-plus emerging countries we cover in the past two decades"
Hong Kong economist Jonathan Anderson warned that if the authorities could handle the situation well and rein the credit growth immediately, Vietnam might avoid risks scenarios "involve either a collapse in the domestic banking system or an external currency crisis".
According to Jonathan, the second risk is more likely to happen, since "Vietnam runs extraordinarily high trade and current account deficits even by EM standards; official FX reserves have declined steadily to very low levels as a share of imports, and the currency has already been under steady weakening pressure throughout the past three years".
Like most other big investment banks, USB is very hesitant in investing in Vietnam. An economist said most big financial organisations are not operating in Vietnam but in other countries such as Indonesia, where the transparency has been greatly enhanced since 1997.
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