VINACHEM

HCM CITY — While many experts are concerned about the country's economic growth, including the trade deficit in the first quarter of the year, Viet Nam Asset Management Company (VAM) has taken a more positive outlook.

Experts from VAM, a fund management company that engages in public and private equity investment and advisory services, said GDP growth in the first three months is estimated at 5.8 per cent (a year-on – year increase of 2.7 per cent).

Comparing the two quarters, industrial production is up 13.6 per cent, retail sales up 24.1 per cent, and exports down only 1.6 per cent.

Although GDP growth is less than the previous quarter, Tet (Lunar New Year) will have a negative impact on GDP growth in the first quarter of each year compared to the rest of the year, according to VAM's report.

Average yearly inflation is now up to 9.5 per cent, and foodstuffs and building materials categories continue to be the primary contributors to the rise.

The trade deficit in the first quarter is estimated at US$3.5 billion, compared to a trade surplus of US$1.5 billion in the first quarter of the year.

However, VAM experts said the number was not as bad as it sounds.

They said the first quarter was anomalous as the surplus was made entirely possible primarilyby the re-export of gold due to the price gap of roughly US$35/ounce in Viet Nam compared to the world market at the time.

In addition, on a monthly level the trade deficit is declining over the fourth quarter of last year, and inflows into the capital account are picking up quite strongly.

An estimated $4 billion in FDI and remittances flowed into Viet Nam in the first quarter.

The evidence is in the currency market, where free market and official rates seem to be in equilibrium for the moment.

Nonetheless, on March 21, Fitch Ratings placed Viet Nam's long-term foreign and local currency ratings on negative watch with potential for a downgrade, citing weakening confidence in the dong and a lack of transparency regarding foreign reserves and the balance of payments.

It does seem that Viet Nam's foreign reserves were drained substantially in 2009 due to the continued high trade deficit and the slowdown in FDI and remittances.

But for the time being, imbalances in the currency, current account and inflation seem well addressed, VAM said.

The VN-Index finished the month at 499.24, up only 0.5 per cent. The market was rallying quite handsomely until Fitch lowered its outlook.

Official audited results are being announced by listed companies during the Annual General Meeting season.

Generally, the earnings have been good and better than management guidance, and some companies have encouraged targets of a 30-100 per cent bottom-line growth in 2010, with those on the higher end of the spectrum mostly riding on new products and newly added capacity.

On the other hand, lacking support from provisions reversal, tax breaks, low-cost materials and interest subsidies, some plastics, pharmaceuticals and auto component companies have planned low targets compared to their earnings posted in the 2009 fiscal year.

As for the stock market, the 2009 fiscal year results have already been priced in, and going forward, stock prices will be mostly driven by targets for the current fiscal year and how management executes their plans, said VAM.

The news on the macro economy, credit and monetary policies, whether official or not, causes corporate news to drive the bourses.

The commitment to curbing inflation, stabilising the banking system as well as lowering borrowing costs in the last few days of March have eased investors' panic. — VNS