HSBC WEEKLY MARKET UPDATE

HSBC Bank (Vietnam) Ltd.

Wednesday, 09 Mar 2016

USDVND stable around SBV’s buying rate

Strong inflows from FDI, FII coupled with even tighter VND liquidity have put further pressure on USDVND last week. The pair opened slightly higher on Monday at 22325 but soon resumed its downtrend to trade below 22300 towards the week-end as supply continued to outweigh demand. The pair touched its lowest level at 22285 on Friday morning and closed the week at 22290 with good liquidity.

As USDVND dropped below 22300, the SBV has resumed buying in USD from the interbank names to build up their FX reserves. It is said that commercial banks have sold good amounts of USD to the SBV at 22300 value spot to reduce their long USD position. The SBV’s buy-in rate is acting as a very solid support for USDVND for the moment.

Interest rates pick up strongly at the beginning of the month

VND interest rates have increased significantly over last week as money surplus in the system was being drained. There was a large maturing amount of OMO money that banks had borrowed since before Tet, totaling VND 37 Trio over last week or VND 142 Trio since after the holiday. As yield curve have been flattening, banks have also increased their government securities holdings by a net amount of near VND 29 Trio over the first 2 months of the year. These 2 withdrawals, coupled with the fact that banks had to start to build their reserve requirements for March, have pushed interest rates onto a new level. On 7Mar16, the average offered rates by major local banks were at 4.88 for ON (up 228bps compared to one week before), 5.06 for 1W (up 201bps), and 5.08 for 1M (up 80bps).

For more details, please see attached file.