The passage of Decree 157, which adds verification requirements for social media accounts in Vietnam, has caused a stir amid claims this will be used to identify distributors of content deemed ‘anti-state’. This may be true, but it seems unlikely this is the actual intent of these new regulations, with several more pressing issues seemingly driving this change… Read More »

Automotive news

Mercedes-Benz starts import business in Vietnam

Mercedes-Benz has established a business in Vietnam to import vehicles and there has been some speculation that it may be moving from an assembly operation to an import operation instead.

For context, the company currently has an assembly factory in Ho Chi Minh City that was established in 1995 on a 30 year lease that was set to expire next year. The process of extending the lease began in 2021, however, bureaucratic hurdles meant that it was not finally approved until last month. This has seen the factory slow production with reports back in August it might shut down altogether. Ergo, it would make sense to start looking at alternatives.

It’s also worth considering that the business environment in Vietnam has changed a lot since 1995. Vietnam now has free trade agreements with a number of countries that have made it much cheaper to import cars.

Currently in Southeast Asia, which is covered by the ASEAN Trade in Goods and Services Agreement under which cars can be shipped to Vietnam tariff free, there are Mercedes-Benz manufacturing facilities in Thailand, Malaysia, and Indonesia. On that note, the European Union-Vietnam Free Trade Agreement will also see tariffs on cars imported from the bloc reduced to zero by 2030.

Aviation news

Vietnam domestic flights show slight recovery in October

Vietnam’s domestic aviation market recorded a slight improvement in October 2024, with total flights reaching 17,847, a 0.72 percent increase from September. The marginal rise follows a steep 19.57 percent decline the previous month.

Among the market leaders, Vietnam Airlines operated 7,483 flights in October with Vietjet retaining its leading position with 7,965 flights, making it the top carrier for domestic routes. Pacific Airlines operated 366 flights, while Vasco and Bamboo Airways contributed 489 and 1,150 flights, respectively. Vietravel Airlines, completed 394 flights during the month.

Banking and Finance News

State Bank continues open market operations

The State Bank of Vietnam has continued to intervene in the currency market with US$881.2 million in treasury bills outstanding as of the close of business Thursday. There were also reverse repurchase agreements outstanding to the tune of US$3.27 billion. Taken together with a weaker dong and a stronger dollar it looks a lot like the State Bank is having challenges finding buyers for its treasury bills and at the same time that liquidity challenges facing Vietnam’s banks are not easing.

Vietnam bank deposits reach new high in August

The total volume of cash kept in banks by individual account holders (as opposed to businesses) reached VND 6.92 quadrillion or US$272.5 billion, up from VND 6.84 quadrillion, or US$277.3 billion, at the end of July, according to State Bank of Vietnam data.

Dan Tri has suggested that the increase in deposits is linked to rising interest rates at Vietnam’s banks.

Dau Tu Chung Khoan on the other hand has suggested that this is because people are looking for safe haven investment channels. The publication is carrying comments from Nguyen Tri Hieu, a finance and banking expert, who has said gold is ‘risky’, stocks are ‘volatile’, and real estate is too expensive which is leading many people to leave their money in the bank. This view seems to be shared by most other publications.

Notably, withdrawals of said deposits could be problematic in that outstanding loans in Vietnam, as of the end of October, exceeded the volume of bank deposits by roughly 3.7 percent. This was reportedly putting liquidity pressure on banks which has become an ongoing theme in Vietnam’s banking industry this year.

Currency news

Vietnam maintains position on US currency manipulation watchlist

The US Treasury department has released its November 2024 FX Report with Vietnam still on its currency manipulator watchlist. This puts Vietnam in the company of China, Japan, Korea, Taiwan, Singapore, Vietnam, and Germany.

Vietnam has met two of three of the US Treasury’s currency manipulator criteria. Specifically it has a material current account surplus greater than 3 percent of its GDP (5 percent in the 12 months ended June 30) and a bilateral trade surplus with the US in excess of US$15 billion (US$111.7 billion in the 12 months ended June 30).

Of note, the third criteria is met when net purchases of foreign currency occur in eight out of 12 months that collectively add up to more than 2 percent of an economy’s GDP over the same 12-month period.

With this in mind, Vietnam is currently about US$16 billion short of the three months worth of imports the IMF recommends a country has in its foreign exchange reserves. This would be about 3 percent of Vietnam’s GDP although given the currently weakened dong it seems unlikely the State Bank will look to replenish its reserves any time soon.

Notably, the bulk of local media coverage has been framed in terms of Vietnam avoiding the currency manipulator tag as opposed to focusing on the fact that Vietnam is still on the US Treasury’s watchlist.

Gold news

The State Bank has sold nearly US$1 billion of its gold reserves

It was reported this week that between June 3 to October 29, the central bank sold 305,600 taels of gold or about 11.46 tons of gold into the market from its reserves. At today’s gold price, US$84,880.7 a kilogram, those 11.46 tons would be worth US$972.7 million.

Of note, the IMF estimated Vietnam’s gold reserves to be worth US$764.2 million as of the end of May and US$819.73 million by the end of August. Of course, there are fluctuations in the gold price and the currency so it’s challenging to get an accurate read on exactly how all these numbers go together. That said, it seems pretty safe to say that there is a communications problem somewhere between either the IMF and the SBV or the SBV and the general public.

Also, The Investor has reported that the State Bank took a one month hiatus from selling gold into the market. This has been reported by Thi Chuong Tai Chinh as a one month break in announcements of gold sales by the State Bank of Vietnam. It’s not clear if this is a matter of semantics or if there is a distinction to be made between a break in selling gold versus a break in making announcements.

Stock market news

Foreign trader 2024 net-sales grow by another US$258 million

Over the last five trading sessions to the close of business on November 21, foreign investors net-sold US$258 million worth of HCMC Stock Exchange stocks. This raises the total net-sold from the market by foreign traders this year to US$3.5 billion or US$3.95 billion over the last 12 months. It has not been a good week or year for the HoSE.

Foreign trader activity, last five trading days

	Buy		Sell		Change
Date	VND	US$	VND	US$	VND	US$
15/11	2,048	$80,558,560	3,377	$132,835,087	-1,329	-$52,276,527
18/11	1,417	$55,738,027	2,891	$113,718,163	-1,474	-$57,980,136
19/11	1,122	$44,134,133	2,797	$110,020,651	-1,675	-$65,886,518
20/11	1,851	$72,809,519	3,069	$120,719,835	-1,218	-$47,910,316
21/11	1,464	$57,586,783	2,326	$91,493,755	-862	-$33,906,972
Total	7,902	$310,827,023	14,460	$568,787,491	-6,558	-$257,960,468

*billions

Source: Vietnam Stock Market Tracker

Trade news

Vietnam faces US countervailing duty on shrimp exports

The United States International Trade Commission has ruled that imports of frozen warmwater shrimp from Vietnam, along with Ecuador and India, are being subsidised by their respective governments, causing material injury to the US shrimp industry, according to a press release from the organisation.

As a result, the US will likely impose countervailing duties on shrimp imports from Vietnam, Ecuador, and India. Additionally, imports from Indonesia, deemed to be sold at less than fair value, will face antidumping duties.

This decision could impact Vietnam’s seafood export sector, which is a key contributor to the nation’s economy. The shrimp industry, in particular, may face challenges in maintaining its competitive edge in the US market, one of its largest export destinations.

A detailed public report from the USITC, titled Frozen Warmwater Shrimp from Ecuador, India, Indonesia, and Vietnam, is expected to provide further insights into the investigation’s findings. The report, scheduled for December 2024, will outline the commission’s views and the evidence collected during the case.

Video game news

Vietnam gamers restricted from buying, selling virtual assets under new Decree

Vietnam’s new Decree on the provision of online services prohibits gamers from cashing out virtual items earned in games into tangible assets like cash or prepaid phone cards. It also restricts players under the age of 18 from playing more than one hour on one game per day and no more than a collective three hours a day.

There are also a number of other requirements for gaming providers outlined in the Decree from signage requirements in gaming centres to warnings placed in-game. For example, “Playing more than 180 minutes a day will have a negative impact on health” is required to be displayed in-game every thirty minutes.

This is part of the same Decree reported earlier this week that also requires social media service providers to verify users’ identities and collect and store their personal information.

The week ahead

There are a handful of events coming up this week. For more information see the: Doing Business in Vietnam: Events Directory 2024

Also, Vietnam is a dynamic market that is changing rapidly. To keep updated to date with the business environment and how it is evolving make sure to subscribe to the-shiv.

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