While observers worry about possible government intervention in the consumer markets if inflation becomes an issue, Vietnam could potentially strike a free-trade deal that could open up markets and benefit Vietnam’s exchange traded fund (ETF).
In Vietnam, Tet, or lunar new year holiday, helped push the consumer-price index up to 2% in February, according to The Economist.
Before Tet, the Central Bank devalued the Vietnamese currency, the dong, by 3.4% in an attempt to get holders of the dollar to buy it. Vietnam may have spent more than $1 billion, over 1% of GDP, in 2009 to buttress its economy, and the credit supply expanded 37%, which increased the black-market price of dollars. [Vietnam Poised to Rebound on Exports.]
Observers will be closely watching March’s inflation data for evidence of whether February’s increase was holiday-driven. Foreign businesses are worried about the government’s response if inflation were to take off – the finance ministry has been hinting at a draft decree that would allow it impose price controls on a range of essential goods.
The European Union and Vietnam announced the start of free-trade negotiations that would allow the E.U. access to Vietnam’s booming markets and provide Vietnam a chance to lure European manufacturers away from China, report John W. Miller and Patrick Barta for The Wall Street Journal. However, the E.U.-Vietnam trade talks may be hindered by protectionist sentiment and human-rights concerns in Europe.
Vietnam’s top exports are textiles, shoes, seafood and coffee, and a free-trade deal could give Vietnam the potential to grow beyond that.
Vietnam’s General Statistics Office expects economic growth to accelerate between 5.7% and 5.9% in the first quarter year-over-year. A free-trade deal could mean even more.
For more information on Vietnam, visit our Vietnam category.
- Market Vectors Vietnam (NYSEArca: VNM)
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.