Dragon Capital: Báo cáo mới nhất của Dragon (ngày 23/04) nhận định lạm phát theo năm của Việt nam đã

Dragon Capital: Báo cáo mới nhất của Dragon (ngày 23/04) nhận định lạm phát theo năm của Việt nam đã lên tới 21%

LIQUIDITY CONTRACTS, INFLATION SOARS - IS THERE A MESSAGE?

Dragon Capital 23/04: The VNI fell 1.5% to 538 during 10-17 Apr, and the decline has continued up until today, with the Index losing another 3% to 522. The bounce prompted by the Governmentâ?Ts support measures has reversed and volumes have carried on dwindling too, at $15-20m per day. Foreigners are still there as net buyers, but their turnover has faded with the marketâ?Ts and they have not shown any ability to reverse the overall selling trend. One of the depressants is the latest inflation number, with the CPI coming in at 21.1% yoy for Apr. This keeps the focus firmly on the liquidity crisis, which has been conjured up as the supposed cure for inflation. Bank deposits are falling thanks to the 11% deposit-rate cap and the smaller banks are simply doing no business. Overnight rates are surging, now at around 14.5% after as much as 22% last week. But SBV has been forced to take over most of the interbank market, using prodigiously huge daily OMOs at 9% for 7-day tenures, in amounts of $350-625m, to keep the system afloat. On the positive side, the Government is now making noises to the effect that the deposit cap may be removed soon, which would begin to free up cash.

This might also indicate a dawning awareness that suppression of the banking system has failed to deal with inflation, since the problem has been treated as a simple monetary one, when in fact prices are rising from external commodity shocks that are being hugely magnified by the FX regime. This by now seems fairly obvious. The only questions are why the Government clings so desperately to the USD peg and ties the economy in knots to accommodate it - and when officials will shift to a more rational policy. Meanwhile another downer is growing concern about 2008 earnings.