Vietnam

GDP slowed on an annualized basis to 5.5 percent in Q2 2008 from 7.4 percent for the same period last year. The State Bank in June raised the base interest rate from 12 to 14 percent, allowing more flexibility for bank deposit and lending rates, the latter rising to 21 percent.

The year-on-year inflation for June was a high 26.9 percent. A key factor in the CPI slowing its rise is the price of rice, which has moderated after a good harvest and lower exports stabilized domestic supply.

The high price of commodities has helped exports reach a record monthly figure of USD6.3 billion for June, which combined with lower imports has helped slow the rise of the trade deficit. The export-import gap for June fell to USD1.3 billion from USD3.3 billion for May.

Foreign direct investment (FDI) reached a remarkable USD16 billion in June, a record figure, including notably a USD7.8 billion steel project in Ha Tinh province. FDI for the year is now USD31.6 billion, a 56 percent increase over the whole of 2007.

The State Bank of Vietnam (SBV) cut the official exchange rate to a record low of VND16,514 against the US dollar on 27 June. The SBV also raised the VND trading band to +/- 2 percent from +/- 1 percent.

The VN Index closed June at 399, down from 414 at the end of May. The VN Index reached the ceiling of its trading band for five consecutive days at the end of June as the market sprung to life following the more positive macroeconomic results. Trading volume remained low but has increased considerably for blue chip stocks, particularly in the energy, commodities and consumer goods sectors.

                                                                                                                                                                   Source: VinaCapital

United States

Earlier hopes of an improvement in economic activity during the second half of 2008 are fading fast as a result of the long-running housing depression, the severe lending pullback, and a worsening employment downturn.

Fed Chairman Ben Bernanke said that he expects the economy will grow “appreciably below its trend rate” for the remainder of this year and that there were “significant downside risks to the outlook”.

Consumers are seeing a bit of relief now that gas prices are edging downward and tax rebate checks of $100 billion have been received. The tax stimulus checks are also giving a spurt to income. In May, real disposable consumer income jumped 7% from a year ago as a result of the $48 billion in tax rebate checks that arrived in consumers’ mail boxes.

Employment continues to deteriorate. Unadjusted employment is off from its year-ago level – the first time this has happened since 2003. Employment losses are widespread. In June, construction employment was down 6% from a year ago, manufacturing was off 2.6%, and the financial and retail segments each were down slightly more than 1% from
year-ago levels.

The housing depression continues to show no signs of turning around. The financial markets applauded June’s hefty 2.6% drop in existing home sales simply because the falloff was “less than expected.” The annualized rate of sales is down an exceptional 33% from the September 2005 peak. Further, the National Association of Realtors reported that about a third of sales were either foreclosures or short sales where the owner accepts less than what is owed on the house. The situation is even worse for new homes. New home sales (roughly 20% of total home sales) were down by a neck-strangling 62% in June from the July 2005 peak.

The situation is tenuous in manufacturing. Industrial production has dipped slightly, to date. Numerous companies are reporting sharp price increases in their raw materials purchases. However, export continues to be strong aided by the weak dollar. The value of our exports of goods in May was up roughly 30% from two years ago.

                                                                                                                                                      Source: Deloitte LLP, USA