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Vietnam
The base interest rate was lowered three times during the past month as inflation concerns have lessened. Reserve requirements have decreased and bank liquidity has improved, with deposit and lending rates declining significantly.
The demand for credit however appears weak as there is a mismatch between sectors that banks want to lend to and sectors that need capital. Borrowers in attractive sectors are reluctant to expand businesses given the gloomy global economic outlook. Local industries are concerned about a possible flood of Chinese-made goods if sales in the US and Europe drop sharply.
The consumer price index had its second month-on-month decline of 0.76 percent, bringing YTD inflation down to 20.7 percent. The decline is a result of lower prices primarily in construction materials, and transportation and telecommunications, due to falling commodity prices.
Exports of crude oil and coal have declined by 10.2 and 35 percent, respectively. Other important export sectors, such as garments and textiles, footwear and furniture, are still on the rise but a downtrend has started, signifying more difficult times ahead.
Year-to-date foreign direct investment passed the USD10 billion mark in November, with USD950 million disbursed during the month. The 2008 target of USD11 million is well within reach.
The VN Index closed November at 315, down 9.2 percent after closing October at 347. Both the Ho Chi Minh and Hanoi exchanges found new 52-week lows near the end of November. During the month, PetroVietnam Finance (PVF) listed on the HoSE, representing 8.4 percent of the VN Index weighting at its listing reference price.
Source: VinaCapital
United States
The economy continues to deteriorate. Bailouts, sharp interest rate cuts, the injection of billions of dollars into the banking system, relaxed bank ownership rules, and help for consumers with their mortgages and credit availability – none of these have been able to offset the sharp deterioration in activity from businesses and consumers.
A recent report from First American CoreLogic found that at least 7.5 million Americans owe more on their mortgages than their homes are worth. A record 1.6 million homes will be in foreclosure this year according to Moody’s Economy.com. US Labor Department data show that the number of people collecting unemployment benefits is at a 25-year high. Personal bankruptcies soared 40% in October from a year ago according to the American Bankruptcy Institute. And with the Dow Jones Industrials Average down 40% from a year ago, consumers’ stock portfolios are taking a hit.
Employment has contracted sharply in recent months. The unemployment rate in October was 6.5%, the highest level in 14 years. Retail sales remain dismal. Motor vehicle sales in October, in units, sank to a level not seen since 1983.
Combined sales of new and existing homes have been declining for nearly three years. The annualized rate of existing home sales is off 31% from its 2005 peak. New home sales in October were down 40% from their year-ago level. Home prices continue to deteriorate as a result of the overhang of homes on the market.
Similar to retailers, inventories are backing up for manufacturers. Their factory utilization rate is off 6.3 percentage points from its 2007 peak. And corporate after-tax profits are down.
A record 85% of bank lending officers said they had tightened their standards for commercial and industrial loans to companies. Also, a record 87% said they had tightened their lending requirements specifically for commercial real estate loans.
Most forecasts for the current quarter call for another decline in real gross domestic product (GDP). Economic activity isn’t expected to pick up until much later in 2009. In addition, the global economy is slowing, which is affecting U.S. exports.
Source: Deloitte USA
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