Vietnam Raises Refinancing Rate to Fight Inflation (Update2)

Feb. 18 (Bloomberg) — Vietnam’s central bank raised the refinancing rate to 11 percent, joining Asian counterparts in tightening policy to curb accelerating inflation as it increased borrowing costs for the first time since early November.

The State Bank of Vietnam raised the rate from 9 percent, effective yesterday, it said in a statement on its website. The rate was one of three that were raised on Nov. 5, when the base rate was also increased to 9 percent from 8 percent, and the discount rate was lifted to 7 percent from 6 percent. The bank didn’t mention the other two rates yesterday.

“This is a first step by the central bank to tighten monetary policy in an attempt to curb inflation,” said Luu Hai Yen, a Hanoi-based analyst at Thang Long Securities Joint-Stock Co., the country’s biggest brokerage. Before yesterday, Vietnam hadn’t raised rates this year and the increase in November was the first since 2009.

The Southeast Asian nation’s inflation has accelerated to a 23-month high, and four currency devaluations in 15 months risk spurring price gains further. Vietnam joins policy makers from China to India and Indonesia in raising rates this year as the region’s growth and rising global commodity costs boost inflationary pressures.

Stocks and bonds across Asia have declined this year amid concern that accelerating price gains will erode purchasing power and spur further tightening. The benchmark VN Index of Vietnamese stocks fell 1.2 percent to 503.92 at the 11 a.m. close, the most since Jan. 25, making it Asia’s biggest decliner.

‘Very Concerned’

“Investors are very concerned now because the hike in the refinancing rate will lead to a hike in borrowing costs and that will affect the money flow into the stock market,” Giang Trung Kien, head of research at FPT Securities Joint-Stock Co., said by phone today.

Lending rates in Vietnam were as high as 20 percent, according to a statement on the central bank’s website Feb. 2.

HAGL Joint-Stock Co., Vietnam’s second-biggest listed property developer, dropped 2.8 percent to 53,000 dong, the biggest decline since Nov. 17. FPT Corp., the country’s biggest telecommunications and software company by value, plunged 4.9 percent to 58,000 dong, the most since November 2009. The daily limit on the Ho Chi Minh City Stock Exchange, the main bourse, is 5 percent.

The International Monetary Fund has urged Vietnam to “focus more decisively” on containing price gains, and Moody’s Investors Service and Standard & Poor’s cut Vietnam’s sovereign credit ratings in December.

Symbolic Move

Banks use the refinancing rate in borrowing money from the State Bank, said Lawrence Wolfe, director of business development at DongA Securities Co. in Ho Chi Minh City. The base rate is “purely symbolic” and the fact that the central bank didn’t raise the base rate doesn’t make yesterday’s move any less significant, he said.

“This shows an intention to tighten monetary policy, but they’re going to have to raise rates even more than this,” Wolfe said. “This is a first step. They’re testing the waters, and they want to go step by step.”

Consumer prices climbed 12.17 percent in January from a year earlier. Citigroup Inc. has said the benchmark base rate should be boosted to 11 percent.

Credit Growth

The new refinancing rate “will make it more expensive and more difficult for banks to get capital from the central bank for making loans,” said Alan Pham, chief economist at VinaCapital Investment Management Ltd. “The purpose is to keep credit growth within the goal of 25 percent. This is also an attempt to keep inflation under control because less credit, less inflation.”

The State Bank of Vietnam devalued the nation’s currency by about 7 percent on Feb. 11, the most since at least 1993.

With the rate increase yesterday, “real interest rates will become less negative, thus helping to slow the rate of credit expansion, which was 27.7 percent last year,” according to a note from Australia & New Zealand Banking Group Ltd. “The hike is essential, especially after the devaluation of the dong last week that will add to inflation pressures.”

Nguyen Van Giau, the governor, and Nguyen Ngoc Bao, director at the central bank’s monetary policy department, didn’t answer calls to their cell phones by Bloomberg News yesterday.

The overnight rate in inter-bank electronic payments and the rate of loans to finance short balances in clearing transactions between the central bank and commercial banks were set at 11 percent, according to the statement.

The central bank may lower the base rate if the monthly consumer price index increases by about 1.4 percent in February from January, online newswire Vietnamplus reported Jan. 27, citing Giau.

“The chances for interest rates level to go down have become impractical,” said Kien of FPT Securities.

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Indian Bank hikes lending rate by 25 basis points

MUMBAI: State-owned lender Indian Bank today hiked lending rate for its existing customers by 25 basis points to 13.75 per cent in line with other banks.

The bank has revised its Benchmark Prime Lending Rate (BPLR) from existing rate of 13.5 per cent to 13.75 per cent, Indian Bank informed the Bombay Stock Exchange in a filing.

This will make all kind of existing loans, including housing and auto loans, expensive by at least 25 basis points.

Last week, the country’s largest lender State Bank of India raised both lending and deposit rates on select maturities by 25 basis points in response to policy rate hike announced by the Reserve Bank on January 25.

Banks have been raising interest rates following a 0.25 percentage point hike in short-term lending (repo) and borrowing (reverse repo) rates each announced by the RBI in its third quarterly review of monetary policy last month.

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Kimia Farma’s 12% Surge Helps JCI to 4th Day of Gains

Positive news from around Asia and the United States helped the Jakarta Composite Index rise for a fourth successive day on Thursday, closing up 17.6 points, or 0.5 percent, at 3,434.38.

“The local market received positive catalysts from the regional market today, while a strengthening rupiah also signaled that global funds are coming into the local market,” said Frederik Daniel Tanggela, an analyst at Sucorinvest Central Gani.

Frederik, who credited rising commodity prices and an improved producer price index announced by the US Department of Labor for the gains, said the JCI would continue rising next week.

About 3.1 billion shares worth Rp 4.4 trillion ($497 million) changed hands, with gainers outnumbering decliners 114 to 86.

Kimia Farma, a state-run pharmaceutical company, was among the most active stocks, rising 12 percent to Rp 149. Kimia Farma’s president director, Sjamsul Arifin, said the company planned a rights offer next year to raise the public’s stake to as much as 30 percent. Its net income is expected to rise from Rp 100.9 billion last year to Rp 150 billion this year.

Astra International, the nation’s biggest automotive retailer, was up 3.5 percent to Rp 51,000. Shares rose after Astra announced January domestic vehicle sales increased 5.4 percent from December to 73,849 units.

Medco Energi Internasional, Indonesia’s biggest listed oil company, gained 2.3 percent to Rp 3,300. Crude oil futures rose 0.4 percent to $85.30 per barrel in after-hours trading in New York on Wednesday.

The rupiah gained 0.1 percent to trade at 8,880 to the US dollar on Thursday, its strongest level since 2007. The currency rose on speculation the central bank will raise its benchmark rate further to dampen inflation.

“Bank Indonesia is giving strong signals that it wants to help combat inflation, and one way of doing that is by increasing the interest rate,” said Eric Alexander Sugandi, an economist at Standard Chartered. “It is also allowing the rupiah to appreciate to control imported inflation.”

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Rupiah Gains on Speculation Borrowing Costs Are Headed Higher

Indonesia’s rupiah advanced to its strongest level since 2007 on speculation the central bank will boost its policy rate further to damp inflation. Bonds rose.

Bank Indonesia raised its reference rate by 25 basis points to 6.75 percent on Feb. 4, the first increase in more than two years, after consumer prices rose the most in 21 months in January. The rupiah has strengthened 1.1 percent this year, the best performance among Asia’s 10 most-traded currencies.

“Bank Indonesia is giving strong signals to the market that it wants to help combat inflation, and one way of doing that is by increasing the interest rate,” said Eric Alexander Sugandi, a Jakarta-based economist at Standard Chartered Plc. “It is also allowing the rupiah to appreciate to control imported inflation.”

The rupiah gained 0.1 percent to 8,883 per dollar as of 4:02 p.m. in Jakarta, according to data compiled by Bloomberg. It reached 8,873 earlier, the strongest level since June 2007.

The currency may average 8,900 to 9,000 to the dollar this year, Bambang Permadi Brodjonegoro, head of fiscal policy at the Finance Ministry, said in Jakarta today.

‘Further Appreciation’

Southeast Asia’s largest economy may expand 6.5 percent in the first quarter from a year earlier, and inflation in February may accelerate 0.2 percent to 0.5 percent from the previous month, Brodjonegoro, said.

Consumer prices in Southeast Asia’s largest economy climbed 7.02 percent in January from 6.96 percent in December. The country’s gross domestic product grew 6.9 percent in the fourth quarter, the most since 2004. Indonesia’s exports rose 25.7 percent in December from a year earlier.

“There is some room for further appreciation” in the rupiah, Milan Zavadjil, the International Monetary Fund’s senior resident representative for Indonesia, wrote in an e-mail to Bloomberg News today. “We do not believe the rupiah is overvalued. This is confirmed by the strong recent performance of exports.”

Ten-year government bonds gained. The yield on the 8.25 percent note due July 2021 slipped two basis points to 8.88 percent, according to closing prices from the Inter-Dealer Market Association. A basis point is 0.01 percentage point.

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Fund Managers Still Positive About Local Market’s Promise

Top mutual fund managers remain upbeat about the industry’s prospects despite Indonesian stocks making a rough start to 2011, saying they believe it will rebound soon.

In the meantime, they suggest investors diversify their holdings with less-risky instruments, such as money-market funds, which provide stable returns amid expectations of further interest rate increases.

Michael Tjoajadi, director at Schroders Investment Management Indonesia, told the Jakarta Globe recently that he believed the stock market still had plenty of room to grow this year.

“The mutual fund industry’s assets under management can still grow around 15 percent this year. I believe the index will regain its strength, especially after the announcement of companies’ earnings. Equity-based mutual funds have always fluctuated following the trend of the index,” he said.

The Jakarta Composite Index, which soared 46 percent in 2010, has lost about 9 percent since January. Lingering inflation fears and rising interest rates around the region saw investors flee toward developed markets.

Just two months ago, the chief of the Indonesia Mutual Fund Managers Association (APRDI), Abipriyadi Riyanto, said he was confident the domestic capital market could help boost the assets managed by the mutual fund industry by 20 percent this year.

Total managed assets in the industry reached Rp 149.1 trillion ($16.7 billion) at the end of 2010, up 27.7 percent from 2009.

Of the Rp 36 trillion in mutual fund assets it managed last year, Schroders put half of it in stocks and the rest in fixed-income and money-market instruments.

Agus D. Priyambada, corporate secretary of Trimegah Sekuritas, said his firm recommended investors allocate 40 percent to 60 percent in equities, 20 percent to 40 percent in fixed-income instruments and no more than 20 percent in money markets.

Putut E. Andanawarih, a director at investment management firm First State Investments Indonesia, has a different strategy to boost assets.

“With growing risk in the stock market, investors will likely be more prone to volatility. I think now is the time for them to re-balance their portfolio,” he said.

That does not mean investors should avoid the stock market entirely, he said, but he suggested they consider spreading allocations to mutual fund products with underlying assets in short-term money market instruments, such as Bank Indonesia certificates (SBI), government bonds with maturity of less than one year and bank time-deposits.

Money-market products have great prospects this year, Putut said. The market expects Bank Indonesia to further raise its benchmark rate, which will increase the yields of SBIs and government bonds

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Indonesia’s Bumi expects 2013 coal output over 110 mln T

Feb 17 (Reuters) – Indonesia’s PT Bumi Resources , Asia’s largest thermal coal exporter, expects to produce more than 110 million tonnes in 2013, or 64 percent higher than this year’s forecast output, a company director said on Thursday.

“Expansion projects to achieve the 2013 target are already under execution,” Dileep Srivastava, a Bumi director, told Reuters. “The strategic principle we are adopting is to build for over capacity across our entire coal supply chain.”

Bumi will become a unit of Bumi Plc, to be listed in London after a $3 billion deal with Nathaniel Rothschild’s Vallar Plc in November. (Reporting by Janeman Latul; Editing by Neil Chatterjee)

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Multipolar Set to Invest $75m For Robbinz Retail Push in China

Multipolar, the holding company that owns Matahari Putra Prima, will invest as much as $75 million to open new Robbinz stores in China and to bolster existing operations, its managing director said on Monday.

“We will open five to seven new stores in China this year, and it will cost around $50 million to $60 million,” Harijono Suwarno said.

Multipolar acquired Robbinz Department Stores in August, purchasing it through subsidiary Mainvest for 345 million Hong Kong dollars ($44.3 million).

“The prospects in China are very good with its economic growth and per-capita income, and we want to seize it,” Multipolar chief financial officer Reynold Ong said, adding that the department store’s sales are expected to grow by 10 percent to 15 percent this year.

He also said total investment, including operational and capital expenditure, would come to about $75 million, with funds coming from internal cash and bank loans.

Robbinz’s per meter square performance is about $150 to $170 each per month, he said. Robbinz currently has three stores, each of which contains around 50,000 square meters.

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