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HCMC banks’ mobilization improves in March   2010-03-31 - VietNamNet/SGT

The central bank’s HCMC branch has said total mobilization of credit institutions in the city in March is estimated at VND608 trillion, up 0.77% from early this year, while the figure in late February declined 0.45%.

However, considering the mobilization mechanism, there is still little capital in Vietnam dong coming out of the banking system. Vietnam dong mobilization in the year to date has dropped 0.54% while mobilization in foreign currency, mainly the U.S. dollar, has risen 4.19% from early this year.

Nguyen Hoang Minh, deputy director of the central bank’s HCMC branch, said that a fall in Vietnam dong mobilization in the first quarter was mainly because corporations withdrew money from banks for their operations while banking rates were so high. However, dong mobilization from the public in the first three months this year is still up about 5%, Minh said.

The lending operations of banks in the city seemed not as positive as credit growth. In the year to date, credit growth is estimated at 0.37%, only slightly higher than January-February’s 0.34%. Total outstanding loans in the banking system in the city in the first three months are forecast to total VND562 trillion. However, outstanding loans in Vietnam dong are down 1.81% while U.S. dollar loans are up 7.2%.

According to securities companies, news on the banking system’s liquidity, especially mobilization, would have a strong effect on the stock market. The nearly unchanged market on Monday was mainly because investors were waiting for news of banking mobilization in the first quarter this year, brokers said.

Fiachra Mac Cana, managing director of Hochiminh City Securities Co. (HSC), said on Monday that a recovery in deposit growth within the banking system remained the missing piece of the puzzle.

With nominal average effective interest rates as high as they are (at about 15-18%), corporations prefer to run down cash reserves rather than borrowing more. With the deposit ceiling still locked at 10.5%, retail customers see little or no incentive to add to their bank deposits now. Overall, deposit growth had been weak this year, which helps to explain the equity market trend, Mac Cana added.

HSC sees two possible scenarios for the future. Firstly, the bond yield curve has flattened of late sending clear signals that inflationary expectations are falling. Falling bond yields in the long term may eventually convince retail depositors to be content with lower than market deposit rates and encourage them to return to bank deposits. Secondly, the central bank may give a helping hand by raising the deposit rate ceiling without moving the prime rate. Either would be very positive for stocks, said Mac Cana.

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