Central bank holds off on gold auctions

By Ngan Anh, Thanh Nien News

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The central bank closely follows the market and only plans to intervene in the gold market if it becomes unstable and fails to balance itself out. Photo: Ngoc Thang  
Despite a large gap between the global price of gold and its price in Vietnam, the central bank has decided to hold off on further bullion auctions, citing the market's stability.

The price of gold in Vietnam shot up in the middle of the month due to worries about China's incursion into Vietnamese waters, Nguyen Quang Huy, head of the Department of Foreign Currency Management under the State Bank of Vietnam (SBV) said at a press briefing last week.

Meanwhile, the global price saw little change. 

For instance, on May 28 gold fell sharply on the world market, but dipped only slightly domestically leaving a significant gap between the two markets. On Wednesday, gold was about VND4.3 million or ($204.8) more valuable, per tael, in Vietnam.

Despite the considerable gap, the central bank has opted not to resume the bullion auctions it began on March 28, 2013 and suspended later that year, Huy said.

The domestic gold market was rather stable during the early part of 2014 with gold trading  down roughly VND1 million per tael from its peak of more than VND5 million per tael in late 2012. That stability was attributed to gold auctions, during which the government provided gold to authorized banks and traders.

The central bank held 76 gold auctions in 2013 and sold a total of 1.82 million taels, according to the SBV.

Huy said the central bank closely follows the market and only plans to intervene in the gold market if it becomes unstable and fails to balance itself out.

Credit woes

Nguyen Thi Hong, head of the SBV’s Monetary Policy Department, said credit had grown 1.31 percent by May 23.

Interest rates are now no longer hindering credit growth, as they have been sharply cut. Healthy businesses are having an easy time accessing loans and banks now compete for customers, Hong added.

She urged ministries to take measures to support firms such as guaranteeing them access to credit. Vietnam has targeted credit growth of 12-14 percent this year.

Mentioning the possibility of cutting interest rates in the coming time, Hong said the management of monetary policy depends on macroeconomic developments, especially inflation, which is estimated to see a month-on-month rise of 0.2 percent in May and a total of 6 percent by the end of the year. 

Meanwhile, the ceiling rate for deposits of 6 months or less has been set at 6 percent.

“The interest rate is suitable for healthy macroeconomic development," Hong said. "If inflation is kept at the expected level, the interest rates will remain unchanged.”

However, commercial banks could cut the rates by 1-2 percent this year, she added.

Amid the complicated situation in the East Sea, where China illegally deployed a US$1-billion oil rig into Vietnam's exclusive economic zone on May 2, the SBV has closely followed the market, and been ready to support banks to ensure their liquidity, she said,

Also during the press briefing, SBV’s chief inspector Nguyen Huu Nghia said the Vietnam Asset Management Company (VAMC) has bought VND6.3 trillion worth of bad debts since early this year.

Banks have registered to sell over VND45.6 billion of bad debts to the VAMC, but bad debt purchases have slowed since 2013, partly because the SBV has reduced its issuance of special bonds redeemable for refinanced loans. 

“The slowdown in buying bad debts does not means that the bad debt settlement of the banking system has become worse,” Nghia said.

VAMC is expected to buy VND70-100 trillion worth of bad debts this year, Nghia said.

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