Which Investment Channels in Vietnam Are Profitable?

Vietnam’s economy is forecast to experience unpredictable development in 2012, according to many economists. The Government's determination to bring inflation to a single-digit rate will reduce the possibility of recovery for securities and real estate markets because of the effects from tightened credit policies. However, some experts have cited good reasons for the recovery of stock and real estate markets this year. For investors, determining which investment channels will bring good profits in 2012 is a hard question to solve.

 

Depositing money at banks for profit is considered the safest investment channel at the moment, according to many economic experts. Dr Vo Tri Thanh, a senior specialist at the Central Institute for Economic Management (CIEM), bank savings are still the most attractive investment channel in early 2012 when no better markets have been defined.

 

For the time being, deposit interest rates are publicly quoted at 14 percent per annum in most banks but actual rates may be higher. Even, rates of demand deposits approximate this level. Depositors have the chance to join a lot of promotion programmes as well.

 

The State-owned Bank for Investment and Development of Vietnam (BIDV) has launched a promotion programme with more than 117,000 awards worth VND26 billion for depositors from December 22, 2011 to March 15, 2012.

 

The Hanoi Building Commercial Joint Stock Bank (Habubank) has recently awarded lucky customers in Hanoi and Hai Phong cities. The Hanoi-based lender carried out a lucky draw for depositors, with more than 1,000 prizes.

 

In addition, many other banks also offer promotions and attractive gifts to savings depositors. For this reason, this channel is a safe shelter for investors.

 

Although bank savings are safe, the return on margin is often lower than other channels. This is usually a temporary shelter when prospects other markets are unclear. Real estate, gold and stock markets are likely offering attractive investment opportunities but many investors are still very precautious.

 

It was a very tough time for property investors last year. A series of real estate companies had to shut down, sell off products or declare bankruptcy because of interest burdens and loan repayments. According to statistics, real estate companies are incurring an enormous debt of VND245 trillion (excluding corporate bonds). Most of this money has been injected into medium and high-grade apartment projects and residential zones, turning banks and the economy into the hostages of property market.

 

Dr Le Xuan Nghia, Vice Chairman of the National Financial Supervision Committee, said the real estate sector is posing huge risks to banks. Thus, the recovery of the real estate market is not only a cure for banks but also for other economic sectors. Nonetheless, according to many experts, the real estate is a lucrative investment channel for investors this year.

 

The past year witnessed a sharp drop of VN-Index and HNX-Index - the gauges of Vietnamese stock exchanges - because of macroeconomic problems. Besides, this investment channel was heavily driven by negative information on the world market, particularly public debt problem in Europe.

 

However, hopes of recovery on this investment channel are high in 2012 after Finance Minister Vuong Dinh Hue asserted in a press briefing that this investment channel would thrive, citing the Ministry of Finance and the State Securities Commission (SSC) would take more drastic measures to regain investor confidence. At the last National Assembly meeting, the Government pledged to have measures to rescue this market in couple with State-owned enterprise restructuring. When the economy revives, the stock market will flourish as a result.

 

In addition to the Government’s solutions, the very potentials of the stock market are also attracting investors. Valuations are relatively low and worth investing.

 

At the opposite extreme, gold is becoming an unknown to quick profit hunters. Directly driven by global economic developments, domestic bullion prices are quite volatile. In 2011, the price of this precious metal was very changeable. It peaked nearly VND50 million per tael (1.2 ounces). Notably, the difference between domestic and international gold prices reached VND5 million per tael, making gold an easy earner for many investors.

 

In 2012, given continued difficulties facing the world economy, gold is believed to soon go past the threshold of US$2,000, even US$2,500, an ounce. Hence, gold prices will probably continue to go up in both domestic and international markets. It is hard to tell about the appearance of strong waves as in 2011 but the profit from gold hoarding is undeniable.

 

However, gold investment has given dear lesson to many investors because they failed to follow the fluctuation of this metal. Besides, the policy of tightening control over gold trading is thinning transactions. Hence, this investment channel is not actually safe and attractive.