Fitch Ratings on Friday said it had placed Vietnam’s long-term foreign and local currency ratings on watch negative as confidence in the country’s currency weakens and on a lack of transparency for key economic data.

But Vietnam’s debt and credit default swaps held steady as the move was largely expected after slower economic growth in the Southeast Asian nation and other fiscal pressures, traders said.

“This reflects the deterioration in domestic confidence in the Vietnamese dong and a lack of transparency regarding international reserves and the balance of payments at a time of weakening external finances,” Fitch said in a statement.

The agency has a BB-minus rating on Vietnam’s long-term foreign and local currency debt.

Vietnam’s 5-year credit default swaps, the cost of insuring its debt against default, and 10-year dollar bonds were steady after Fitch released the statement.

The country’s 5-year CDS was last seen at 227/233 basis points (bps). Its sovereign bonds due in 2020 were flat at 101.50/102 cents on the dollar, but higher than its issue price of 98.576 in January.

“It’s been expected because of the slower growth and the devaluation of the dong and other fiscal pressures,” said Brayan Lai, credit analyst at Credit Agricole CIB.

“We already expect a weaker Vietnam credit going forward, however, an actual downgrade will not be implemented unless there are successive two-three years of economic underperformance.”

Vietnam devalued its currency, the dong, in February by 3.25 percent, the fourth since December 2008.

A lower rating may make it more expensive for Vietnam to borrow overseas.

Veitnam in January sold $1 billion of 10-year bonds, its second foray into the global debt market since a maiden issue in 2005. The issue was well received, with total orders at $2.4 billion, as investors hungry for yield and looking to diversify their holdings bought the debt.

Vietnam has the lowest rating among the subinvestment grade countries in Asia rated by Fitch.

The government expects the economy to expand 6.5 percent this year, following a 5.32 percent rise in 2009, the slowest growth since 1999. (Reuters)