Vietnam had better issue gold-denominated bonds: Analysts

It’s necessary to issue gold-denominated bonds rather than granting quota for local enterprises to import gold in order to save social resources, analysts said, the local newswire Dau Tu Chung Khoan reported December 27.

It is estimated that 45% of the public’s savings is gold, another 24% is cash deposited at the banks and the rest are invested in foreign currencies, property, which is very wasteful, said an economist.

Gold deposit and lending activities of local banks were restricted in the wake of Circular 22, causing gold deposit interest rates to reduce to about 0.2-1.5% p.a. As Circular 22 required local lenders to raise gold deposits only by issuing valuable papers, they had to issue gold certificates of deposits (CDs).

Besides, it’s likely that gold deposits will be applied 0% interest rates and depositors had to pay deposit fees for the banks.

If knowing the amount of gold deposits by local lenders, Government could issue bonds denominated in gold besides in domestic and foreign currencies, a banker said.

Earlier, the SBV allowed local firms to import gold, hoping them to boost up selling to meet the demand for gold in an effort to cool down the gold frenzy. However, no longer had local enterprises and lenders imported gold, they sold out amid volatile local gold prices, he concerned, adding that giving quota to import gold might also affect dollar exchange rates.

“Issuing gold-denominated bonds is more necessary to granting gold import quota to stabilize the market. Face values of those bonds should range from 1 tael to 4 taels and yields should be 0.5-1% p.a., equivalent to the average gold deposit interest rates.”

Sharing the same view point, Tran Hoang Ngan, Dean of the Banking Faculty at the HCM City Economics University said the Government should mull issuing Government bonds in gold to attract gold deposits from the public. Last year, Vietnam failed to issue government bonds denominated in the dong, he said, citing that the country could raise only 4.2% of VND61.7trillion.

Gold bonds issues would help improve liquidity for gold market, raise capital for the state budget to launch more projects, improve the country’s forex reserves, the local media reported, adding that it would also reduce demand for the greenback to import gold as local firms could buy gold from the Government to produce jewelry. – Stoxplus.com

Tags: gold-denominated bonds