Vietnam suspends gold imports in move to ease growing trade deficit
Tuesday, 1 July 2008
Amy Kazmin in Bangkok and Javier Blas in London
VIETNAM'S communist authorities have temporarily suspended all gold imports in a bid to tackle the country's spiralling trade deficit and help support the depreciating local currency, the dong.
With Vietnamese investors rushing into gold as a hedge against skyrocketing inflation, Hanoi -- which sets an annual quota for gold imports -- has withdrawn licences for further imports, traders said.
The decision comes as record imports of gold bars have made Vietnam the world's biggest market for gold bullion, surpassing India and China and helping to deepen Vietnam's trade deficit.
The state-controlled Lao Dong newspaper reported that the trade deficit for the first half of the year had tripled to nearly $17bn, up from $5.2bn in the same period of 2007. Vietnam's trade deficit for the whole of 2007 was $12.4bn.
The rising trade deficit has put pressure on the dong, which was effectively devalued by 2.0 per cent on June 11 as part of a readjustment in the official exchange rate. Despite the devaluation, the dong trades at a further discount on the black market.
Hanoi has regulated gold imports for years. But the recent collapse of the local equity and property markets, inflation which hit 25 per cent in May and concern about the weakness of both the US dollar and the dong have spurred a big increase in local demand for gold. Gold traders in Hong Kong said the popularity of the metal in Vietnam also surged as its price jumped this year to a record high of $1,030.80 a troy ounce. It traded late this month just below $900 an ounce. Gold prices have averaged $910 an ounce this year, against $659 in the same period of last year.
According to the industry-backed World Gold Council, Vietnam's first-quarter gold imports were 36.8 tonnes, up 71 per cent from the first-quarter of last year. Of that, 31.5 tonnes were gold bars -- or so-called investment gold -- up 110 per cent over the same period last year.
Vietnamese market insiders say that the value of the country's gold imports for the year -- prior to the suspension -- had hit $1.7bn, for 45 tonnes, compared to total gold imports of $1.6bn, for 70 tonnes, in 2007.
"We've seen high demand as Vietnamese investors have taken a rational decision that this is a hedge against higher inflation, and a weak dollar," said John Shrimpton, a director at Dragon Capital, a Ho Chi Minh City-based boutique investment bank.
FT Syndication Service
VIETNAM'S communist authorities have temporarily suspended all gold imports in a bid to tackle the country's spiralling trade deficit and help support the depreciating local currency, the dong.
With Vietnamese investors rushing into gold as a hedge against skyrocketing inflation, Hanoi -- which sets an annual quota for gold imports -- has withdrawn licences for further imports, traders said.
The decision comes as record imports of gold bars have made Vietnam the world's biggest market for gold bullion, surpassing India and China and helping to deepen Vietnam's trade deficit.
The state-controlled Lao Dong newspaper reported that the trade deficit for the first half of the year had tripled to nearly $17bn, up from $5.2bn in the same period of 2007. Vietnam's trade deficit for the whole of 2007 was $12.4bn.
The rising trade deficit has put pressure on the dong, which was effectively devalued by 2.0 per cent on June 11 as part of a readjustment in the official exchange rate. Despite the devaluation, the dong trades at a further discount on the black market.
Hanoi has regulated gold imports for years. But the recent collapse of the local equity and property markets, inflation which hit 25 per cent in May and concern about the weakness of both the US dollar and the dong have spurred a big increase in local demand for gold. Gold traders in Hong Kong said the popularity of the metal in Vietnam also surged as its price jumped this year to a record high of $1,030.80 a troy ounce. It traded late this month just below $900 an ounce. Gold prices have averaged $910 an ounce this year, against $659 in the same period of last year.
According to the industry-backed World Gold Council, Vietnam's first-quarter gold imports were 36.8 tonnes, up 71 per cent from the first-quarter of last year. Of that, 31.5 tonnes were gold bars -- or so-called investment gold -- up 110 per cent over the same period last year.
Vietnamese market insiders say that the value of the country's gold imports for the year -- prior to the suspension -- had hit $1.7bn, for 45 tonnes, compared to total gold imports of $1.6bn, for 70 tonnes, in 2007.
"We've seen high demand as Vietnamese investors have taken a rational decision that this is a hedge against higher inflation, and a weak dollar," said John Shrimpton, a director at Dragon Capital, a Ho Chi Minh City-based boutique investment bank.
FT Syndication Service