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Investors play on as Vietnam founders

After the default of one of its biggest state-owned companies in December, the country’s latest round of problems began: ratings downgrades, rising inflation and an 8.5% devaluation. Yet some investors are optimistic. They think its markets are cheap, and are waiting on a new wave of IPOs. Lawrence White reports

AT THE END of 2010 and the beginning of this year, one negative story after another about Vietnam hit the headlines of the local and international media. On December 20, indebted state-owned shipbuilder Vinashin missed a $60 million principal payment to its creditors, revealing a long-suspected funding problem at the company. Three days later Standard & Poor’s followed Moody’s and Fitch Ratings in cutting the country’s long-term credit rating by one notch, having warned on December 13 that Vinashin’s woes might affect the creditworthiness of some banks. Then, as fears about inflation developed, the government announced on February 11 that it was devaluing the dong by 8.5% against the US dollar. The IMF welcomed the move as necessary to close the gap between the official and black-market exchange rates but the market responded with unintended grim humour by immediately pushing the unofficial rate higher still. While the official rate moved from D18,932 to the dollar to D20,693, within five days the ­unofficial rate had climbed to D21,900. As the Vinashin debacle developed, coverage in the local ­media exposed more problems at the company. The search for the individuals responsible had begun in August 2010 with the arrest of the chairman, Pham Thanh Binh.

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