Moodys downgraded Vietnams foreign- and local-currency government bonds to B2 from B1 last week, negatively affecting its overall risk profile. Vietnams five-year yields rose to a two-month high on the back of the news.
The rating agency also downgraded eight of Vietnams leading financial institutions, citing a continued deterioration in asset quality and a weaker operating environment, as government support for the banking sector will remain ineffectual.
This is a development that corresponds closely with ECR data. Vietnams overall ECR score has continued to fall over each quarter this year. The sovereigns ECR score fell by 0.8 points from Q2 2012 to 39.6 in September this falls on the back of a further three points score decrease from Q1.
This leaves Vietnam ranked well into the bottom half of tier four on ECRs global risk rankings. Vietnams position has fallen two places since Q1 2012, to 85 in September. The sovereign now ranks alongside Ukraine, Lebanon and Macedonia.
Vietnams bank stability, which is a measure of a countrys banking-sectors strength, is the second-most unstable among the southeast Asian economies, with only Laoss banking sector waning behind Vietnams. In addition, Vietnams banking-stability indicator is the lowest among Vietnams economic indicators.