Asia

Economics & Strategy

abc
Global Research

Vietnam Monitor  Things are finely balanced in Vietnam. At the time of

writing, Vietnam is gripped by significant BoP strains,

(Issue 14) VND weakness, rising inflation and a sell-off in bonds

and equities. Although these phenomena have their
Policy response key to resolve BoP, origin in an overheating economy, they have been
VND strains compounded by an overly cautious policy response and
a poor policy structure. Of particular concern has been
recent weakness in the VND and a sharp deterioration in
the trade deficit.

 VND weakness will add to inflation in the short term,

while doing little to affect the trade deficit. It also risks a
run on the currency by locals, who have already bought
record amounts of gold this year. In sum, currency
weakness at this point risks a much more disorderly
adjustment in Vietnam than needs to occur.
2 June 2008
Pieter van der Schaft*
 A comprehensive and well communicated package of
Asia Local Rates Strategist fiscal and monetary consolidation measures is warranted
The Hongkong and Shanghai Banking Corporation Limited (HK) at short notice in our opinion. Import growth needs to
+852 2822 4277 pietervanderschaft@hsbc.com.hk
slow sharply, as does domestic investment, of which
Garry Evans* SOEs seem to be accounting for an inordinately large
Equity Strategist
The Hongkong and Shanghai Banking Corporation Limited (HK)
share. The right package could, with some discomfort on
+852 2996 6916 garryevans@hsbc.com.hk the growth side, stabilise things in relatively short order.
Richard Yetsenga*
While bond yields may have further upside regardless,
FX Strategist the currency and equities certainly offer value here if
The Hongkong and Shanghai Banking Corporation Limited (HK) policy is conducted appropriately.
+852 2996 6565 richard.yetsenga@hsbc.com.hk
 We are worried, however, that the authorities will
Prakriti Sofat*
Economist continue with their piecemeal approach. Certainly the
The Hongkong and Shanghai Banking Corporation Limited, structure of the policy process in Vietnam does not lend
Singapore branch itself to bold policy moves; and that is what is required
+65 6230 2879 prakritisofat@hsbc.com.sg
now. Recent readings on inflation and the trade deficit,
Virgil F Esguerra* as well as the price action in markets, suggest that a
Asia Local Rates Strategist
continuation of the current policy approach is likely to
The Hongkong and Shanghai Banking Corporation Limited (HK)
+852 2822 4665 virgilesguerra@hsbc.com.hk contribute to further volatility and market weakness, and
there are clear risks that developments could become
Dilip Shahani*
Head of Global Research, Asia-Pacific genuinely disorderly. On balance, we still see further
+852 2822 4520 dilipshahani@hsbc.com.hk downside risks to the VND, equities, bonds and
*Employed by a non-US affiliate of HSBC Securities (USA) Inc, economic growth in the next few months, while trading
and is not registered/qualified pursuant to NYSE and/or NASD liquidity in Vietnam's bond, FX, money and equity
regulations
markets will remain extremely thin.
Issuer of report: The Hongkong and Shanghai Banking
Corporation Limited

Disclaimer & Disclosures

This report must be read with the
disclosures and the analyst certifications
in the Disclosure appendix, and with the
Disclaimer, which forms part of it
 Asia
Economics & Strategy abc
2 June 2008

USD/VND FX reserves

16,500 3% 20
2%
15
16,000
1%
10
0%
15,500
5
-1%
15,000 -2% 0

Dec-99

Dec-00

Dec-01

Dec-02

Dec-03

Dec-04

Dec-05

Dec-06
Jan-05

Sep-05
Jan-06

Sep-06
Jan-07

Sep-07
Jan-08
May-05

May-06

May-07

May-08

USD/VND (lhs) Y/y change (rhs) Foreign reserv es (USDbn)

Source: Bloomberg Source: CEIC

O/n call money and bond yields Headline and ex-food CPI

20 30
18
16 25
14
12 20
10 15
8
6 10
4
2 5
0
0
Jan-07

Mar-07

Jul-07

Sep-07

Jan-08

Mar-08
May-07

Nov-07

May-08

Jan-04

Sep-04
Jan-05

Sep-05
Jan-06

Sep-06
Jan-07

Sep-07
Jan-08
May-04

May-05

May-06

May-07

May-08

O/n call money 5y r VGB y ields

2y r VGB y ields CPI CPI ex -food & foodstuffs

Source: Reuters, HSBC Source: CEIC, HSBC

HCMS Index GDP growth

1400 200% 10
1200 150% 9
1000 100%
800 8
50%
600 7
400 0%
-50% 6
200
0 -100% 5
Dec-04

Dec-05

Dec-06

Dec-07
Apr-05
Aug-05

Apr-06
Aug-06

Apr-07
Aug-07

Apr-08

Mar-00
Sep-00
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07

HCMSI (lhs) Y/y change (rhs) GDP, y /y

Source: Bloomberg Source: CEIC

2
 Asia
Economics & Strategy abc
2 June 2008

Credit strategy
 Moody's expected to cut Vietnam outlook on inflation concerns
 Retain Sell on Vietnam '16 and buy 5-yr Vietnam CDS for target of
425-450bps range

The Vietnam sovereign credit rating has come
under pressure due to the government’s slow
response to resolving the inflation problem and
deteriorating external position. To be specific, Fitch
cites poor inflation-fighting credibility and concerns
that inflation may undermine the banking system in
its decision to lower the sovereign outlook to
‘negative’ from ‘stable’. The rating was left
unchanged at BB-. This action follows S&P’s move
earlier in the month to lower the outlook to
‘negative’ from ‘stable’. These actions come as no
surprise to us given that inflation has been heading
sharply higher and was last reported at 25% y/y for
May. In the coming weeks, we expect Moody’s to
follow the other credit rating agencies and cut its
‘positive’ outlook to ‘stable’; we do not rule out a
more aggressive shift to ‘negative’ to reflect that
inflation left unchecked poses a risk to the banking
system, the currency and the balance of payments.
So far, the central bank has responded with
interest rate hikes and higher statutory reserves to
slow credit growth. But monetary policy remains
projected at 6.2% of GDP this year. In other
words, the government’s action so far is unlikely
to have a materially positive impact on the
merchandise trade account. In the first five
months of 2008, Vietnam's trade deficit reached
USD14.4bn compared to USD4.3bn a year earlier.
If the trade position continues to deteriorate at this
pace, we would see a full-year merchandise trade
deficit of USD35bn or 40% of GDP.
As a result, we maintain our Vietnam
Underweight which has been in place since
December. We retain a sell on the Vietnam’16
bonds and keep the buy 5-yr Vietnam CDS call
for a move up to the 425-450bps area from mid of
360bps. From a relative value perspective, we
revise upward our spread target trade versus 5-yr
Philippine CDS to 150bps from the original band
of 60-70bps projected a month ago (see Fig 1).
Vietnam still suffering from foot-dragging
150
100

fairly stimulative with policy rates still negative. 50

Similarly, the government has announced plans to 0
halt and delay selective infrastructure projects to
-50
cool economic growth and ease the balance of
payments problem. Again, however, the amount -100

being talked about in the local press of VND1.6trn 01/08 02/08 03/08 04/08 05/08 06/08
Spread betw een the 5-y r Vietnam and ROP CDS (bps)
(USD99m) in suspended projects appears modest
Source: Bloomberg
against a backdrop of a government budget deficit

3
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Economics & Strategy abc
2 June 2008

Economics
 Rice prices boosting inflation whilst…
 …worsening trade position weighs on the currency
 Central bank raised rates but still more action is needed

Things seem to be getting worse by the month in 1. Catching up with Ukraine and Venezuela?

Vietnam. Inflation went above 25% y-o-y in May, 35

having doubled over the last six months, with the 25
% Yr

trade deficit for the first five months of the year a 15

whopping USD14.4bn compared with USD12bn for 5
the whole of 2007. On the policy front, the central -5
bank raised base rates by 325bps, to 12%, and also 99 00 01 02 03 04 05 06 07 08
removed the deposit rate cap. Evidence of fiscal Vietnam Kazakhstan
tightening, however, has been disappointing. Venezuela Ukraine

Inflation Source: Bloomberg, CEIC

Inflation in Vietnam is nearly 20ppts higher now

It was not much of a surprise that food and
compared with January last year, having doubled
foodstuffs inflation in Vietnam hit yet another
over the last six months to touch 25.2% y-o-y in
record, now above 42% y-o-y, from 34%
May. We have in the past made comparisons with
previously. The stunner was by far food inflation2
other high inflation countries in the region such as
which was nearly 70% y-o-y, more than triple the
Sri Lanka and also Indonesia1. This time around
level at the start of the year (see chart 2).
we thought it would be helpful to look at the
larger emerging market space.

In chart 1 we have plotted the year-on-year

change in consumer prices in Vietnam along with
the same in Ukraine, Venezuela and Kazakhstan.
All four countries have seen a sharp acceleration
in prices since the middle of last year. This largely
derives from the high weight of food in the CPI
basket. Ukraine, for example, has a weight of
nearly 64% and Kazakhstan of around 45%.

2
A sub-component of food & foodstuffs, with a
1
Vietnam Monitor 13 May 2008. weight of 13%.

4
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2 June 2008

2. Food inflation through the roof inflation will be sustained. On the domestic front,
80 80 we would also highlight that there has been
anecdotal evidence of hoarding by merchants,
60 60
which has exacerbated the situation further.
% Yr

40 40
However, even if one were to leave aside food
20 20
and energy-related cost increases, core inflation in
0 0
Vietnam has been gaining momentum. According
Jan-05 Jan-06 Jan-07 Jan-08
to our estimates, core inflation is currently
Food Foodstuffs Food & Foodstuffs
running at 12% y-o-y compared with around 6%
Source: Bloomberg, HSBC. *S&P index is lagged which allows us to plot it till end 2008
y-o-y in September last year.

4. Core inflation is rising as well

Given that the food index is dominated by rice, a
15
large part of this run up is probably on account of
the sharp rise in global rice inflation. Currently, 10
% Yr

rice prices are rising by around 100% y-o-y in 5

local currency terms compared with 45% y-o-y in 0
January (Chart 3). With the weight of rice in the
-5
CPI basket being roughly 8%, this suggests that
99 00 01 02 03 04 05 06 07 08
rice price inflation is directly adding 8ppts to
Inflation ex -food & energy
headline inflation.
Source: HSBC
3. Rice prices up by nearly 100%

150 With high inflation prints, we think inflation

100 expectations are probably edging up in the
economy. Since the start of the year, there have
% Yr

50
been around 300 strikes by workers asking for
0
higher wages. This compares with 540 strikes in
-50 full of 2007 and 390 in 2006. The wage-price
98 99 00 01 02 03 04 05 06 07 08 spiral that appears to be beginning, if it becomes
embedded, could make matters much worse.
Source: HSBC
Balance of payments: a deficit
brewing
International rice prices, however, have turned a
bit recently perhaps, a result of a stronger dollar, On the trade deficit position, things have gotten
downward pressure on account of rice’s premium worse still. The trade deficit till May year-to-date
to wheat (substitution), speculative bets taking a was USD14.4bn compared with USD4.3bn in the
breather on account of price volatility and also same period last year. If the trade position
some positive news on the supply side. For continues to deteriorate at this pace we would see
example, Vietnam plans to export 4mn tonnes of a deficit of USD35bn or 40% of GDP in 2008.
rice by the end of September compared with an (There is no strong seasonal pattern to trade data.)
earlier target of 3.5mn tonnes. It remains to be
seen whether the slight slowing in rice price

5
 Asia
Economics & Strategy
2 June 2008
Imports were up 67% year-to-date in May –
double the rate seen in the same period last year –
to USD37.8bn, and exports grew by a less
spectacular 27.2% year-to-date to USD23.4bn
versus 20% y-t-d in May 2007. In year-on-year
terms imports grew by 55% in May compared
with 85% in April and export growth slowed to
around 26% from 40% previously. However, we
would like to emphasize that despite the high
exposure to the US (20% of Vietnam’s exports are
shipped to the US) exports have been holding up
reasonably well, with shipments still running
north of the decade average of 21% y/y.
As we discussed in detail in our report, Vietnam:
Deficit dangers? (April 2008), the precipitous
worsening of the trade deficit is likely to result in
a big current account deficit, even assuming that
remittance inflows remain strong. The latter,
however, seems less likely given that in 2007 a
large share of the remittance inflow was actually
used to bet on the equity and real estate markets.
Overall we think the current account deficit will
probably exceed 15% of GDP this year.
On the capital account side, foreign donors have
pledged to disburse USD5.4bn in development
assistance in 2008. However, past experience
shows that disbursements are typically 60% of the
pledged amount. Foreign direct investment
indicators to date suggest another strong year of
inflows. FDI commitments year to date stand at
USD15.3bn compared with USD4.4bn in the
same period last year and more importantly FDI
disbursements April year-to-date were USD3.1bn,
up 25% compared to the same period last year
(USD2.5bn). If this pace were to continue,
disbursements would be USD8bn for 2008, which
is also the expectation of the Ministry of Planning
and Investment. However, given the current
market environment the risk is that companies
will be more cautious in disbursing funds for the
rest of the year.
6
abc
What does all this mean? Our discussion suggests
that Vietnam will probably see a balance of
payments deficit this year – the first time since
1998 – unless portfolio flows were to beat the
2007 inflows of around USD7bn, which seems
difficult in the current environment. The balance
of payments deficit will probably result in the
central bank running down its foreign exchange
(FX) reserves, which currently stand at around
USD18bn3.
Policy
We have argued in these pages that the central
bank is behind the curve; however, it is playing
catch up. In May, the State Bank of Vietnam
(SBV) raised the base rate by 325bps, to 12%; this
follows a 50bps hike in January.
5. Rates have been raised
15 14
10 9
%
5 4
0 -1
Aug-03 Jan-05 Jun-06 Nov -07
Base Discount Re-financing
Source: HSBC
The base rate, however, is the basic rate for
commercial banks to set up trading interest rates,
including both deposit and lending rates.
According to the nation’s Civil Code, lending
rates cannot exceed 1.5 times the base rate.
Following the latest hike, the cap on lending rates
now stands at 18%. Most banks, however, charge
some management fees etc., so market lending
rates are around 20% or so. Given inflation above
25% and the prospects of further price rises,
3
FX reserves were USD23bn at the end of 2007.
 Asia
Economics & Strategy abc
2 June 2008

policy could still be agreed to be fairly

stimulative. As such, we think further hikes in the
base rate are likely.

The central bank also removed the 12% cap on

deposit rates. This has seen liquidity flow back into
the banking system, as commercial banks raised
deposit rates to around 14-15%. From a policy
perspective, the fact that liquidity is coming back to
the banking system is positive as then the central
bank can exercise some control through reserve
requirements, open market operations etc. If,
however, liquidity is sloshing around outside the
banking system, probably in commodity buying,
then it makes policy that much more difficult in an
already challenging environment.

On the growth front we think that GDP will

probably slow this year, not least because of the
income squeeze from high inflation but also due to
cutbacks in investment spending by firms on the
back of margin compression with rising input costs
and a weaker demand outlook. Additionally, signs of
credit growth slowing in the economy should also
help reduce overall demand. However, things have
been disappointing so far on the fiscal front. The
government has announced a cutback on
unnecessary projects and spending, but according to
newswires so far only 30 provinces and nine
ministries have reported plans to cut back spending
to the tune of USD125mn (source: Tuoi Tre), which
seems small given the government’s target of a
USD6bn reduction and the size of the economy
(USD80bn or so).

Prakriti Sofat

7
 Asia
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2 June 2008

Equity strategy
 The mounting crisis has caused stocks to fall by 55% this year
 The three-day stock exchange closure in May makes us nervous
 PE has fallen to 10x but there is further downside risk

From bad to worse When trading resumed on May 30, the market fell
by another 1.5%. Many foreign investors were
The Vietnam stock market goes from bad to
shocked that an exchange could shut for such a
worse. In the near-crisis macro environment
prolonged period. This clearly raises the risk that
described in detail elsewhere in this Vietnam
foreigners might not be able to repatriate capital in
Monitor, the VN Index fell every single day in
the event of the crisis deepening.
May, usually close to its 2% trading limit. The
index has now fallen by 55% this year, making it 2. Key stock market data
the worst performing market in the world, and by HCM Hanoi Total
65% since its peak in March 2007. Market cap (USDm) 11,463 3,226 14,689
No. of stocks 151 137 288
1. Vietnam stock index Stocks with mkt cap >USD1bn 1 0 1
Stocks with mkt cap >USD500m 8 2 10
1200 Stocks with mkt cap >USD200m 14 2 16
Stocks that hit foreign limit 2 10 12
1000 Daily turnover (USDm, 1mth ave) 8 3 11
Foreign ownership 25.7% 14.7% 23.3%
800 PE (2007) x 11.8 10.0
ROE 22.9% 17.2% 22.8%
600
DY 3.7% 4.8%
400 Source: HSBC, Bloomberg, HOSE

200
VN Index
0 As a result of the market turmoil, most market
Oct-06

Oct-07
Jan-06
Apr-06

Jul-06

Jan-07

Apr-07

Jul-07

Jan-08
Apr-08

indicators have deteriorated sharply. Combined

market cap of the two exchanges has fallen to
Source: Bloomberg only USD15bn, from USD23bn last September.
There is now only one listed stock (Vinamilk)
When we say it fell every day in May that is not with a market cap of over USD1bn, the cut-off for
quite true. In fact, the Ho Chi Minh exchange closed many international investors. Only 14 stocks
for three full days after a trading system hitch on the would even fall into most fund managers’ small-
morning of May 27. Coming after rumours that the cap category (market cap over USD200m),
authorities planned to shut the Ho Chi Minh bourse compared to 25 last September.
temporarily to slow the pace of selling, this
Similarly, turnover has collapsed, with the Ho Chi
technical problem – never fully explained by the
Minh Stock Exchanges turning over on average
exchange – brought out the conspiracy theorists.
only USD11m a day in May and Hanoi USD6m,

8
 Asia
Economics & Strategy abc
2 June 2008

compared to USD82m and USD30m respectively 4. Foreign net buying of Vietnamese equities

in October last year (Chart 3). 350

300
3. Daily trading value on HCM and Hanoi exchanges (20DMA)
250
100

USD m
HCM
200
80 Hanoi 150
100
60
USDm

50
40 0

Dec-06

Oct-07
Dec-07
Jan-07
Feb-07
Mar-07
Apr-07
Jun-07
Jul-07
Aug-07
Sep-07

Jan-08
Feb-08
Mar-08
Apr-08
May-07

Nov-07

May-08
20

0
Source: HoSE, Bloomberg (to May 29)
Oct-06

Oct-07
Jan-06
Apr-06

Jul-06

Jan-07

Apr-07
Jul-07

Jan-08
Apr-08

How far can it fall?

Source: Bloomberg
With the large declines in the market, valuations
Interestingly, the downward pressure on the are undoubtedly starting to look attractive. The
market has not come from foreign investors, who Ho Chi Minh exchange is now trading on 11x last
continue to be substantial buyers. In May they year’s earnings. If we assume 10% EPS growth
bought USD132m of equities net, and were this year and next (reduced from our previous
buyers every day during the month (Chart 4). This assumption of 20%), this puts the market on a 12-
is because most of the foreign money left in the month forward PE of 10.5x. That is the cheapest
Vietnamese market comes from closed-end funds, multiple that the Vietnamese market has traded on
which rarely see outflows. Many of these funds in its (short) investible history (Chart 5). But it is
raised money in 2007 with a view to investing in probably not low enough to declare it an outright
privatisation IPOs, but these have yet to bargain: in the Asia Crisis and the 2000-1 bear
materialise. In the meantime, they are taking market, prospective PEs in many Asian markets
advantage of cheaper valuations to put some of fell to 6-8x.
their cash to work. 5. Estimated 12-month forward PE for VN Index

The selling pressure, therefore, has come entirely 35

from domestic investors, both individuals who 30

25
find putting their money in gold or bank deposits
20
at 14% more attractive, and from banks that are
15
starting to be strapped for cash. We think it likely 10
that many investors, sitting on large paper losses, 5
will choose to cut their losses rather than hang on 0
Oct-06

Oct-07
Jan-06

Apr-06

Jul-06

Jan-07

Apr-07

Jul-07

Jan-08

Apr-08

longer to a falling market. This is likely to put

further downward pressure on stock prices.
Source: HSBC (assuming 10% EPS growth in 2008 and 2009)

9
 Asia
Economics & Strategy abc
2 June 2008

And there are a number of risks that are likely to 6. Q1 2008 earnings results
keep investors wary. With tight monetary policy Code Company Q1 Basis 2008 Basis
Forecast
likely to continue for the rest of the year and the
VNM VIETNAM DAIRY PRODUCT -4% NP 18% NP
government looking to cut public expenditure, DPM PETROVIETNAM FERT 77% PBT 16% PBT
how likely is it that economic growth could slow KBC KINHBAC CITY DEVT n/a
ACB ASIA COMMERCIAL BANK 21% PBT 17% NP
to well below the 7% growth the government now VPL VINPEARL JSC n/a
STB SAIGON THUONG TIN 44% PBT 25% PBT
forecasts? How much risk is there that this PVD PETROVIETNAM DRILLING 545.9% NP 22% PBT
triggers bank collapses, as rating agency Fitch PPC PHA LAI THERMAL POWER -0.4% NP -11% PBT
VIC VINCOM JSC 33% NP
warns? Foreign investors have not had to worry ITA TAN TAO IND’L PARK 29% NP
much about currency factors in Vietnam until now, HPG HOA PHAT GROUP JSC 451% NP 15% NP
FPT CORP FOR FIN AND PROM 47% NP
with the government controlling the FX market. SSI SAIGON SECURITIES INC -75% NP
KDC KINHDO CORPORATION -13% NP
But with non-deliverable forwards indicating a VSH VINH SON HYDROPO 72% NP
28% fall in the Vietnamese dong over the next ANV NAM VIET CORP n/a
Source: HSBC, Bloomberg
year, how much of a risk is a sharp depreciation?
Could these factors cause foreign investors to give
Garry Evans
up on Vietnam, triggering selling?

Finally, is there a possibility that corporate

earnings, which grew 41% last year, could
collapse, negating the valuation argument? Q1
earnings did come in a little mixed, with four of
the 13 largest companies reporting negative
growth (see Table 6). For some, for example
Vinamilk, this was because the two-year post-
listing tax break expired. But, on the whole, both
underlying growth and companies’ forecasts for
this year remain strong. But this will be an area to
monitor closely for the rest of the year.

Our market view remains that Vietnam is an

attractive market on a long-term basis. FDI and
tourism remain strong. The country’s
entrepreneurialism gives it a bright future. But the
next few quarters will be difficult. For investors
already invested in the market, we would not
recommend selling at these levels. But investors
looking for an entry point will probably find a
cheaper one later in the year.

10
 Asia
Economics & Strategy abc
2 June 2008

Fixed income strategy

 VGB yields have mainly risen due to rising bank deposit funding
costs
 However, further rises in VGB yields are likely given prospects for
further VND weakness, SBV policy tightening and an eventual
resumption of supply
 Onshore liquidity will likely remain very tight and Vietnam's
markets frozen for the next 6-12 months

Rising inflation, a sharp deterioration in the trade 1. Vietnam bond yields

deficit and (prospects for further) VND weakness 5-Jan 6-Mar 1-Apr 6-May 29-May
Tenor Yield Yield Yield Yield Yield
have coincided with a sharp rise in VND
VGBs 2yr 8.00% 7.70% 8.10% 12.0% 17.00%
denominated bond yields over the past month. At the 5yr 8.60% 8.70% 9.30% 13.0% 19.00%
time of writing, 2yr and 5yr VGB yields are 10yr 9.10% 9.20% 9.80% 14.0% 17.00%
EVN 10yr 10.10% 10.20% 10.80% 15.5% 22.00%
indicatively priced at 19%, though market liquidity Devt 5yr 8.80% 8.80% 9.50% 13.5% 19.50%
Bank of
is virtually non-existent. This compares with Vietnam
headline inflation of 25.2% y/y in March, though 10yr 9.30% 9.30% 10.00% 14.5% 17.50%
15yr 9.60% 9.60% 10.30% 15.0% 17.00%
inflation is likely to rise further to 30% given reports BIDV 10nc5 9.60% 9.70% 10.30% 14.0% 20.00%
15nc10 10.10% 10.20% 10.80% 15.5% 21.00%
of significant domestic hoarding of cement, steel, Vinashin 10yr 10.30% 10.40% 11.00% 17.0% 22.00%
fertiliser, gold, rice and USD as inflation hedges and Source: HSBC

in anticipation of import tariff hikes and a tentative

liberalisation of price controls on 10 essential
domestic goods in June or July.
Aside from these macro-economic uncertainties,
the rise in VGB yields has mainly reflected
increased funding costs among domestic banks
and tight liquidity within some parts of the
banking system. Deposit rates have risen to 14-
15.5% varying by deposit tenor following the
removal of a 12% deposit rate cap on 18 May in
response to deposit withdrawals by the general
public. Including an 11% reserve requirement on
VND deposits, all-in deposit funding costs
amount to 17-18%, which require minimum bank
lending rates of 21-22%. The tight liquidity
situation in the banking system was reflected in

11
 Asia
Economics & Strategy
2 June 2008
VND53tr of SBV liquidity injections during 12-
16 May, though these liquidity injections have
since declined to around VND28tr.
Given tight bank liquidity, bank deposit funding
costs currently represent the floor below VGB
yields even when the O/N rate is currently quoted
around 11.75%. However, banks with tight
liquidity reportedly only have access to interbank
liquidity subject to haircuts on collateralised
borrowings (even with VGBs and SBV bills as
collateral). In turn, the effective O/N rate is
currently around 15%. There is a limited risk,
however, that these collateralised borrowings will
be forcibly unwound on a further rise in VGB
yields as SBV is currently providing the weaker
banks with liquidity with loan contracts as
collateral. Moreover, local banks hold most bonds
in their accrual books, while SBV is currently
monitoring the liquidity situation of each bank on
a daily basis.
VGB yields to rise further
That said, we expect VGB yields to rise further
above 20% in coming weeks for the following
reasons:
 Further VND weakness: given Vietnam's
rapidly widening trade deficit (USD14.4bn
during 5M 2008; though this may be
overstated by a temporary surge in hoarding),
our FX strategists expect the USD/VND spot
fixing rate to rise further, while short-dated
USD/VND implied forward rates are unlikely
to fall below 20% near term.
Further SBV policy tightening: SBV's efforts to
contain inflation and slow down domestic demand
have been made more difficult by the lack of
fiscal consolidation efforts, SBV's multiple policy
objectives (promote growth, contain inflation,
maintain USD/VND within a trading band,
supervise banks) and lack of independence (it is
answerable to the Prime Minister and National
12
abc
Assembly). Moreover, SBV has been reluctant to
tighten liquidity further given prevailing fragilities
in the banking system. SBV's policy stance, in this
respect, is aligned with the needs of the weakest
banks in the system.
Against this backdrop, the removal of the 12%
deposit rate cap and the increase in SBV's base
rate from 8.75% to 12% on 18 May did not
constitute any monetary tightening as illustrated
by the continued softness in the O/N rate (at
11.75%) (see Figure 2). SBV does not lend funds
under the base rate and the SBV base rate is
merely an administrative rate to determine
maximum lending rates (according to civil law,
banks are allowed to set their lending rates at
150% of the base rate).
2. VGB yields versus O/N call money
20
18
16
14
12
10
8
6
4
2
0
Jan-07
Mar-07
Jul-07
Sep-07
Jan-08
Mar-08
May-07
Nov-07
May-08
O/n call money 5y r VGB y ields
2y r VGB y ields
Source: Reuters, HSBC
Instead, SBV has in recent months chosen to
conduct policy through a range of unorthodox
measures, including the compulsory sale of SBV
bills at below market yields and a tightening of
FX and money market liquidity through strict
curbs on the sale of VND and USD. Although
these measures and the tightness in bank liquidity
have resulted in a drying up of bank lending,
which – together with declining consumer
purchasing power – should eventually lead to a
slowdown in domestic demand, we nevertheless
believe that SBV will be forced to tighten its
policy stance further in order to:
 Asia
Economics & Strategy abc
2 June 2008

1 Shore up the VND; spending, for which the authorities envisage

USD6bn in investment curbs). However, only
2 Prevent a renewed withdrawal of deposits out
VND2tr in actual spending cuts has been
of the banking system as headline inflation
identified thus far.
rises to 30%;
Prospects for coming months
3 Rapidly cool off domestic demand in the
absence of significant fiscal consolidation Given the sharp deterioration of the trade deficit
efforts (see below). and rising inflation, a comprehensive and well
communicated package of fiscal and monetary
In this respect, we believe that SBV would most
consolidation measures is warranted at short
effectively be able to tighten its policy stance by
notice, in our opinion. However, risks are that the
issuing more SBV bills at market-determined
authorities continue to opt for a piecemeal
rates, combined with a sharp corresponding hike
approach towards resolving the current situation.
in its repo rate and a modest expansion of its repo
If so, such an approach could lead to increased FX
window. With headline inflation running at 25%
weakness and greater interest volatility. Although
y/y, a rise in the O/N rate towards 20-25% is
the authorities may initially look to counter FX
required at the minimum to achieve the
weakness and increased interest rate volatility
aforementioned objectives.
with more market control measures (e.g.
 Limited onshore demand: Given tight bank maintenance of the USD/VND trading band,
liquidity, we see limited onshore demand for reduced sales of USD, restrictions on capital
VGBs for accrual book purposes despite outflows), market forces would eventually force
attractive yields. Moreover, although onshore the hand of the authorities to implement more
banks can repo VGBs out to SBV at SBV's aggressive fiscal and monetary consolidation
12% repo rate to earn attractive carry, SBV's measures than would be needed if action is taken
repo window is very small (between VND3- swiftly. What is not in doubt, however, is that in
9tr in recent weeks and VND3tr currently). both scenarios, VND rates and bond yields will
likely remain high and Vietnam's FX, bond and
 Supply pressures: Excess liquidity (VND30-
money markets frozen over the next few months.
40tr in March) has allowed MOF to defer
VGB issuance in recent weeks. Thus far, the Pieter van der Schaft
MOF has issued only VND10tr of VGBs out
Calendar
of VND85tr planned issuance for 2008
Date Event Note
(though this target is currently under review).
5-Jun VGB underwriting VND300-500bn
Given VND1.5tr of weekly scheduled 13-Jun VGB auction VND300-500bn
19-Jun VGB underwriting VND300-500bn
issuance, MOF currently still has ample 23-27 Jun CPI (Jun, y/y) Prior 25.2%
liquidity, though at some point it would have 25-27 Jun IP (Jun, y/y) Prior 16.7%
25-27 Jun Retail sales (Jun, y/y) Prior 29.7%
to come back to the market again if 25-27 Jun Exports (Jun, y/y) Prior 27.2%
25-27 Jun Imports (Jun, y/y) Prior 67.0%
expenditures are not reduced swiftly. Press 27-Jun VGB auction VND300-500bn
reports, in this respect, suggest that the 21-25 Jul CPI (Jul, y/y) -
28-31 Jul Exports (Jul, y/y) -
authorities plan to cut investment spending
Source: Bloomberg, HSBC
projects by only VND20tr – insufficient, in
our opinion, to curb the trade deficit (though
the main problem lies with SOE investment

13
 Asia
Economics & Strategy abc
2 June 2008

FX strategy
 This is not yet a crisis
 But could become one if the VND is allowed to depreciate
 Or if the underlying causes are not addressed correctly and quickly

There is clearly some value emerging in Vietnam.
The weakness in the VND in recent weeks,
however, suggests that conditions are likely to
continue getting worse before they get better. A
clear, coherent and aggressive policy package
designed to address the root causes of the
symptoms in the FX market could stabilise things
relatively quickly. Unfortunately, there are also
clear risks that policy plays a role in driving the
currency to overshoot.
Policy response has been
insufficient
Since March, the VND has come under depreciation
pressure. The NDF fixing (a broad measure of where
many spot transactions onshore are occurring)
moved from 15,519 to be trading at 16,233 on May
15, a move of 4.6%. On May 16 the authorities
responded with the bold step of raising the base rate
from 8.75% to 12%. This had the effect of capping
lending rates at 18%, and seeing deposit rates
increase from 12% to around 14%.
Unfortunately, these rate increases have done very
little to improve the supply-demand imbalance in
the FX market. The rate of currency depreciation
has actually escalated since the interest rate
moves. The exchange rate at present is a critical
barometer of Vietnam’s ability to attract enough
capital to fund the trade deficit, which is a natural
counterpart to the FDI boom.

1. The VND FX market

17500

17000

16500

16000

15500
Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08

Fix Official USD/VND spot Ceiling Floor NDF Fix

Source: HSBC, Bloomberg

14
 Asia
Economics & Strategy
2 June 2008
From a broader perspective, with credit growth
still strong, real rates of all types still negative and
inflation still rising (in % 3-month terms, which
suggests the % yoy rate will continue rising for
some months yet on base effects alone), the policy
response has clearly been insufficient.
The fact the authorities have allowed unofficial
rates of VND to trade progressively further away
from the official band, and that the official fixing
for USD-VND is increasing at the fastest rate on
record, suggests that currency depreciation may
have been accepted as the latest policy tool.
Why the VND is not the
problem
Our worry is that the authorities, by not
intervening in sufficient volumes (or in a
sufficiently tactical manner) to restore the
confidence of locals in the managed exchange rate
regime, or undertaking additional policy steps to
slow the domestic economy rapidly, are risking a
much more substantial economic retrenchment
than needs to occur. Our concern is that currency
depreciation is not the correct policy tool in the
current environment, unless accompanied by
much stronger policy action elsewhere.
It is true that the trade deficit is large. But
Vietnam has not suffered a loss of
competitiveness because of VND appreciation.
2. VND-USD in real terms
125
100
75
50
Jan-90 Jan-93 Jan-96 Jan-99 Jan-02 Jan-05 Jan-08
VND versus USD RER Long term average
Source: Reuters, Bloomberg, HSBC
abc
From the peak of the official USD-VND policy
band in August 2007 to the low of the NDF fixing
rate in March, the VND only appreciated by 4.5%.
Export growth in the latest data is still a
reasonable 27.2% yoy.
Vietnam has lost competitiveness because of the
inflation spike which has followed an FDI boom
of unprecedented size. This is what has driven the
VND in real USD terms to the highest level on
record, and the VND in REER terms to similar
levels. The trade deficit is, similarly, reflecting the
67.0% yoy gain in imports, not any particular
weakness on the export side.
In addition, while the VND in real terms is at high
levels (25% from the long-term average against
both the USD the REER), it is difficult to argue
that it is expensive. The World Bank’s
International Comparison Program, using 2005
data, shows the VND 70% undervalued in
absolute PPP terms. Only the Laotian kip is more
undervalued, at 72%. While some of this
undervaluation would have been eroded by the
past year’s inflation performance, the valuation
gap is still large.
3. VND REER
130
115
100
85
70
55
Jan-90 Jan-94 Jan-98 Jan-02 Jan-06
REER LR Avg Avg since 1998
Source: Reuters, HSBC
15
 Asia
Economics & Strategy
2 June 2008
The scale of Vietnam’s FDI-boom, and consequent
trade-deficit widening, is much greater than seen in
most other emerging countries. This gives a hint
perhaps, about why the digestion problems have
ended up being so severe. In China, the net FDI to
GDP ratio peaked in 1994 at 5.5%. Vietnam's 2007
ratio, based on USD6bn of actual disbursed FDI is
8.4%, up from 2.9% in 2006. Last year’s USD21bn
in committed FDI is a massive 30% of GDP. Over
the last two months in Vietnam the trade deficit
annualises at 40% of GDP. It is almost inconceivable
that any country can fund a deficit that large for any
material period of time, regardless of where the
currency is trading.
In our view, the ongoing FDI boom should not
give one comfort about the fragility of the current
situation. To our way of thinking, an FDI boom
will typically result in a deterioration in the trade
deficit, due to the importation of investment
materials and stronger domestic demand. But for
the currency this will be more than offset by
capital inflows prompted by higher domestic
interest rates as policy adjusts to the short-term
inflationary consequences of the boom. As such,
an FDI boom should result in currency
appreciation. In Vietnam’s case, however,
domestic policy has lagged the domestic boom,
with the result that the currency has come under
depreciation pressure as the imbalances have been
allowed to build.
Why VND depreciation could
become a problem
Certainly VND depreciation will help the trade
deficit with a lag - though the currency move
needed to make a material difference to the
current gap between imports and exports is so
large that we doubt it is currently being
countenanced by the domestic policy authorities.
That said, it will add to the domestic boom and
inflation in the short term – hardly what is needed
to stabilise the current situation.
16
abc
So the currency depreciation adds to what are
already overly loose domestic monetary
conditions, risking spiralling inflation
expectations and prompting even weaker asset
prices. This will ultimately require tighter
domestic monetary conditions. Either way,
domestic conditions need to tighten further from
where they are – the tightening ahead of FX
depreciation will be much less severe and much
less destructive.
In addition to this, we worry that the authorities
are risking a run on the currency. Disbursed FDI
inflow in the past two years totals something
around USD12bn. Currency depreciation will see
those investors to increasingly look to hedge their
FX exposure. A greater share of additional
disbursements will also look for FX hedging.
Pending FDI may even reconsider their
investment as the currency weakens and inflation
rises further.
Moreover, the behaviour of local depositors is a
significant concern. Locals have spent much of
the past two years de-dollarising, as the VND
stabilized and started to appreciate. The FX share
of bank deposits is, at the latest data, at a record
low of around 26%. That process could easily
reverse under current conditions. This year has
already been characterized by a significant
increase in purchases of gold as residents seek
alternative stores of value, and press reports
suggests that hoarding of commodities is
widespread. While many focus on the behaviour
of foreign investors during EM crisis, most crisis
have, in actuality, been flights of domestic capital.
Worryingly from this perspective, Vietnam
residents face a liberal capital account regime.
In sum, there is a high probability that the FX
market will not self correct as the VND becomes
cheaper; at least until the currency has depreciated
for quite some way and domestic dislocation has
resulted. Unless there is a change in the
 Asia
Economics & Strategy abc
2 June 2008

underlying supply and demand for VND due

either to a rapidly improving trade deficit (which
is unlikely to occur quickly enough without
aggressive policy action) or a shift in the
inducement to hold VND rather than the USD,
gold or other assets (i.e. an increase in VND
deposit rates or a dramatic fall in inflation) then
VND weakness will likely be taken by locals as a
reason to increasingly prefer other stores of
wealth, and by foreigners as an increased reason
to hedge, or sell their assets. That is, as the VND
depreciates, the rate of depreciation will likely
accelerate rather than slow, unless the authorities
rapidly restore faith in the peg.

What needs to happen

As we argued in this forum last month, a number
of things need to happen to stabilise conditions.
And there is still time to stabilise things without
too much damage, if the correct medicine is
applied in a timely manner. We suggested that:

 The authorities need to stabilise the FX

market. A selective ban on imports could be
considered here, as well as more tactically
applied FX intervention. Drip feeding
reserves into the market will simply ensure
that they diminish over time, and will do little
to discourage a hoarding of dollars.
Argentina’s recent intervention activities
could offer some lessons here.

 Demand and inflation need to be curbed.

Harsh measures to control SOE expenditure
will likely need to be paramount here.

 The authorities need to demonstrate the ability

to successfully manage and absorb foreign
capital without sacrificing macro stability.

As argued, we believe that VND depreciation

dangerously complicates this task in the short term.

Richard Yetsenga

17
 Asia
Economics & Strategy abc
2 June 2008

Disclosure appendix
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in this research report: Pieter Van Der Schaft, Garry Evans, Prakriti Sofat, Richard Yetsenga, Virgil Esguerra and Dilip
Shahani

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For disclosures in respect of any company, please see the most recently published report on that company available at
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Additional disclosures
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5 All market data included in this report are dated as at close 30 May 2008, unless otherwise indicated in the report.
6 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its
Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research
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18
 Asia
Economics & Strategy abc
2 June 2008

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19
 abc

GEMs Research Team

United Arab Emirates
Multi-asset
Chavan Bhogaita
Global Head of Credit Research
Philip Poole +971 450 77695 chavanbhogaita@hsbc.com
Global Head of Emerging Markets Research
+44 20 7991 5641 philip.poole@hsbcib.com Currency
Wietse Nijenhuis Clyde Wardle
+44 20 7992 3680 wietse.nijenhuis@hsbcib.com +1 212 525 3345 clyde.wardle@us.hsbc.com
Richard Yetsenga
Economics
+852 2996 6565 richard.yetsenga@hsbc.com.hk
Latin America Daniel Hui
Javier Finkman +852 2822 4340 danielpyhui@hsbc.com.hk
+54 11 4344 8144 javier.finkman@hsbc.com.ar
Perry Kojodjojo
Ramiro D Blazquez +852 2996 6568 perrykojodjojo@hsbc.com.hk
+54 11 4348 5759 ramiro.blazquez@hsbc.com.ar
Alexandre Bassoli Fixed Income
+55 11 3847 5744 alexandre.bassoli@hsbc.com.br Pieter Van Der Schaft
Jonathan Heath +852 2822 4277 pietervanderschaft@hsbc.com.hk
+52 55 5721 2176 jonathan.heath@hsbc.com.mx Virgil Esguerra
Juan Pedro Trevino-Gutierrez +852 2822 4665 virgilesguerra@hsbc.com.hk
+52 55 5721 2179 juan.trevino@hsbc.com.mx Alejandro Mártinez-Cruz
Lorena Dominguez-Torres Debt Markets
+52 55 5721 2172 lorena.dominguez@hsbc.com.mx +52 55 5721 2380 alejandro.martinezcr@hsbc.com.mx
Marjorie Hernandez Hernan M Yellati
+1 212 525 4109 marjorie.hernandez@us.hsbc.com Debt Markets
Asia +1 212 525 6787 hernan.m.yellati@us.hsbc.com
Peter Morgan
Equity
+852 2822 4870 petermorgan@hsbc.com.hk
Qu Hongbin CEMEA
+852 2822 2025 hongbinqu@hsbc.com.hk
Europe
Frederic Neumann Will Manuel
+852 2822 4556 fredericneumann@hsbc.com.hk Head of CEMEA Company Research
Robert Prior-Wandesforde +44 20 7992 3602 will.manuel@hsbcib.com
+65 6239 0840 robert.prior-wandesforde@hsbc.com.sg Maciej Baranski
Christopher Wong +44 20 7991 6782 maciej.baranski@hsbcib.com
+852 2996 6917 christopherwong@hsbc.com.hk Anisa Redman
Janus Chan +44 20 7991 6822 anisa.redman@hsbcib.com
+852 2996 6975 januschan@hsbc.com.hk Herve Drouet
CEMEA +44 20 7991 6827 herve.drouet@hsbcib.com
Juliet Sampson Sergey Fedoseev
+44 20 7991 5651 juliet.sampson@hsbcib.com +44 20 7991 6831 sergey.fedoseev@hsbcib.com
Alexander Morozov Veronika Lyssogorskaya
+7 49 5721 1577 alexander.morozov@hsbc.com +44 20 7992 3684 veronika.lyssogorskaya@hsbcib.com
Murat Ulgen Turkey
+90 21 2366 1625 murat.ulgen@hsbc.com.tr Cenk Orcan
Simon Williams Co-Head of Turkey Equity Research
+971 4507 7614 simon.williams@hsbc.com +90 212 366 1605 cenkorcan@hsbc.com.tr
Dafydd Lewis Bulent Yurdagul
+971 4 5077 815 dafyyd.lewis@hsbcib.com Co-Head of Turkey Equity Research
Esra Erisir +90 212 366 1604 bulentyurdagul@hsbc.com.tr
+90 21 2366 1615 esra.erisir@hsbc.com.tr Levent Bayar
John Lomax +90 212 366 1617 leventbayar@hsbc.com.tr
Head of Equity Strategy, GEMs Tamer Sengun
+44 20 7992 3712 john.lomax@hsbcib.com +90 212 376 4615 tamersengun@hsbc.com.tr
Pinar Ceritoglu
Credit
+90 212 376 4613 pinarceritoglu@hsbc.com.tr
Dilip Shahani Erol Hullu
+852 2822 4520 dilipshahani@hsbc.com.hk +90 212 376 4616 erolhullu@hsbc.com.tr
Becky Liu Cagan Orsun
+852 2822 4392 beckyjliu@hsbc.com.hk +90 212 376 46 20 caganorsun@hsbc.com.tr
Devendran Mahendran Egypt
+852 2822 4521 devendran@hsbc.com.hk Alia El Mehelmy
Zhiming Zhang +20 27 396 441 aliaelmehelmy@hsbc.com
+852 2822 4523 zhimingzhang@hsbc.com.hk Wael Orban
Olga Fedatova +202 27 396 462 waelorban@hsbc.com
+44 20 7992 3707 olga.fedotova@hsbcib.com Ahmed Hafez Saad
Julia Kovach +202 27 396 469 ahmedhafezsaad@hsbc.com
+44 20 7992 3706 julia.kovach@hsbcib.com Israel
Chavan Bhogaita Avshalom Shimei
+971 4507 7695 chavanbhogaita@hsbc.com +972 3 710 1197 avshalomshimei@hsbc.com
Keerthi Angammana Yonah Weisz
Credit Strategy +972 3 710 1198 yonahweisz@hsbc.com
+44 20 79915431 keerthisri.angammana@hsbcib.com
 abc

GEMs Research Team (continued)

Equity CEMEA (continued) Gary Chiu
+852 2822 4297 garychiu@hsbc.com.hk
United Arab Emirates
Walid Khalfallah
Head of Middle East and CEMEA Financials Equity Research
+971 4 5077 458 walid.khalfallah@hsbcib.com Natural Resources (continued)
Karim Khadr Scully Tsoi
+971 4 507 7231 karim.khadr@hsbcib.com +852 2996 6620 scullytsoi@hsbc.com.hk
Kunal Bajaj Chris Chan
+971 4 507 7458 kunalbajaj@hsbc.com +852 2996 6619 chrischan@hsbc.com.hk
Arsalan Mustafa
Vishwas Katela
+971 4 507 7642 arsalanmustafa@hsbc.com
+91 22 2268 1236 vishwaskatela@hsbc.co.in
Majed Azzam
Equity Strategy
+971 4 507 7380 majed.a.azzam@hsbc.com
Garry Evans
Asia +852 2996 6916 garryevans@hsbc.com.hk
Real Estate
Steven Sun
Herald van der Linde
+852 2822 4298 stevensun@hsbc.com.hk
+852 2996 6575 heraldvanderlinde@hsbc.com.hk
Leo Li
Ashutosh Narkar
+852 2822 6919 leofli@hsbc.com.hk
+91 22 3023 1474 ashutoshnarkar@hsbc.co.in
Jacqueline Tse
Michelle Kwok
+852 2822 6602 jacquelinetse@hsbc.com.hk
+852 2996 6918 michellekwok@hsbc.com.hk
Banks Consumer Brands
Todd Dunivant Matt Marsden
Head of Banks, Asia-Pacific +852 2996 6531 mattmarsden@hsbc.com.hk
+852 2996 6599 tdunivant@hsbc.com.hk Sean Yang
York Pun +852 2822 4342 seanyang@hsbc.com.hk
+852 2822 4396 yorkkypun@hsbc.com.hk Percy Panthaki
Saumya Agarwal +91 22 2268 1240 percypanthaki@hsbc.co.in
+91 22 2268 1235 saumyaagarwal@hsbc.co.in Summer Wang
Kathy Park +852 2822 4337 summerwywang@hsbc.com.hk
+82 2 3706 8755 kathypark@kr.hsbc.com TMT
Shary Wu Steven C Pelayo
+852 2996 6585 sharywu@hsbc.com.hk +852 2822 4391 stevenpelayo@hsbc.com.hk
Katherine Lei Tse-yong Yao
+852 2996 6926 katherinelllei@hsbc.com.hk +852 2822 4397 tse-yongyao@hsbc.com.hk
Insurance Tucker Grinnan
Anubhav Adlakha +852 2822 4686 tuckergrinnan@hsbc.com.hk
+852 2996 6592 anubhavadlakha@hsbc.com.hk Walden Shing
Patricia Cheng +852 2996 6751 waldenshing@hsbc.com.hk
+852 2996 6584 patriciacheng@hsbc.com.hk Shishir Singh
Industrials +852 2822 4292 shishirkumarsingh@hsbc.com.hk
Sumeet Agrawal Rajiv Sharma
+91 22 2268 1243 sumeetagrawal@hsbcib.in +91 80 66272481 rajivsharma@hsbc.co.in
Steve Man Percy Panthaki
+852 2822 4395 steveyfman@hsbc.com.hk +91 22 2268 1240 percypanthaki@hsbc.co.in
Elvis Au-Yeung Wanli Wang
+852 2996 6555 elvisauyeung@hsbc.com.hk +8862 8725 6020 wanliwang@hsbc.com.tw
Sandeep Somani Christine Wang
+91 22 2268 1245 sandeepsomani@hsbc.co.in +8862 8725 6024 christineccwang@hsbc.com.tw
Sachin Gupta Leo Tsai
+91 22 2268 1079 sachin1gupta@hsbc.co.in +8862 8725 6022 leocytsai@hsbc.com.tw
Mark Webb Small & Mid-cap
+852 2996 6574 markwebb@hsbc.com.hk Ken Ho
Azura Shahrim +852 2996 6593 kenho@hsbc.com.hk
+852 2996 6976 azurashahrim@hsbc.com.hk Elaine Lam
Eric Lin +852 2822 4398 elainehlam@hsbc.com.hk
+852 2996 6570 ericpklin@hsbc.com.hk Jenny Wang
Healthcare +886 8725 6023 jennywang@hsbc.com.tw
Jatin Kotian Parash Jain
+91 22 2268 1638 jatin.kotian@hsbc.co.in +852 2996 6717 parashjain@hsbc.com.hk
Nam Park
+852 2996 6591 nampark@hsbc.com.hk Latin America
Steve Bae Alexandre Gartner
+852 2996 6571 jinsukbae@hsbc.com.hk Head of Brazil Equity Research
Carolyn Poon +55 11 3371 8181 alexandre.gartner@hsbc.com.br
+852 2996 6586 carolynpoon@hsbc.com.hk Victor Galliano
Banks, Small & Mid-cap, Homebuilders
Natural Resources
+1 212 525 5253 victor.galliano@us.hsbc.com
Daniel Kang
+852 2996 6669 danielkang@hsbc.com.hk Pedro Herrera
Small & Mid-cap, Consumer & Retail
Sarah Mak
+1 212 525 5126 pedro.herrera@us.hsbc.com
+852 2822 4551 sarahmak@hsbc.com.hk
Reginaldo Pereira
Steven Hong Xing Li
Electric Utilities, Independent Power Producers
+852 2996 6941 stevenhongxingli@hsbc.com.hk
+55 11 3371 8203 reginaldo.pereira@hsbc.com.br