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Vietnam Inflation and
Investment Strategies
Investment Department
Jul 2011
LOGO
Contents
1.
Inflation introduction
2.
Vietnam Overview
3.
Investment Strategies
What is Inflation ?
What is Inflation ?
INFLATION
What is Inflation ?
INFLATION
What is Inflation ?
INFLATION
What is Inflation ?
INFLATION
What is Inflation ?
 In Economics, Inflation is a rise in the general
level of prices of goods and services in an
economy over a period of time
What is Inflation ?
 Method to measure inflation is CPI (Consumer
Price Index)
Month over month
CPI
Year over year
Year to date
What is Inflation ?
 Method to measure inflation is CPI (Consumer
Price Index)
Vietnam
Month over month
CPI
1.17%
Year over year
22.16%
Year to date
14.61%
Meaning of Inflation
 For Government
fiscal & monetary policies
 For enterprises
expenses, salary policies, …
 Investors
real profit
 Employee
real income
 For countries
the living index
Contents
1.
Inflation introduction
2.
Vietnam Overview
3.
Investment Strategies
4.
Vietnam CPI Basket
Vietnam CPI Basket
11 key
items
Food and foodstuffs
39.93%
Housing & construction
10.01%
1
2
11
3
Vietnam
CPI
10
4
Basket
9
5
8
7
6
Vietnam CPI Basket
11 key
items
Food and foodstuffs
39.93%
Housing & construction
10.01%
1
2
Other
3.34% 11
3
Transport
8.87%
Vietnam
Communication 10
2.73%
CPI
4 Family appliances and tool
Basket
8.65%
Entertainment and tourism 9
3.83%
5
8
Drink and cigarettes
4.03%
7
Education
5.72%
6
Textile footgear and hat
7.28%
Medicament health
5.61%
Vietnam CPI Basket
11 key
items
Food and foodstuffs
39.93%
Housing & construction
10.01%
1
2
Other
3.34% 11
3
Transport
8.87%
Vietnam
Communication 10
2.73%
CPI
4 Family appliances and tool
Basket
8.65%
Entertainment and tourism 9
3.83%
5
8
Drink and cigarettes
4.03%
7
Education
5.72%
6
Textile footgear and hat
7.28%
Medicament health
5.61%
Vietnam Inflation Overview
Vietnam Inflation Overview
Hyper inflation
Phase: 1976 – 1981
%
Initial
stage after
the war
 1976 – 1981
REFORM
period
Wrong
economic
policies
~
60%
Vietnam Inflation Overview
Hyper inflation
Phase: 1981 – 1988
%
Initial
stage after
the war
 1976 – 1981
 1981 – 1988
REFORM
period
Wrong
economic
policies
~
~
60%
514%
Vietnam Inflation Overview
Hyper inflation
Phase: 1988– 1992
%
Initial
stage after
the war
REFORM
period
Wrong
economic
policies
 1976 – 1981
 1981 – 1988
 1988 – 1992
~
~
~
60%
514%
46%
Vietnam CPI Overview
Phase: 1992 – 2011
ASEAN
countries
financial crisis
 1992 – 2000
 2000 – 2011
Government
boosted GDP
~
~
8.2%
9.4%
Vietnam CPI Overview
Top ten highest inflation Countries as of Jun 2011
 Current CPI remain at high level
 Tighten monetary and fiscal policies
Reasons of Inflation
1. HIGH credit growth for non manufactory industry
Credit growth vs CPI
Higher credit growth -> higher inflation
Delay time: 5 – 8 months
Reasons of Inflation
2. LOW investment efficiency
Vietnam ICOR vs CPI
Reasons of Inflation
2. LOW investment efficiency
Vietnam ICOR vs CPI
Vietnam ICOR vs other peers
countries
Average line
LOWER investment efficiency => HIGHER inflation
Contents
1.
Inflation introduction
2.
Vietnam Overview
3.
Investment Strategies
.
Investment strategies
US market
1978
CPI
Vietnam
CPI
current
Investment strategies
US market
1978
CPI
Vietnam
CPI
current
Investment strategies
US market
1978
CPI
Vietnam
CPI
current
Correlation between Current Vietnam
and US 1978:
- CPI was twice at its peaks within
3- 4 years
- US CPI gradually decreased
=> VN CPI also gradually decrease
in the next 15 years ?
Investment strategies
US market
1978
CPI
Vietnam
CPI
current
Investment strategy for 15 coming
years (from US experiences)
Investment strategies
US market
10ys bond yield
CPI
Vietnam
current
Investment strategy for 15 coming
years (from US experiences)
1.Bonds investment
CPI
~
184%
Investment strategies
US market
Stock index
10ys bond yield
CPI
Vietnam
CPI
current
Investment strategy for 15 coming
years (from US experiences)
1.Bonds investment ~
184%
2.Stock investment
580%
~
Investment strategies
US market
Stock index
10ys bond yield
Real estate
index
CPI
Vietnam
CPI
current
Investment strategy for 15 coming
years (from US experiences)
1. Bonds investment
~
2. Stock investment
~
3. Real estate investment ~
184%
580%
5%
Investment strategies
US market
Stock index
10ys bond yield
Real estate
index
CPI
Vietnam
CPI
current
Investment strategy for 15 years
coming years (from US experiences)
1. Bonds investment
~
44%
2. Stock investment
~
580%
3. Real estate investment ~
Stock
5%
LOGO