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Vietnam Inflation and Investment Strategies

Investment Department

Jul 2011

Contents

Inflation introduction1.

Vietnam Overview2.

Investment Strategies 3.

What is Inflation ?

What is Inflation ?

INFLATION

What is Inflation ?

INFLATION

What is Inflation ?

INFLATION

What is Inflation ?

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)

What is Inflation ?

Month over month

Year over year

Year to date

CPICPI

Method to measure inflation is CPI (Consumer Price Index)

What is Inflation ?

Month over month

Year over year

Year to date

CPICPI

Vietnam

1.17%

22.16%

14.61%

For Government fiscal & monetary policies

For enterprises expenses, salary policies, …

Investors real profit

Employee real income

For countries the living index

Meaning of Inflation

Contents

Inflation introduction1.

Vietnam Overview 2.

Investment Strategies 3.

4.

Vietnam CPI Basket

Vietnam CPI Basket

1

86

2

3

4

Vietnam

CPIBasket

Housing & construction10.01%

Food and foodstuffs39.93%

9

10

5

7

11

11 key

items

Vietnam CPI Basket

1

86

2

3

4

Vietnam

CPIBasket

Housing & construction10.01%

Food and foodstuffs39.93%

Transport 8.87%

Family appliances and tool 8.65%

Medicament health5.61%

Textile footgear and hat7.28%

9

Drink and cigarettes4.03%

10Communication2.73%

Education5.72%

Entertainment and tourism3.83%

Other3.34%

5

7

11

11 key

items

Vietnam CPI Basket

1

86

2

3

4

Vietnam

CPIBasket

Housing & construction10.01%

Food and foodstuffs39.93%

Transport 8.87%

Family appliances and tool 8.65%

Medicament health5.61%

Textile footgear and hat7.28%

9

Drink and cigarettes4.03%

10Communication2.73%

Education5.72%

Entertainment and tourism3.83%

Other3.34%

5

7

11

11 key

items

Vietnam Inflation Overview

Vietnam Inflation Overview

Phase: 1976 – 1981 %

Hyper inflation

1976 – 1981 ~ 60%

Initial stage after

the war Wrong economic policies

REFORMperiod

Vietnam Inflation Overview

Phase: 1981 – 1988 %

Hyper inflation

1976 – 1981 ~ 60% 1981 – 1988 ~ 514%

Initial stage after

the war Wrong economic policies

REFORMperiod

Vietnam Inflation Overview

Phase: 1988– 1992 %

Hyper inflation

1976 – 1981 ~ 60% 1981 – 1988 ~ 514% 1988 – 1992 ~ 46%

Initial stage after

the war Wrong economic policies

REFORMperiod

Vietnam CPI Overview

1992 – 2000 ~ 8.2% 2000 – 2011 ~ 9.4%

Phase: 1992 – 2011

ASEAN countries

financial crisis

Government boosted GDP

Current CPI remain at high level Tighten monetary and fiscal policies

Top ten highest inflation Countries as of Jun 2011

Vietnam CPI Overview

Reasons of Inflation

Credit growth vs CPI

Higher credit growth -> higher inflation Delay time: 5 – 8 months

1. HIGH credit growth for non manufactory industry

Reasons of Inflation

2. LOW investment efficiency

Vietnam ICOR vs CPI

Reasons of Inflation

2. LOW investment efficiency

Vietnam ICOR vs CPIVietnam ICOR vs other peers

countries

Average line

LOWER investment efficiency => HIGHER inflation

Contents

Inflation introduction1.

Vietnam Overview 2.

Investment Strategies 3.

.

Investment strategies

Vietnam

US market

CPI

CPI

current

1978

Investment strategies1978

currentVietnam

US market

CPI

CPI

Investment strategies

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 ?

1978

currentVietnam

US market

CPI

CPI

Investment strategies

Investment strategy for 15 coming years (from US experiences)

1978

currentVietnam

US market

CPI

CPI

Vietnam

US market

CPI

CPI

10ys bond yield

Investment strategy for 15 coming years (from US experiences)

1.Bonds investment ~ 184%

Investment strategies

current

Vietnam

US market

CPI

CPI

10ys bond yieldStock index

Investment strategy for 15 coming years (from US experiences)

1.Bonds investment ~ 184%

2.Stock investment ~ 580%

Investment strategies

current

Vietnam

US market

CPI

CPI

Stock index10ys bond yield Real estate

index

Investment strategy for 15 coming years (from US experiences)

1.Bonds investment ~ 184%

2.Stock investment ~ 580%

3.Real estate investment ~ 5%

Investment strategies

current

Vietnam

US market

CPI

CPI

Stock index10ys bond yield Real estate

index

Investment strategy for 15 years coming years (from US experiences)

1.Bonds investment ~ 44%

2.Stock investment ~ 580%

3.Real estate investment ~ 5%

Stock

Investment strategies

current

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