State Bank of Vietnam may net withdraw $6.35 bln in ongoing streak

The State Bank of Vietnam will net withdraw an estimated VND100-150 trillion ($6.35 billion) in the ongoing T-bill sales streak that started on Monday amidst the weakening of the dong.

Analysts with BIDV Securities (BSC) said that T-bill issuance was a normal operation by a central bank that did not indicate a reversal of its monetary policy. In the 2018-2023 period, the SBV conducted this operation several times a year, they noted.

In five consecutive days until Friday, the SBV sold 28-day T-bills for a combined VND75 trillion ($3.17 billion), with winning rates at 1.38-1.4% per annum.

The new T-bill sale tranche is aimed at slowing down the rising USD/VND which is driven by the large gap between USD- and VND-denominated interest rates, the strengthening of the U.S. dollar, and the Fed signaling postponement of rate cuts to the second quarter of this year, the analysts said in a note.

They said that while T-bills was a normal operation by a central bank, it would impact the local stock market in dependence of its volume.

“With a net withdrawing value of below VND100 trillion ($4.23 billion), there is a 33.33% chance that the VN-Index, which represents the Ho Chi Minh Stock Exchange, will fall in the corresponding period,” the analysts said.

If the net withdrawal value surpasses VND100 trillion, the possibility of a VN-Index decline will double to 66.67%, they reckoned.

In 2023, the SBV used this regulating tool twice and the VN-Index fell in both occasions.

In 27 days ending March 2, the net withdrawing value was VND239.16 trillion ($10.12 billion) and the index dropped 5.19%. Later in 47 days ending November 8, a VND194.65 trillion net withdrawal resulted in a 15.22% decline of the VN-Index.