Vietnamese businesses get benefits from Japan’s loosened monetary policy

Apr 17th at 23:30

17-04-2013 23:30:32+07:00

The Japanese central bank has decided to loosen the monetary policy in an effort to raise the inflation rate to 2 percent, which would bring benefits to many Vietnamese businesses, according to Maybank Kim Eng Vietnam Securities Company (MBKE).

The price of PPC shares of the Pha Lai thermopower plant has been hovering around VND16,100-21,200 over the last month. PPC is believed to benefit most from the Japanese yen depreciation. The PPC price has soared by 73 percent so far this year on the expectation about the high profits the company would obtain when the yen depreciates.

The company borrowed yen27.85 billion at the interest rate of 2.45 percent to build Pha Lai No 2 plant, and incurred the big losses in recent years due to the depreciation of the Vietnam dong against the yen and the dollar.

However, things have got different. PPC has reported the profit of VND745 billion, or 36 million dollar in 2012 because of the 9.7 percent depreciation of the yen against the dong. The profit then helped make PPC’s profit increase from VND9.7 billion in 2011 to VND770 billion in 2012.

And if the yen depreciates further by another 8 percent in 2013, the profit from the exchange rate fluctuation to be obtained by PPC would be VND530 billion. If so, PPC’s post tax profit would be 89 percent higher than the profit it would obtain in case of the stable yen valuation.

The monetary policy loosening has also benefited the enterprises which import materials from Japan to make products for domestic consumption. Hoa Sen Group is one of them.

Hoa Sen imports 60-70 percent of hot rolled coil (HRC) it needs from Japan to make galvanized iron sheet, used for industrial production workshops and civil construction works.

MBKE has estimated that the post-tax profit of Hoa Sen would increase by 38 percent in 2013, reaching VND509 billion, or $24 million thanks to the lower financial costs and the increasing profit from the factory expansion.

Meanwhile, the Doan Xa Port, or DXP, a port developer, would not direct benefits from the Japanese new monetary policy, but it hopes it would benefit indirectly from the increase in the exports of Japanese invested enterprises.

A report showed that Japan makes up 50 percent of the foreign direct investment (FDI) capital in Vietnam. Since most of the products churned out by the Japanese invested enterprises in Vietnam have been exported back to Japan, DXP hopes it would get fatter profit from the services to be provided to the Japanese export enterprises.

DXP’s business performance heavily depends on the import-export activities. When China unexpectedly decided to stop importing frozen meat across the border gate in March – May 2012, Vietnamese export companies had to store meat products at the port for longer time, thus helping DXP obtain the 39 percent increase in turnover and 60 percent in profit in comparison with the same period of the last year.

Meanwhile, the Japanese yen depreciation would be not the good news for the companies which export products to Japan. MPC, the Vietnamese leading shrimp exporter, though getting payment in dollars, would still bear influences from the exchange rate fluctuation.

If Japanese importers ask to reduce the import prices to offset the yen depreciation, by 20 percent, for example, MPC’s turnover and profit in 2013 would decrease by 4 percent and 9.5 percent, respectively.

In case the sale prices remain unchanged, the export volume may decrease by 20 percent, which would make both the turnover and profit down by 4 percent.