Vietnam Commentary: January 2012

Portfolio Management Comments

Inflation in January increased by 1.00%, a slower rate than the 1.39% average rate of inflation growth for the past five years, mainly due to the increase in food prices (+1.02%), Housing & Construction Materials (+1.71%), Textile, Footwear & Hats (+1.97%), and Drinks & Cigarettes (+1.17%)1. The remaining categories of the CPI basket increased less than 1% or even slightly dropped (Communication -0.01%)1. The Vietnamese Government’s tightening policies initiated in the early months of last year have shown some impact. However, global commodity prices, including crude oil, are showing an uptick after reaching a peak in April 20112 raising the likelihood of higher inflation for the coming months. Moreover, given the fact that electricity and petrol prices have been pressed flat in the past several months in order to put a lid on inflation, we’re expecting that at some point in the next month or so, the government will have to allow prices of these items to increase. In fact, petrol & crude oil distributors are complaining that they are…

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