Vietnam's Premier Faces First Confidence Vote
Comment of the Day

June 10 2013

Commentary by Eoin Treacy

Vietnam's Premier Faces First Confidence Vote

This article from Bloomberg News may be of interest to subscribers. Here is a section
While Dung, 63, is expected to pass his confidence ballot, there may be enough votes against him and a small number of senior lawmakers to send a message, said Roberto Herrera-Lim, New York-based Asia Director at the Eurasia Group. Last year, Dung was “steps away” from being pushed out, he added.

“There will be enough negative votes so that it will be seen Dung is under some sort of public admonition,” Herrera-Lim said by phone. “They are trying to send two messages: There is a government reaction to the problems that is credible, and the prime minister is being scolded.”

The confidence vote is a two-step process. Lawmakers vote to rate a leader with “high confidence,” “confidence” or “low confidence,” according to the legislature's website. A low confidence outcome from two-thirds of delegates will bring a no-confidence vote either this week or later this year when the legislature next meets, with a majority required for the dismissal of an official. Two consecutive annual ratings of low confidence will also trigger a no-confidence vote.

Eoin Treacy's view Vietnam has been off the radar for the majority of investors for the last few years not least because deteriorating governance and high inflation took a toll on sentiment. However, following a persistent devaluation from 2008, the Dong stabilised in early 2011 and remains in the 21,000 area compared to the US Dollar. The currency is the most obvious symbol of the administration's efforts to improve governance and can probably be regarded as a barometer for how serious they are in achieving their development goals.

The Vietnam stock market is the second best performer in Asia this year behind Pakistan; outperforming even Japan in local currency and US Dollar terms. The Index broke a three-year progression of lower rally highs in January and ranged above the 200-day MA until three weeks ago when it broke upwards to new recovery highs. A sustained move below 480 would be required to question medium-term potential for additional upside.

The UK listed Vietnam Opportunity Fund is denominated in British Pounds and trades at a discount to NAV of 22.93%. The fund has tended to perform in line with the Vietnamese stock market.

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