Will Vietnam's Inflation Pressures Be Under Control In Time for ETF?
June 02, 2008
by Tom Lydon
Vietnam is in the middle of an inflation crisis one hopes will improve by the time an exchange traded fund (ETF) for the country is launched.
While Market Vectors awaits the okay from the Securities and Exchange Commission (SEC) for its Vietnam ETF, the country's leaders are struggling to keep prices under control.
About 1,000 workers walked off the job at Panasonic Communications Vietnam Co., demanding higher pay to keep pace with inflation that rose 25.2% year-over-year in May, reports James Hookway for the Wall Street Journal. It's just the latest of similar protests as workers see the buying power of their wages sharply decreased.
According to government statistics, about 300 strikes took place in the first quarter. That's up from 103 in the first quarter of last year, and it's also in spite of a new labor rule that states workers can be held liable to compensate their employers if they walk off the job illegally.
Despite the problems, foreign companies are expanding their operations in the country. Last year, foreign companies applied to invest $20 billion in Vietnam - one-third more than in Thailand. This has contributed to sharply rising office rents.
Just as in the United States, inflation is weighing on the financial markets and stock prices are sliding. They've already fallen 55% since the first of the year, and economists are worried that the problem could lead to a broad economic crisis if it isn't handled correctly.