VIetNam money market

Instruments,Participants and Trading Process

Group member
Nguyen Nam Khanh Tran Cam Tu Nguyen Ngoc Phuong Nguyen Thi Phuong Dung

TABLE OF CONTENT
I

Overview Instruments and trading process

II

III

Participants
Q&A Critical thinking

IV

OVERVIEW
Definition: Money markets exits to transfer funds from individuals, corporations, and government units with short-term excess funds (suppliers of funds) to economic agents who have short-term needs for funds (users of funds)

OVERVIEW
Feature:

The money market instruments are liquid and can be turned quickly at
low cost. is not a well-defined place where the business istransacted as in the case of capital markets where all business is transacted ata formal place, i.e. stock exchange It is a wholesale market & the volume of funds or financial assets traded are very large Interest rate varies upon on the interplay of demand & supply SBV is integral

OVERVIEW
Function Providing an equilibrating mechanism for leveling out the short-term surpluses and deficits.

Offering a focal point for the central bank

intervention for influencing liquidity in the economy

Creating an access to the user of short-term money

to meet their requirements at a realistic price

OVERVIEW
Development of VN money market

Instruments and their trading process

Treasury Bills Interbank market Negotiable Certificate of
Treasury Bills

Deposit Commercial Paper

Bankers Acceptances
Commercial Paper

Repurchase Agreement

Treasury bills (T-bills)

Definition: Short-term debt obligations issued by the ministry of finance with the aim of covering a temporary deficit of state budget.

Treasury bills (T-bills)

Characteristics Collection and payment in Vietnam minimum value of 1,000,000 VND 3 kinds of term: 1-month, 3-month, 6-month and 9-month Treasury bills are discount treasury bills high liquidity, owned mainly by commercial banks T-bills issued in the form of book-entry treasury bonds and certificates.

n v: T ng
Thi gian S thnh vin d thu 8 22 11 6 S thnh Khi vin trng lng d thu kin 3 4 1000 4000 4000 3000 Khi lng trng thu 1000 1100 100 T l trng thu/d kin 100% 27.5% 33.3%

Thng 1 Thng 2 Thng 3 Thng 4

Thng 5
Thng 6 Tng cng

11
4 62

1
7

4000
3000 19000

50
2150

1.25%
10.75%

Kt qu u thu tn phiu 6 thng u nm 2011

Phin giao dch Phin 1 Phin 2 Phin 3

Li sut t thu 10.95-13.92 10.7 12.0 10.84 12.0

Li sut trng thu 11.0 10.95 -

Phin giao dch Phin 12 Phin 13 Phin 14

Li sut t thu 13.0 14.0 12.0 20.0 14.0 16.0

Li sut trng thu 12.0 -

Phin 4
Phin 5 Phin 6 Phin 7 Phin 8 Phin 9 Phin 10

10.60 12.0
11.20 12.5 11.6 12.1 11.8 14.0 11.1 14.0 12.0 14.0 12.5 13.0

10.70
-

Phin 15
Phin 16 Phin 17 Phin 18 Phin 19 Phin 20 Phin 21

14.0 15.5
13.5 13.6 13.0 15.40 13.2 - 13.2 13.5 13.5

Phin 11

12.8 14.5

Tnh hnh li sut cc phin u thu 6 thng u nm 2011

n v: t ng

Thi hn 364 ngy

Nm 2000 Nm 2001 Nm 2002 Qu1/2003 4.441 2.945 6.218 2.480

Thi hn khc Tng s

970

2.202

4.441

3.915

8.420

2.480

Khi lng pht hnh tn phiu kho bc ti NHNN

Ngun: Ngn hng Nh nc Vit Nam

Nm thc hin

Tn phiu kho bc S phin Khi lng trng thu (t ng)

1995 (t thng 5) 1996 1997 1998 1999 2000 2001 2002 2003 2004

4 16 37 46 45 43 46 50 51 48

243,60 823,40 2.917,50 4.020,70 3.011,60 4.441,00 3.915,00 8.410,00 15.901,00 19.465,00

2005
2006 Tng cng

60
48 498

22.120,60
22.075,10 107.344,50

Inter-bank market:

15/02/08
Over night 1-week 2-week 1-month 3-month 6-month 12-month 21.28 12.48 10.31 11.23 9.27 7.73 9.01

19/02/08
20.00 17.51 14.36 13.72 9.69 8.47 9.41

14/03/08 12/06/08
5.62 9.21 8.86 11.73 9.87 9.44 9.41 18.14 17.92 17.80 15.73 14.06 11.00 10.63

17/10/08
10.98 11.34 13.44 15.74 16.03 15.49 12.64

25/11/08
7.55 9.04 9.97 12.65 13.28 14.62 13.65

31/12/08 16/01/09 30/01/09

5.18 6.64 7.64 9.73 11.95 11.95 12.14 4.91 5.83 6.28 6.69 7.56 11.03 11.49 6.27 7.09 7.48 7.88 9.78 11.73 11.77

10

15

20

25

0
15-01-08 22-01-08 29-01-08 05-02-08 12-02-08 19-02-08 26-02-08 04-03-08 11-03-08 18-03-08 25-03-08 01-04-08

5 VNIBOR (overnight)

VNIBOR (overnight)

Term

Overnigh t

1-week

2-week

1-month

3-month

6-month

12-month

VND

6.04

6.45

7.59

7.88

9.66

8.35

Commercial paper
Definition: An unsecured short-term promissory note issued by a corporation to raise short-term cash

Commercial paper
2 types: pay unconditionally a specified amount of money to the beneficiary when there is a request or the note matures Promissory note issued by who need to borrow Draft issued by who is ready for lend

Commercial Paper
Features: An individual may not be a party to a commercial paper, although foreigners may participate as beneficiaries A commercial paper issued with a longer term requires the approval of the State Bank of Vietnam (SBV). Didnt mention about electronic forms of commercial papers Must follow the official form specified by the government Short-term maturity (< 1 year) Most banks provide the service of discounting commercial paper Not active in secondary market Usually used in international transactions

Commercial Paper
Some benefits: + Another method of payment + Legal base in buying/selling on credit Trading process: CPs are sold either directly to investors or indirectly through brokers and dealers such as investment banks or major bank subsidiaries. Selling through brokers more expensive for issuer due to underwriting costs. If not, the company must find appropriate investors and determine the discount rate on the paper. The yield: like T-bills, yields on CP are quoted on a discount basic. Compare to US: In US, CP is one of the largest (in term of dollar value outstanding) of the money market instrument. In VN, it is not because of the imperfect regulation, the lack of measuring credit rating. Maturities in US is often less than 270 days

Repurchase agreement
Definition: Agreements involving the sales of securities by one party to another with a promise to repurchase the securities at a specified date and price Features: Popular in Vietnam moneys market besides T-bills and Federal Funds A collateralize fed funds loan Maturity: overnight, some days, 1, 2, 3 weeks or 1, 2, 3, 6 months The profit from Repo is found not depend on coupon interest or interest of montage. In Viet Nam, repo is used by SBV in July 2000 although it existed on the market for a long time

Commercial Paper
Trading process

Commercial Paper
Yield: the annualized percentage difference between the initial selling price of the securities and the contracted (re)purchase price Securities can be accepted to repo

Certificate of deposit ( CD )
Definition: CD is a bank-issued time deposit that specifies an interest rate and maturity date and is negotiable in the secondary market. Function: CD is a tool for capital mobilization of banks.

Certificate of deposit (CD)

Characteristics:

First published in Vietnam on 15/02 to 10/04/2006 by

Techcombank. Denominations range from 1 mil VND to 1 bil VND or 100 USD to 100,000 USD Maturity: popularly 1, 2, 3, 6, 9, 12 months Yield: Interest rate is negotiable depending on CDs' buyers' finance status, different kinds of CDs' term and competitveness among banks.

Certificate of deposit
Trading process:

Issuing negotiable CDs with the most popular maturities and rates respectively
subject to its funding, banks sell CDs to investors. Comparation: In VN, negotiable CD is still a new product and not yet developed. However, in most developed country like US, it is one of the most efficient instruments in the money market because of their very active second market, unlike VN's weak one. It is well received and helps banks regain many of their lost deposits. Indeed, the success of negotiable CD helps bank managers focus more actively on managing the liabily side of their portfolios.

Banker's Acceptances
Definition:

Is a time draft payable to a seller of goods, with payment

guaranteed by a bank. Function: Used in international trade transactions to finance trade in goods that have yet to be shipped from a foreign exporter (seller) to a domestic importer (buyer). ( banks as a payment guarantors)

Banks Acceptances
Features:

In Vietnam, according to clause I2, article 20, Law on Credit Institutions, Bankers
acceptance is a document made by the credit institution that commits to pay the seller of the goods a promised future payment for its customer (the buyer) when the buyer fail to fulfil the agreement with the seller as specified between two parties. The buyer will then be liable and have to pay back the credit institutions the money they owed. In Vietnam, when exporting goods to other country in the world, the most popular and preferable type of payment (especially for medium and small sellers) is L/C. L/C is a special type of bankers acceptance for international trading. Uniform customs and practices relating to L/C are provided by the UCP 600 rules of International Chamber of Commerce (ICC).

Participants
State bank of Vietnam Commercial banks Non-financial institutions Non-bank institutions Broker and dealers Individuals

State bank of Vietnam

Commercial banks

Participants
Instrument Treasury bills Principal Issuer The ministry of finance Principal Investor SBV; Comm banks; Brokers and dealers; Other FIs; Corps SBV, Comm banks Brokers and dealers Other FIs, Corps Brokers and dealers Corporations Brokers and dealers; Corps; Other FIs Comm banks; Corps; Brokers and dealers

Repurchase agreement

SBV; Comm banks; Brokers and dealers; Other FIs Comm banks Other FIs; Corps Commercial banks Commercial banks

Commercial Paper Negotiable CDs Bankers acceptances

 "What is your group's opinion about the operation of interbank market in Vietnam? Give examples to illustrate your point of view".

Thanks for your attention!