Vietnam’s credit ratings remain stable despite East Sea tensions

VietNamNet Bridge - Standards and Poor’s (S&P) and Moody’s, two of the world’s three most prestigious credit-rating firms, have said that tensions in the East Sea and public disorder in some localities of Vietnam had not affected Vietnam’s credit ratings.

In the last month, the Vietnamese stock market had tumbled amid the Chinese deployment of a drilling rig in the East Sea, and the domestic gold market had turned scorching-hot as people rushed to buy gold, fearing an escalation of the conflict.

And, some foreign investors voiced their concern that the Vietnamese investment environment could get worse if the Vietnam-China territorial dispute was not settled peacefully.

However, the markets returned to normal, and the international credit rating firms did not adjust the rating prospects or lower the Vietnam’s sovereign rating.

Standards and Poor’s (S&P) and Moody’s in Singapore told Thoi Bao Kinh Te Saigon that the rating would not be hurt by the temporary problem in the East Sea.

Moody’s believes that the conflict with China in the East Sea would not affect Vietnam’s rating prospects.

S&P also said that China’s recent actions were a part of a long-term Chinese strategy to gradually swallow the East Sea. S&P said that no one could say for certain how far the activity will go and how serious the tensions will become, although it thinks both the Vietnamese and Chinese governments would restrain themselves to avoid a military conflict.

Regarding the demonstrations taking place in some localities in Vietnam which led to public disorder, S&P said that this was just an extreme reaction of some people amid China’s illegal acts in the East Sea.

The credit rating firm has recognized the great efforts by the Vietnamese government to control the situation, re-establish public order and ensure security for foreign investors.

Also according to S&P, the fall of the stock index, the fleeing of securities investors and the hot gold market could inevitably occur in any upheaval. However, it believes that the markets will be fine in the long term.

The impact of the conflict in the East Sea on Vietnam’s rating prospects is believed to be not as serious as the impact caused by other factors, such as the slowdown in China’s economic growth.

Vietnam, as an open economy and one with close trade relations with China, is affected by China’s growth. Vietnam’s GDP and export growth in the immediate future could be hurt.

Thus, Vietnam’s GDP and export growth slowdown could be caused not by the East Sea tensions but by slower Chinese economic growth. This could be the reason for S&P’s decision to consider adjusting Vietnam’s rating.

Vietnamese analysts said, that with Moody’s and S&P’s reassurance, Vietnamese and foreign investors could emit a sigh of relief.

However, they warn that that the stable credit rating would only continue if the conflict in the East Sea does not continue to escalate.


credit ratings, SP