Inflation stalking investors’ minds

The General Statistics Office (GSO) recently released September’s consumer price index (CPI) data which revealed a sudden 1.31 per cent on-month jump, bringing the CPI’s increase this year to 6.46 per cent against December 2009.

Evidence of the CPI jump is being seen in the nation’s shops

Le Chi Phuc, Saigon Invest Fund Management Company’s investment director, said the number was a record high, fuelling concerns amongst analysts and investors about the CPI’s year-end figure.

“Inflation is now returning to be a top market focus after several months of little talk about it,” Phuc told Tri Viet Securities Company clients in Hanoi recently.

Cao Thi Diem Trang, a macro analyst with Ho Chi Minh City Securities Corporation (HSC), said  September’s CPI was the first 1 per cent increase since February, while the year-on-year number marked the first acceleration in annual prices since March.

In February this year, inflation rose 1.96 per cent on-month then gradually grew lower at between 0.2 to 0.5 per cent in the following months before picking up in September to 1.31 per cent, said a GSO source.

“The figure proved all commentators who were calling a much lower figure over the past weeks were completely wrong,” said Trang.

“Therefore, while we have clearly now seen the bottom of the inflation cycle and we do expect a more gentle rise in prices between now and the year’s end,” she added.

Phuc said investors and analysts should wait for the CPI this month to decide their next investment move. If October’s CPI number is below a 0.7 per cent on-month increase, it will be positive for the market outlook.

“It is hard to predict the 2010’s CPI, but the 8 per cent increase projection is unlikely,” said Phuc, forecasting that the country’s inflation would be between  9 and 10 per cent for this year.

HSC has revised up its year-end CPI target from 8.02 to 8.9 per cent as a result of September’s CPI.

Pham Do Chi, a former senior economist with International Monetary Fund (IMF), said the State Bank was targeting to boost credit growth and the money supply for the rest of this year to meet the 25 per cent credit growth for 2010. However, this would cause inflationary pressures.

“I am sure that the inflation rate will not be lower than a 0.85 per cent increase a month in the final quarter of this year,” Chi, currently economist with the Star Vietnam project, told participants at National Assembly’s recent workshop on “Economic Stability and Economic Outlook 2011”.