Exchange rate in 2021 will fluctuate less, enterprises should not be subjective

Enterprises need to find tools and solutions to prevent exchange rate risks. Photo: ST

Will not change much

An analyst group at VNDirect Securities Joint Stock Company said that the appreciation of the VND would not only mitigate the US accusation of "currency manipulation" for Vietnam, but also stimulate investment inflows into Vietnam, reducing the burden of foreign debt payment and reducing the trade imbalance between the US and Vietnam.

The appreciation of the VND would make exports disadvantageous, and imports would benefit. However, VNDirect said that the structure of the majority of exports today had a large proportion of imported materials, so the disadvantage or benefits from the increase or decrease of the exchange rate (if any) would be not clear.

In addition, according to experts, in 2021, the State Bank (SBV) will have to manage the exchange rate more cautiously, but with abundant liquidity in the system and record high foreign reserves at present, the annual rate will not change much. In particular, according to VNDirect, even the case of the VND appreciation does not affect Vietnam's exports much, in the context that other currencies in the region also appreciate strongly against the USD, especially the Yuan (China).

Moreover, in recent years, every time the foreign currency market faces a "wave", the State Bank has announced tools and resources to manage the exchange rate in a stable direction, meeting the supply and demand of the market and helping the market to quickly stabilize. This has helped domestic import and export enterprises to benefit, avoiding exchange rate risks.

Not only that, with the stability of the exchange rate, many enterprises in 2020 have gained significant results. For example, with Minh Phu Seafood Corporation (MPC), the financial statements of this enterprise in third quarter of 2020 showed that a stable exchange rate helped Minh Phu to record loss of less than VND1 billion from exchange rate differences, while they suffered a loss of more than VND36 billion in the same period because of this expense.

In addition, many enterprises with projects with loans in foreign currencies will also reduce a lot of their financial costs thanks to the stability and lower appreciation of VND.

Plan to limit the risk

However, with the fluctuation of the USD/VND exchange rate forecasted by experts in the range of +/- 0.5%, import and export enterprises still have to be cautious and make necessary contingency plans. In particular, according to enterprises, this time is near the Lunar New Year, the peak season in import and export activities, so the supply of foreign currency may be narrowed.

Moreover, the movements of foreign currencies are all unexpected, even in the short term, they also have an impact on enterprises, especially in the context of the current pandemic and economic recession.

Talking about the proactive plan of enterprise, Mr. Ngo The Hung, Director of Thang Loi Trading Joint Stock Company, said that in order to be proactive, the enterprise had included exchange rate risks into its annual financial plans at about 3% of the total cost.

It helped them have more financial accounts needed to compensate when the exchange rate increased. If the costs were benefited, this amount would also be balanced to change as a provision for the next year. In addition, for many enterprises, the simplest proactive method is to ask customers to pay immediately instead of a few months later; or enterprises can use currency swaps, futures contracts, derivative exchange rate instruments, exchange rate insurance at banks with low cost but very convenient and safe; or import goods for reserve 1-3 months in advance to avoid risk.

Despite the influence of Covid-19, however, with efforts, many enterprises still closed their orders until the first quarter or even the second quarter of 2021, it helps enterprises have a convenient source of goods with stable prices for the first months of the year.

The representative of Thanh Cong Textile - Investment - Trading Joint Stock Company said that the enterprise had received enough orders until the end of the first quarter of 2021 and started to receive orders for the second quarter of 2021. The market with the strongest recovery was the US while Japan and South Korea were flat.

However, many enterprises also shared that due to the global pandemic, many foreign partners, even though signed contracts, finished delivery, but still "begged" for debt, sometimes up to 180 days, making them lack finance to produce the next orders and worry that exchange rate fluctuations could decrease the value of future orders.

It can be said that the risks of enterprises in exchange rate will be limited if the enterprises use the right method of prevention, the business strategy must also be forecasted in the long-term.