Hanoi (VNA) - Government bonds have recently seen strong foreign buyingdespite the facts that the dollar is expected to continue appreciating due tothe US’s plan to raise interest rates a few more times in the near future andthat Vietnam does not have incentives toattract foreign investment in its bonds.

Market observers also said the government bond market liquidity has improved agreat deal thanks to the investments from abroad.

Foreign investors bought 11 trillion VND (484.6million USD) worth of the bonds in thefirst five months of the year, according to the National Financial SupervisoryCommittee.

Data from VP Bank Securities Company shows that between June 23 and 26 foreignpurchases of government bonds on the secondary market were worth 61.647trillion VND, an increase of 34.8 percentover the previous week.

The Saigon Securities Company saidthat in the first half of the year foreigners bought government bonds worth 14.9trillion VND (656.4 million USD), an increase of 1.7trillion VND (74.9 million USD) over the same period lastyear.

The chief of a foreign-invested fund management company, who asked not to benamed, said the biggest concern for foreign investors buying government bondswas the depreciation of the dong againstthe greenback.

However, the value of the dollar had not changed much though the US centralbank has hiked rates several times.

The dollar appreciated slightly against the dong afterthe US raised the rate once in mid-June, but soon declined.

Recently the State Bank of Vietnam allowed the dong todecline slightly to 22,725 VND perdollar.

It was facilitated in this by the downward trend in inflation and the exchangerate since the beginning of this year, thus creating conditions for the centralbank to improve the foreign exchange reserves and to inject liquidity intothe market without resorting to open market operations and not puttingpressure on the exchange rate.

An executive at a major bank in HCM City said that with the many positiveaspects in the economy the dong-dollarexchange rate is likely to remain steady until the year-end unless there areunexpected extraneous factors.

To take advantage of this opportunity, he said, the Ministry of Finance isdrafting a plan with many incentives to attract foreign funds into the bondmarket.

If they are offered tax and fee breaks, foreign investors would be happy toenter the bond market, he said.-VNA