How to move a sgnificant deposit into vietnamese wong from offshore

I transfer USD direct to my USD local account with ACB.  ACB then gives me a very good rate when I transfer from my USD to dong accounts.  I don't know whether any local banks offer AUD accounts however.   I suspect you may be better having CBA do the AUD to USD trade for you and then transferring the resulting USD to a local bank but I have no experience with this.

Thanks for your reply richlv.

Do you have any idea what sort of % spread that bank takes on the official usd/dong exchange rate?  I saw the comm babk was buying IMT's at something like 18 385 when the spot rate on aud is about 19 233. That's about 4.4% spread - which i consider enormous.  It may well be that it is indeed a retail cross-rate spread through the usd and that this is a forced banking practice in vietnam ie no direct quotes or market making on other currencies locally.  Perhaps somebody knows? 

When you consider that means a $4.4k loss on 100k and that you can live for 4-6 months on that kind of cash in vietnam it kind of puts things in perspective.  It's worth shopping around.

I'm guessing you are right--it's a retail cross-rate spread in VN.  If I were you, I would contact my bank in Australia,  tell them I would like to do a larger-than-retail exchange rate trade, and ask if you (or your bank rep) can deal directly with CBA treasury in order to do an AUD to USD trade.  Then transfer the resulting USD to a bank in VN.  I have a friend who recently did this with St. George/Westpac and was quoted a 0.5% spread instead of the normal 3% retail rate spread on USD/AUD...

Sorry, I didn't directly answer your question on the spread.  I normally traded at pretty much the official rate, e.g. before the last 1% deval I was dealing USD to dong at around 20,800-20,900.

Hi Richlv,
         Ok - so what you are saying is that if you open a usd account with a viet local bank exchanges to dong will take place essentially without a spread.  That makes sense when i think about it.  It's a pegged exchange rate policy so the govt absorbs the market spread by guaranteeing and enforcing the rate to its institutional banking system - it is a ;counterparty of last resort' in a market making sense. 
         Equally, i imagine an australian bank will not be able to offer a simialr spreadless rate from aussie dollars to dong is pegged to the usd it floats against everything that floats against the dollar.  I guess your friend had st george/westpac convert aud to usd on the australian side before wiring it to vietnam rather than having the vietnam bank convert on their side.  I would guess vietnam banks would be forced to convert from aussie to dong and back to usd in a pegged system - just guessing, and that would probably be more expensive.
          The other thing you have to be careful of is that the bank you use has a treasury that lists your target bank as a direct counterparty.  If it doesn't it will use its regional counterparty which could well be in singapore or hong kong which will then intermmediate with a set of charges (that can even be % based rather than fixed and are often significant, but not as significant as the primary market spread).  This counterparty intermmediation can even involve more than one bank and becomes an intermmediation chain.  That's my understanding anyway, and also that since deregulation there is no brokerage principle of best execution duty involved so a retail bank dealer desk can just send it any way it wants and all the spreads and fees just get stuck straight to you.
           I would be happy with 0.5% spreads for convenience of execution but it is hard for me to shop around the aussie banking system apart from my current banking relationship as i have been an expat for quite some time and no longer have an address there.  I'll check what the commbank to commbank arrangement would be.  They should be able to be reasonably efficient as they have a direct presence in vietnam domestically which reduces the liquidity risk component of spread in that currency pair.  Whether thats how banks choose to behave is another question of course.

Best,

Mark

ps I assume from the context that your friend was transferring a significant sum of money also.  Do you think it is becoming reasonably common for expats to put significant sums (eg >100k usd) on deposit there without worrying nights?

Hi Mark,

Everything you wrote in the first two paragraphs is exactly how I understand the situation; it's a pegged exchange rate system here which by design favors any USD/VND transactions--particularly because the govt would like to encourage any inflows of foreign currency.

And, yes, that is a good point on the direct counterparty, although if it is only a correspondent relationship, i.e. the AU to VN bank transaction is simply a USD transfer with no currency risk, the correspondent banks normally do not levy any excessive charges.  (But probably best to check in advance).  And, yes, commbank to commbank SHOULD be the cheapest, most frictionless way to do the transfer.   

I'm not sure it's common for large amounts to be put on deposit but I wouldn't call it uncommon either.  I'm well acquainted with people who have transferred quite large sums from time to time (USD 200k+) for property transactions and left the funds on deposit until completion, which could be a few months in advance.  So far, touch wood, no problems.

Best,
Richard

Hi Richard,
           Yhanks for your on-the-ground responses Richard - i genuinely appreciate it.
           I'm considering stretching the term structure from a few months to a couple of years, then switching into property at that time.  My basic reasoning is that economies like vietnam are facing significantly reduced imported inflation due to the global debt deflation.  I think bank rates have been slow to reduce to this new trend and there is a short time scale opportunity to lock in cash on deposit for 10% in a 5% inflation regime - i think that's a good example of markets not reacting quickly enough to a change in an econometric trend (rear view mirror bias).  I also can't see how the entire western currency block is not going to devalue against the emerging world.  The worst thing to have right now is a 'mature mortgage market combined with historically low and contained inflation rates'.  That's central bank speak for 'baby boomer ponzi scheme nearing exhaustion'.  Since my labour sector in london basically does not exist any more its a good time to pull out to vietnam and build again.  I am interested in the consnsus view on just how serious a security of deposit concern might be of course.  Economically, i think 10% risk free with declining inflation and a crashing property market looks pretty good. I think the well-educated risk-rational component of generation Jones in the first world is basically going to be victimised economically as a policy outcome for the rest of their years - they sure have for the last 15.  Please pardon my bluntness, 15 years as an expat aussie in london will do that and more to a guy.  ) 

Best,

Mark

ps How long have you been over there?  Where are you based?

Hi Richard,
           It's also occurred to me that there may ba a serious aymnetry in the spread across counterparty or correspondent banks in a currency pair that is pegged via crossing to a third and floats on the other, incoming leg.  I intend to call the vietnamese commonwealth bank treasury function (if there is one) and get an indicative quote from that side as well. 
           I also wonder whether there is any kind of fx brokerage or market maker outside the institutional banking system in vietnam?  One of my early musings was whether any of the money changers had evolved into something regulated enough to be described as a brokerage service.

I will report back my findings to the forum.  Retail banks may not be very happy with me but house-hunting aussies, canadians etc might think i am a bit of alright. 

Best,

Mark

Hi Mark,

Sorry for the delay in replying, just tied up with this and that...

Look, I think your reasoning is absolutely sound in terms of the disconnect between the expected inflation rate and the bond market yields.  You know how markets are--they get a fixed idea about how things should be and take a long time to change that, even in the face of new facts.  I did the same trade in Indonesia 6-7 years ago or so when no one trusted the currency but the macro situation was obviously improving dramatically.  Locked in an 11%+ yield, now 4.5%...  I don't see why VN should be much different.  And, yes, it's hard to see anything changing in the West for the better...quite the contrary really.  But this is probably a longer form conversation worth having over a good glass of Australian red some day.

I can't comment with any degree of authority on the security of deposit here.  I don't believe it is an issue in the bigger banks here but I would stick to those.  For what it's worth, an Aussie fund manager out of Singapore told me Military Bank looks very strong.  We use ACB but haven't had any longer term deposits there.

As far as fx brokerage, there seems to be a thriving unofficial currency market where the rates are 1-2% better than the official quote.  You'd have to ask a real local or longer term resident how it works however. 

I've been here for a couple of years on and off, based in Hoi An.  Good place--

Hi Richard,
           Yes, i saw that Indo move also but was too young to take advantage of it - you kind of have to be there to do it and that meant giving up my career at that time.  Of course, now 'career' is a verb in the past tense for any highly-skilled expat based in britain.    Plus ca change.
           I can report back that unless you are a particularly generous type that the commonwealth bank might not be a great option.  It's essentially a marketing strategy to exchange your AUD $ at about 18.6k with spread losses from the current crossed peg at about 19.3k as per my earler email - no treasury booked trade available for larger trades as i understand it.  They'll waive their $22 dollar service charge for the IMT though - nothing quite like an institutionalised, oligarchical, deregulated industry structure when it comes to 'competitive commercial behaviour' is there?
           I am presently investigating the oanda.com option or similar for crossing AUD to USD and then wiring out to a direct recipient bank in vietnam.  That's probably the best arrangement i can come up with as the commonwealth is not passing on the competitive gains of acquicistion of a domestic counterparty.  Sheez, it's not even an open-market transaction when you are your own counterparty - it's an internally funded trade, settled via treasury reserves.  Admittedly, there is asymnetry on the reserves balance but the domestic counterparty has access to the domestic bid-ask spread and liquidity structure on AUD to wong to offset that, and that market structure has the reverse asymnetry as it is seeking hard foreign tender.  Yes, i am a big fan of banks, huge.
           I am not surprised to hear your comment about Military Bank.  The bottom line when you are dealing with emerging economies is that you make your money in the non-insured segment of the primary-list banking sector (often, you don't even have access to regular fixed income and monetary instruments in the insured segment, reserved to citizens) because that's where the lack of access to capital on deposit forces the term structure up at the short end.  In terms of deposit security in the absence of insurance, you bank where the govt banks to support some pet sector.  I bet Military Bank gets a lot of govt deposit in Vietnam to support military sector spending.  In the phils, a lot of rural province politico cash is in the LandBank credit co-op i beleive.  Govts tend not to let their own deposit-takers fail - informal prudential macro-supervision, bamboo-style?
          If you've spent time in Indo and Vietnam may i pick your brain with a further local knowledge quesion?  I'm an aussie ex-chartered engineer with a working background in global markets technology, applied and mathematical finance.  Any scope in Indo in oil and gas or Viet for that sort of skillset to your knowledge.
           Actually, I'd love to do Indo but i can't justify it at the present term structure - i'd have to have a job.  You can still stick $150k into vietnam on a 3 year term deposit and basically live off it - well, get by off it.  As one of those risk-rational generation joneser's i'm thumbing my nose at baby boomers and their ponzi-finance plots and schemes (debt-scamming the kids riotously).  When i saw the aussie university sector bloat out to american and british scale 15 years ago i knew the fix was in.  I've been a saver against the ponzi crisis ever since.  Sadly, you have to save some before you can slip the shackles and you have to take the currency hits along the way - got the deep red welts nearest my heart to show all. 

Best,

Mark

ps I'd be real happy to hook up over a decent glass of aussie red at some time.  Actually, i'll chip in a bottle for the global baby boomer trust and we can scam 'em back a little by drinking it quickly before they leverage it, the american govt provides an implicit guarantee over that leverage, the global banking system constructs a collaterlised pass-through structure with maturity and seniority tranches, and generation jones's funds the issue with their pension contributions and insurance policy premiums.  hee hee

Hi Mark,

As I understand, you want to transfer money in AUD to Viet Nam and  open term deposit in the bank? or you'll transfer by bank, then withdraw and invest in other currencies or buy gold, security...? And do you care to transfer back this money overseas in future?

Actually if you want to transfer in foreign currency and open term deposit there, you should set up personal account in foreign bank that don't have any credit fee like local bank. And you can negotiate the best foreign exchange rate with them. In case you transfer in AUD and want to keep term deposit in AUD, beside Comment Wealth, you can consider to choose ANZ or Standard Chartered Bank. As I know foreign bank especially Standard Chartered Bank will have fee when you want to cash withdraw in foreign currency only, not for VND and other services. Beside that in foreign banks have deal currency, you can open term deposit in USD/ AUD to earn highest interest rate.

In case you transfer fund to Vietnam, then convert to VND to invest some places, pls make sure you chose the right bank and right account so that they can record source of fund for you, then you can transfer back overseas in future after investment.

Hope some info can help you a little.

Trang Nguyen

I was thinking doing term deposit too. Should have done it last year when $1 Cdn would have got me $22,000 Dong. Now it's $20,000 and the Cdn is predicted to go down even more relative to the USD. Canada is also due for a housing bubble pop. So might pop some Cdn dollars in there convert it to Dong and wait for the Cdn dollar to drop again so I get a double bonus of interest + currency profit.

I think interest rate in Vietnam will also go down as they've somewhat got it under control. Oh inflation is 6.69% so if you're getting 10% interest that's awesome!

Thanks for your reply Trang.

Yes, i now understand that fees are very variable between dong and foreign currency accounts and between domestic and international bank retail offerings.  I also understand that if you are trying to move funds back out of the country a very strict audit trail of the source of local currency funds is required.

Actually, i am considering being a long-term investor in vietnam.  I am not convinced that an cost-effective exit strategy exists from the vietnamese monetary system.  Of course, if you place a macro-bet on the currency and you win then the fact that getting it back out is pretty expensive and takes attention to detail as above is probably not a major issue.  I am considering vietnam as a long-term country option so that is not my goal at this point.  My goal is to provide for my in-country needs.

Thanks for taking the time to reply also - i appreciate it.

Best,

Mark