investing in an Asian country (to dollar or not to dollar?)

colm.ims

Hi Everyone,

I hope this is the right forum, feel free to move it if needed.

I am Irish but am living in Vietnam. I am about to invest 15.5k euro into an investment scheme in Vietnam (exact details not important). But it works on a monthly interest rate paid to me with the principal returned after 6 months.

The vietmamese currency is the Vietnam Dong but the USD is also very commonly used. The Euro is not used at all here save for travelers exchanging cash for holidays...

The investment I am making here is 20,000 USD. So I am transferring 15.5k euro from Ireland to my Vietnamese bank account to meet that cost. What I worry about is the fluctuations in currency over the next 6 months. I know that it is probably as feasible to predict the weather as currencies given the current market circumstances,, but i have a question that I hope someone can help with.

Q: Would it be safest to invest 20,000 dollars and seek the interest and principle return in dollars aswell? OR.. would it be better to invest it in Vietnamese Dong and seek the return in Dong aswell?

Bear in mind, I will be living here for the forseeable future so on a day to day basis i earn and spend Dong.. But it seems that dollars are the currency for larger transactions so I am quite unsure as to how to proceed.

The interest i will be receiving is very good but I would hate to see it and my investment severely depreciated by choosing the wrong investment currency

Any help or advice would be most appreciated

Thanks

Colm

beagle001

I would check out how safe your money is first.
I have many Vietnamese friends who wood not touch a Vietnamese bank as they have no trust in them.
I know you are spending time there but put simply you are not from Vietnam and could easily lose the lot if their banks turn sour.
Believe me you would have no hope of gettingbit back,best option got Asian banking is HSBC.
I have been going to Vietnam since 2002 and they are sittingbon there own property bubble,which will burst.
Country is v influenced by China as well who will see a property crash next year.

colm.ims

Thanks for the reply Beagle..

I should have been more specific. The actual investment is not with a bank, but i need to transfer the money first into a bank account in order to get it from Ireland. The Viet banks are actually quite stable at present although you never know in this country so i do agree with your concerns.. However, my bank is actually Asia Commercial Bank (ACB) which is not a Vietnamese owned bank so I believe my cash is safe there. On the return of my investment I will most probably transfer the money out of Vietnam just to be safe

My query however, relates more to the actual currency I should make the investment in. Should I do it in VN Dong as i earn and spend that here, or should I do it in dollars and take the risk on the 6 month currency fluctuation..

thanks again for your help

Wudyaquit

Are you sure you'll have the 2 options? It's unlikely the investment you're going into is going to take the FX risk unless it's explicitly stated. More likely that they'll pay out in VND or else the equivalent in USD at the prevailing exchange rate at maturity (in which case there's no difference from your point of view - if you want the money for spending in Vietnam you're better getting it in VND to avoid exchange fees / if you want it for investment in Europe or US, better to have it in USD).
USD has had bigger swings versus Eur over the past year, but on balance, VND would be regarded as the more volatile currency.

colm.ims

Wudyaquit, thanks for the reply.

I will be living here for up to 3 years, so I will be using the dong on a regular basis. I don't mind receiving the interest in Dong as I have lots of time to take advantage of a good exchange rate, and Vietnamese interest rates on the Dong are 12.5% for a 6 month savings account.

The principle investment however, I will be returning to Ireland (or maybe Switzerland if the banks fail) after the 6 month period. Right now transferring the euro to dollar works at approx 15,300 euro to make 20,000 USD. (1euro=1.31USD)

In your opinion, with the current problems of the euro (based on Greece, Ireland and the likelyhood of Portugal and Spain to follow)... in 6 months time do you think it likely that when I am changing the dollar back to euro (to return the initial investment) that I will gain or lose. I would hope that I gain or at least break even transferring my 20k dollars back to euro in 6 months, but I do not have enough of a grasp of the subject to make an informed decision....

What do you think?

Thanks again

Illkillya

The $ goes very far in Vietnam at the moment, it is a good time to convert to VND with this exchange rate. People talk about banks in VN being unsafe, but you have the likes of ANZ / ACB / HSBC much more trustworthy than AIB / BOI at the moment.

colm.ims

Thanks Illkillya,

The rate is good for the Dong at present and combined with the bank savings interest rates, it is especially attractive..

Can you shed any light on my dollar to euro question? Do you think I will gain or lose converting my 20,000 dollars back to Euro in 6 months?

Thanks

eire2009

colm.ims wrote: »

Thanks Illkillya,

The rate is good for the Dong at present and combined with the bank savings interest rates, it is especially attractive..

Can you shed any light on my dollar to euro question? Do you think I will gain or lose converting my 20,000 dollars back to Euro in 6 months?

Thanks

Personally I believe the euro is doomed and you will see that in the next 2-3 years when countries start defaulting on payments .. 6 months could go either way really depends on Spain and Portugal IMO but I cant see anything too positive coming out of Europe so you shouldn't be burnt too badly unless America starts printing more money..

I would rather my money in dollar than the euro for six months ..

colm.ims

Thanks mate,

you've been a good help. I was thinking of trying to hedge my euro investment with the company to receive the exact amount back in euro after 6 months so that I don't risk anything (reason being that the principle is a personal loan), but I think I will keep it in dollars and hopefully take advantage of a good ER when the time comes..

Illkillya

I'm not an expert on this stuff by any means but generally agree with eire2009 here. I recently converted a lot of money to VND and am keeping the rest in USD, spending the VND and hoping that I will never have to bring it back to €.