Business News: Vietnam FC Rating Lowered to BB- by Standard & Poor’s

Business News: Vietnam FC Rating Lowered to BB- by Standard & Poor’s

Vietnam FC Rating Lowered to BB- by Standard & Poor’s

Posted: 25 Dec 2010 04:51 AM PST

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By Colin Keatinge

Dec. 23 (Bloomberg) -- Vietnam had its long-term foreign currency sovereign credit rating lowered to BB- from BB by Standard & Poor’s Ratings Services.

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To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net

China Raises Interest Rates as Inflation Accelerates

Posted: 25 Dec 2010 04:49 AM PST

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By Bloomberg News

(Updates with economist comment in fourth paragraph, central bank adviser’s comment in seventh paragraph)

Dec. 25 (Bloomberg) -- China raised interest rates for the second time in just over two months after consumer prices jumped the most in 28 months and the government forecast “relatively high” inflation in the first half of 2011.

The benchmark one-year lending rate will rise by 25 basis points to 5.81 percent and the one-year deposit rate will climb by the same amount to 2.75 percent, effective tomorrow, the People’s Bank of China said in a one-sentence statement on its website today.

Bank lending and a higher-than-forecast trade surplus have pumped more cash into an economy already awash with money. Today’s rate increase may not be the last as Premier Wen Jiabao shifts the nation’s monetary policy to a tighter stance and focuses on slowing gains in property and inflation that are making it harder for families to buy homes and pay for food.

“This demonstrates how determined the government is to control inflation,” said Wang Qing, a Hong Kong-based economist with Morgan Stanley. “Interest rates on medium and long-term loans are adjusted by banks at the beginning of every year so by raising rates now, this will have a much greater tightening effect than it would have in January.”

Wang said he expects three more interest-rate adjustments of 25 basis points each in the first half of next year. Ken Peng, an economist at Citigroup Inc. in Hong Kong said today he forecasts increases totaling 100 basis points next year.

Tighter Policies

Today’s interest-rate increase is the first since Chinese leaders on Dec. 3 announced a shift to a “prudent” monetary policy from the “moderately loose” stance adopted to support the economy amid the global financial crisis.

The move is aimed at reining in inflation expectations and narrowing the gap between gains in consumer prices and savings rates, Ba Shusong, a government researcher and an adviser to the People’s Bank of China, told state television today.

The new benchmark one-year deposit rate of 2.75 percent and the five-year rate of 4.55 percent compare with inflation of 5.1 percent in November.

Concern that the government would increase interest rates to slow expansion in the world’s fastest-growing major economy spurred an 11 percent selloff in the benchmark Shanghai Composite Index of stocks in November. The index jumped 2.9 percent on Dec. 13, the biggest gain in 8 weeks, after the central bank ordered lenders to set aside more money as reserves to control liquidity rather than boosting borrowing costs.

Price Pressures

Copper fell from a record in London on Dec. 14 on concern China, the world’s largest metal consumer, will take more steps to curb inflation.

“A rate hike is not normally on the wish-list for Santa Claus but in China’s case this is a prudent move,” said Brian Jackson, a Hong Kong-based senior strategist at Royal Bank of Canada. “It is increasingly clear that using quantitative measures such as the reserve requirement ratio to rein in liquidity and credit hasn’t been enough and that adjusting the price of credit is needed to get price pressures under control.”

China is tightening after a record expansion of credit to counter the effects of the world financial crisis. The broadest measure of money supply, M2, has surged by 55 percent over the past two years and outstanding yuan-denominated loans have climbed 60 percent to 47.4 trillion yuan after the government loosened monetary policy to support the economy during the global financial crisis.

Lagging Behind

The country is lagging behind counterparts across Asia that took steps earlier to raise borrowing costs from global recession lows. Malaysia boosted its benchmark rate three times, starting in March, Taiwan began in June and South Korea in July. The PBOC last increased the benchmark one-year lending and deposit rates on Oct. 19, the first gain since 2007.

The government is taking a “very prudent approach” to boosting interest rates because of an unstable and rapidly changing global environment, central bank Governor Zhou Xiaochuan was cited as saying by the official China Daily on Dec. 17. Today’s move may indicate that policy makers now see curbing inflation a more pressing job as price increases extend beyond seasonal fluctuations in food prices.

Residence-related costs, including charges for water, electricity and rent, jumped 5.8 percent last month from a year earlier, the most in more than two years, and consumer goods prices rose 5.9 percent, the biggest gain since August 2008, according to statistics bureau data.

‘Long-term Battle’

China raised gasoline and diesel prices by as much as 4 percent on Dec. 22 to reflect higher global costs of oil. Still, the increase was less than half of the gain in crude prices over the previous month and the nation’s planning agency said it limited the rise because of the “rapid increase in overall prices.”

The nation must prepare for a “long-term battle” against price increases, Peng Sen, vice chairman of the National Development and Reform Commission, told state television on Dec. 21. The root causes of inflation have yet to be resolved, he said, citing domestic supply shortages, gains in global commodity prices and excessive liquidity.

Inflation is expected to reach 3.3 percent for the whole of this year, breaching the government’s target of 3 percent, Peng said. The commission raised its expectation of average gains in consumer prices next year to 4 percent, state television reported on Dec. 14.

‘Relatively High’ Inflation

Consumer price increases could accelerate to more than 6 percent in coming months, Ben Simpfendorfer, a Hong Kong-based economist at Royal Bank of Scotland Plc, said in a Dec 11 note. Inflation will remain “relatively high” in the first half of next year, especially the first quarter, as the impact of rising costs in October and November feeds through to the data, the NDRC said on Dec. 11.

The government has been reluctant to raise interest rates, preferring to increase the amount of deposits banks must set aside as reserves to curb liquidity that’s fueling gains in food and asset prices. The People’s Bank of China has increased the reserve ratio six times this year, including three times since November.

Policy makers are concerned that raising interest rates could “encourage hot money inflows,” Paul Cavey, a Hong Kong- based economist at Macquarie Securities Ltd. said. “Raising interest rates has far more implications” than ordering lenders to set aside more of their deposits as reserves, as it may affect the ability of local governments and companies to pay their debts.

Hot Money

PBOC adviser Ba Shusong told state television today that the government will step up regulation of capital inflows, without specifying measures that will be taken.

The nation’s foreign-exchange regulator this month published a list of companies involved in illegal currency deals including the use of fake contracts as part of its crackdown on hot money inflows, the official Xinhua news agency reported on Dec. 10.

The Ministry of Commerce said last month it is stepping up supervision of foreign investment in real estate to crack down on speculation after a 48 percent jump in overseas fund inflows to the industry in the first 11 months of the year.

Policy makers may also allow faster gains in the yuan to help curb inflation from higher prices of imported commodities, according to analysts’ forecasts. The currency, which has risen 2.85 percent since the central bank dropped its dollar peg in June as the economy rebounded from the financial crisis, can strengthen at a faster pace if gains are “controllable,” Li Daokui, a central bank adviser, said in a Dec. 3 interview.

The yuan closed 0.2 percent higher against the dollar on Dec. 24 at 6.6320.

--Li Yanping. With assistance from Sophie Leung in Hong Kong and Fan Wenxin in Shanghai. Editors: Paul Panckhurst, Nerys Avery

To contact the Bloomberg News staff on this story: Li Yanping in Beijing at yli16@bloomberg.net

To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net

Nippon Yusen to Triple Capesize Fleet Serving India

Posted: 25 Dec 2010 04:15 AM PST

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By Masumi Suga and Kiyotaka Matsuda

(Updates with share price in 10th paragraph.)

Dec. 24 (Bloomberg) -- Nippon Yusen K.K., Japan’s second- largest operator of dry-bulk ships, plans to more than triple its fleet of capesizes serving India because of demand for coal and iron ore in the world’s fastest-growing major steel market.

The shipping line expects to have 15 capesizes hauling the commodities to India by 2015, close to the fleet size currently serving China, Kazuo Ogasawara, general manager of its bulker group, said in an interview in Tokyo. The company plans to expand its total capesize fleet to 120 from 95 by 2012-2013.

Indian imports of coal may surge nearly seven-fold to 200 million metric tons a year by 2015 as the growing economy drives demand for metal and electricity, Ogasawara said. The nation’s steel consumption may also jump 14 percent next year, compared with a 3.5 percent increase in China and a decline in Japan, according the World Steel Association.

“Crude steel output in India is set to surpass the level of Japan,” Ogasawara said in a Dec. 21 interview. “In addition, electricity demand is coming in.”

The shipping line is in talks with Indian steelmakers on long-term contracts, Ogasawara said, without elaborating. It currently runs four vessels for Indian customers Tata Steel Ltd. and Tata Power Co.

India will likely use 68 million tons of steel next year, compared with 599 million tons in China, the world’s largest steel consumer, and 62 million tons in Japan, according to an Oct. 4 estimate by the World Steel Association.

New Orders?

Nippon Yusen will watch the market and the timing of port projects before deciding whether to place any new orders for ships, Ogasawara said. India needs to triple port capacity by 2020, Shipping Minister G.K. Vasan said at a conference in New Delhi on Dec. 22.

Next year, about 200 capesize bulkers will be delivered globally, and capacity may outpace demand, Ogasawara said. Rates to hire capesizes that mostly haul iron ore and coal have dived 43 percent this year to $21,219 a day, according to the Baltic Exchange in London.

Fleet expansion has driven rents lower even as demand increased. Seaborne trade in coal and iron ore to make steel and generate power will rise 10 percent this year, according to London-based Clarkson Plc, the world’s biggest shipbroker. At the same time capesize-fleet capacity will grow 23 percent.

Nippon Yusen, also Japan’s largest shipping line by sales, fell 1.4 percent to 364 yen as of the 11 a.m. trading break in Tokyo. The stock has gained 28 percent this year.

India, the third-largest iron-ore exporter, may also become a net importer, as domestic companies invest in overseas mines to secure adequate supplies, Ogasawara said. NMDC Ltd., India’s biggest iron-ore producer, plans to buy a mine in Australia, its first overseas acquisition.

India Coal

India’s Coal Minister Sriprakash Jaiswal also said this week that state-run companies will seek to buy mines in South Africa, Botswana and Mozambique to plug a domestic shortfall. He is due to visit Africa next month.

Coal India Ltd., the world’s biggest producer of the fuel, and Neyveli Lignite Corp. are among state-owned companies looking for deposits overseas. Jaiswal said local supply may fall short of demand by 83 million metric tons in the year ending March 31.

Nippon Yusen said Oct. 29 it expects a profit of 76 billion yen ($907 million) for the year ending March 31, compared with a previous forecast of 68 billion yen, following a rebound in demand for container shipments to the U.S. and Europe. Tokyo- based Mitsui O.S.K. Lines Ltd., operator of the world’s largest merchant fleet, also raised its forecast. The companies also operate car carriers, oil tankers and liquefied natural gas carriers.

--With assistance from Alistair Holloway in London. Editors: Alan Soughley, Neil Denslow

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editors responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net; Neil Denslow at ndenslow@bloomberg.net

West Africa May Use &lsquo;Legitimate Force&rsquo; in Ivory Coast

Posted: 25 Dec 2010 04:15 AM PST

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By Elisha Bala-Gbogbo

(Updates with Ecowas comment in second paragraph.)

Dec. 24 (Bloomberg) -- West African leaders urged Ivory Coast President Laurent Gbagbo to step down peacefully for President-elect Alassane Ouattara, saying “legitimate force” may be used if he fails to do so.

Presidents from 11 of the 15-member Economic Community of West African States, or Ecowas, were joined by foreign ministers of Mali, Gambia and Guinea in resolving that the call on Gbagbo to quit was “immutable,” according to a statement issued at the end of a summit today in Nigeria’s capital, Abuja.

The group “would be left with no alternative but to take other measures, including the use of legitimate force to achieve the goals of the Ivorian people,” they said in the statement.

Ivory Coast, the world’s top cocoa grower, has been roiled by violent political unrest since Gbagbo rejected the result of a Nov. 28 election won by Ouattara. Gbagbo has spurned international calls to step down as the leader.

The Central Bank of West African States has recognized Ouattara as Ivory Coast’s president, giving him control over state reserves previously governed by Gbagbo, the central bank, or BCEAO, said on its website today. The seven finance ministers of the member states except Ivory Coast backed Ouattara at a meeting in Guinea-Bissau yesterday, underlining Gbagbo’s isolation in the face of support for his rival by the United Nations, the African Union and Ecowas.

Ecowas will send a “high-level delegation” to Ivory Coast to brief Gbagbo on the latest decision of regional leaders, according to the statement in Abuja.

Political violence has left 173 people dead since Dec. 16, when security forces opened fire on Ouattara supporters protesting in the commercial capital, Abidjan, according to the UN. The political standoff began when the Constitutional Council rejected the election results and declared Gbagbo, 65, the winner. The electoral commission gave victory to Ouattara, 68.

Gbagbo’s defeat is “irrefutable” and he must step down, Philip Crowley, a U.S. State Department spokesman, said in Washington on Dec. 22.

--Editors: Steve Walsh, Charles Carter

To contact the reporter on this story: Elisha Bala-Gbogbo in Abuja at ebalagbogbo@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net.

Dim Sum Bond Top Underwriters See Sales Doubling: China Credit

Posted: 25 Dec 2010 04:15 AM PST

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By Shelley Smith

Dec. 24 (Bloomberg) -- HSBC Holdings Plc and Standard Chartered Plc, the biggest foreign underwriters of yuan bonds sold in Hong Kong, say sales will double in 2011 as demand outstrips supply and the yuan appreciates.

New issues may increase to a record 80 billion yuan ($12 billion) next year, with as much as 30 billion yuan of sales in the first quarter, according to HSBC, the No. 2 underwriter of so-called dim sum bonds. Standard Chartered, the fourth largest this year, says sales could top as much as 100 billion yuan as Moscow-based United Co. Rusal and BP Plc plan issues. Offerings in 2010 total 40.7 billion yuan, data compiled by Bloomberg show.

“We’re likely to see strong growth to around 80 billion yuan in 2011,” Sean Henderson, HSBC’s head of Asia debt syndicate, said in a telephone interview. The dim sum market has grown 10-fold since 2008 as China seeks to use the city as an international center to promote the use of the yuan beyond its borders for trade and finance.

Forecasts of currency gains spurred a 29 percent month-on- month jump in yuan deposits in Hong Kong to a high of 279.6 billion yuan in November, according to a statement from the Hong Kong Monetary Authority yesterday, creating an investor base seeking yuan-denominated securities. Bond issuers can save about 220 basis points, or 2.2 percentage point, in interest payments selling yuan bonds in Hong Kong rather than in Shanghai.

Cantonese Food

Dim sum bonds, named after the Cantonese brunch food, pay an average yield of about 1.6 percent, according to Treasury Markets Association data, which tracks 30 outstanding issues including notes sold by China Development Bank Corp. and Bank of China Ltd. The average yield paid on three- to five-year bonds sold by government-linked companies in China is 3.8 percent, according to Bank of America Merrill Lynch’s China Quasi- Government Index.

Investment-grade companies in Asia pay an average 4.76 percent to sell dollar-denominated bonds, according to JPMorgan Chase & Co.’s Asia Credit Index.

China Development Bank’s dim sum bonds due November 2013 yield 1.9 percent, according to TMA prices. The lender’s dollar- denominated bonds due in October 2014 yield 2.82 percent, according to BNP Paribas prices, while its yuan bonds due October 2013 pay 3.7 percent, according to Chinabond prices.

Bank of China, the No. 1 underwriter of dim sum bonds this year, said this week it plans to set up an index tracking the performance of the most actively traded dim sum notes, according to an e-mailed statement from the bank on Dec. 20. Nobody at Bank of China was able provide a dim sum bond forecast yesterday, said Clarina Man, a spokeswoman.

Issuer Pipeline

Haitong Securities Co.’s Hong Kong unit set up a 5 billion yuan fixed-income fund in September that invests in offshore renminbi bonds.

“The pipeline for issuers is still pretty strong,” Kong Weipeng, head of fixed-income investment at Haitong International Asset Management, said in an interview in Hong Kong on Dec. 22. “A stable appreciation would be helpful for the development for the offshore yuan bond market. In the long run people expect the yuan to appreciate.”

The yuan may rise as much as 6 percent next year against the dollar, Zhang Ming, the Beijing-based deputy chief of the International Finance Research Office of the state-backed Chinese Academy of Social Sciences, said in an interview this week. The median forecast of 21 analysts surveyed by Bloomberg is for a 5.9 percent advance to 6.28 yuan against the dollar by the end of next year.

China’s currency is the best-performing among those of the so-called BRIC economies over the past decade. The yuan has strengthened 25 percent against the dollar in the past 10 years, outperforming gains of 15 percent by the Brazilian real, 3.4 percent in India’s rupee and an 8.7 percent slide in the Russian ruble, according to data compiled by Bloomberg.

BP, Rusal

The yuan gained 0.11 percent to 6.6358 per dollar today in Shanghai, according to the China Foreign Exchange Trade System. Non-deliverable forwards show traders are betting on a 2.1 percent advance in the coming 12 months.

Rusal planned to hire banks to sell yuan-denominated bonds and conduct a sale as early as the first quarter of 2011, the company’s head of capital markets Oleg Mukhamedshin said on Dec. 17 in Moscow. A sale of 1 billion yuan would be a “reasonable” amount, he said.

BP, based in London, was considering selling bonds denominated in yuan, Gary Admans, the company’s manager of debt capital markets, said at a conference in London on Dec. 7. International Finance Corp., the World Bank’s private investment arm, aims to offer about 100 million yuan of five-year notes, Nina Shapiro, IFC’s Treasurer said Oct. 20.

Galaxy, VTB

China’s government and China Development Bank led issuance in the dim sum bond market this year, with 14.6 billion yuan of sales between them, according to data compiled by Bloomberg.

Casino operator Galaxy Entertainment Group Ltd. sold the first speculative-grade dim sum bond this month. The 1.38 billion yuan of three-year bonds were priced to yield 4.625 percent.

VTB Group, Russia’s second-largest bank, became the first company from an emerging market outside Asia to sell bonds denominated in yuan on Dec. 10. The three-year bonds were priced to yield 2.95 percent, compared with a yield of 5.9 percent for VTB’s five-year bonds in dollars, according to Bloomberg data.

Elsewhere in China’s credit markets, five-year credit- default swap contracts on the nation’s bonds fell 0.5 basis point to 67.5 basis points yesterday, CMA prices show. The contracts rose 17 basis points in November after falling in October and September. Credit-default swaps typically decline as investor confidence improves and rise as it deteriorates.

‘Demand Imbalance’

The yield on the 3.67 percent government bond due October 2020 rose 3.5 basis points yesterday to 3.83 percent, Interbank Funding Center data show. One-year interest-rate swaps, the fixed cost needed to receive the floating seven-day repurchase rate, climbed eight basis points to 3.15 percent yesterday.

“The current imbalance between demand from investors and supply of bonds out there is such that we could lead to 100 billion yuan to 150 billion yuan of issuance,” Daniel Mamadou, co-head of Asian capital markets and treasury solutions at Deutsche Bank AG, said in a telephone interview. “But all the market players have by now understood that this is going to be a process that is carefully observed and managed by both the People’s Bank of China and the Hong Kong Monetary Authority.”

Deutsche Bank, which helped arrange the first high-yield dim sum bond, is the seventh-largest underwriter.

HSBC’s forecast for new issuance is achievable should regulators let borrowers repatriate proceeds and cross-currency swap markets develop further, Henderson said.

--Editors: Hugh Chow, Tom Kohn

To contact the reporter on this story: Shelley Smith in Hong Kong at ssmith118@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

Emerging Stocks Drop for First Time in Four Days; Won Weakens

Posted: 25 Dec 2010 04:15 AM PST

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By Bloomberg News

Dec. 24 (Bloomberg) -- Emerging-market stocks fell for the first time in four days as North Korea threatened to wage a “sacred war” if attacked and concern deepened that inflation will force Asian central banks to raise interest rates.

The MSCI Emerging Markets Index retreated 0.04 percent to 1,127.31 at 12:06 p.m. in New York, trimming this week’s gain to 1.1 percent. Almost two stocks fell for every one that rose. South Korea’s Kospi Index lost 0.4 percent and the won weakened 0.2 percent against the dollar. China’s Shanghai Composite Index slipped 0.7 percent on concerns a cash shortage will make it difficult for companies to borrow for expansion.

Mexico’s IPC index fell 0.1 percent, while Chile’s IPSA index climbed 0.2 percent. Markets in Brazil were closed before the Christmas holiday.

North Korea said it will use nuclear weapons if attacked as South Korea held a military exercise with jet fighters and mobile artillery near the Demilitarized Zone that separates the countries. Investors pulled money from emerging-market equity mutual funds for the first time since May in the week ended Dec. 22 amid concern that rising commodity prices will prompt China to tighten monetary policy, according to EPFR Global.

“It won’t be a surprise if the government announces further reserve ratio or interest-rate hikes by the year end as curbing inflation is the top priority for decision makers,” said Wu Kan, a fund manager in Shanghai at Dazhong Insurance Co., which oversees $285 million.

Year-to-Date

The MSCI emerging-market gauge has advanced 14 percent this year, following a record 75 percent gain in 2009. The index is down 2.5 percent from its 2010 peak on Nov. 5. Emerging-market stock funds have taken in a record $92.5 billion this year and developing-nation bond funds had inflows of $52.5 billion, also an all-time high, according to EPFR.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries declined 1 basis point to 2.40 percentage points, according to JPMorgan Chase & Co.’s EMBI+ Index.

The Shanghai Composite index extended this year’s decline to 13 percent. China’s Finance Ministry failed to draw enough demand at a bill sale for the second time in a month, reflecting a cash squeeze sparked by seasonal demand for funds and higher reserve-requirement ratios.

Increased demand for food in Asia will help to boost prices next year, fueling faster inflation, according to Yougesh Khatri at Nomura Holdings Inc., who flagged rising costs as a “key theme” for 2011 in an interview on Bloomberg Television.

Carmakers Drop

SAIC Motor Corp. led declines among Chinese automakers after the city of Beijing said it will limit the number of new passenger vehicles. SAIC, the nation’s biggest carmaker, slumped 2.3 percent to a four-month low.

Vietnam’s VN Index slipped 0.6 percent as the country’s annual inflation rate accelerated to 11.75 percent, the fastest in 22 months.

Rising metal prices boosted shares of producers. South Africa’s AngloGold Ashanti Ltd. advanced 1.2 percent as gold gained 0.3 percent in London and platinum added 0.7 percent.

United Co. Rusal rose in Moscow as the Russian depositary receipts of the world’s biggest aluminum producer started trading. The RDRs, the first of their kind, reached $15.60 on the RTS Stock Exchange. The RTS said yesterday the receipts, which equal 10 common shares, would be listed at the equivalent of 460 rubles ($15.04).

Cencosud SA, Chile’s largest retailer by sales, rose 1.3 percent to 3,649.8 pesos and led gains among Chilean stocks as it plans to invest approximately $1 billion in 2011 in the five countries it operates. In Mexico, America Movil SAB fell 0.1 percent to 35.01 pesos after announcing yesterday an agreement with the Mexican unit of Spain’s Telefonica SA to reduce interconnection fees.

--Zhang Shidong, Michael Patterson. With assistance from Irene Shen in Shanghai, Rajhkumar K Shaaw in Mumbai and Eduardo Thomson in Santiago. Editors: Linda Shen, Brendan Walsh

To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

Vinashin May &lsquo;Jeopardize&rsquo; Vietnam Debt, Moody&rsquo;s Says

Posted: 25 Dec 2010 04:15 AM PST

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By Bloomberg News

(Updates with political context from eighth paragraph.)

Dec. 24 (Bloomberg) -- Vietnam and its state-backed companies will face greater difficulties borrowing money after reports Vietnam Shipbuilding Industry Group defaulted on a loan, according to Moody’s Investors Service.

Vinashin, as the shipbuilder is known, failed to meet an extended deadline to make a $60 million loan payment to foreign creditors yesterday, the Financial Times reported, citing unidentified people familiar with the situation. Vinashin Chairman Nguyen Ngoc Su declined to comment when contacted on his cell phone by Bloomberg News today.

“The implication of the Vinashin default is that it might not be company-specific after all,” Alan Greene, a Moody’s senior credit officer, said in a phone interview from Singapore. “The question now is why, seemingly for the sake of $60 million, has Vietnam jeopardized access to credit markets?”

Vietnam’s debt rating was cut by Standard & Poor’s yesterday by one rung to BB-, three levels below investment- grade, putting it on par with Bangladesh and Mongolia. The downgrade followed a similar move by Moody’s earlier this month, adding to pressure on a government striving to tackle inflation of 11.75 percent, a 22-month high, and a weakening currency.

Vinashin, which the government says had debt of about 86 trillion dong ($4.4 billion) as of June, asked lenders for a one-year delay on repayments on a $600 million loan, organized by Credit Suisse Group AG in 2007, Chairman Su was quoted by the Vietnam News Agency as saying Dec. 20. The first payment of $60 million was due the same day.

Vinacomin

State-owned miner Vietnam National Coal-Mineral Industries Group, or Vinacomin, was downgraded to B2 from Ba3 by Moody’s on Dec. 15, and its outlook was lowered to negative from stable by Standard & Poor’s yesterday.

Vinacomin may be downgraded again if Moody’s takes further rating action on the sovereign, Greene said. The Hanoi-based- coal miner postponed a planned sale of as much as $500 million of 10-year bonds, a person familiar with the matter said last month.

Vinashin’s debt issues may be linked to politics before the Communist Party Congress next month, according to Hanoi-based Tony Foster, managing partner at law firm Freshfields Bruckhaus Deringer, said in a telephone interview. “It’s not an economic decision, it’s something political going on,” Foster said.

Prime Minister Nguyen Tan Dung faced calls for a confidence vote at a National Assembly meeting last month as lawmakers demanded accountability for Vinashin’s deteriorating finances.

Credit Swaps

The cost to insure Vietnam’s debt against default soared to the highest level in almost 18 months on Dec. 21 after closing at 300 basis points, the most since July 15, 2009, CMA prices show. Credit-default swaps were little changed at 305 basis points as of 11:05 a.m. today in Singapore, according to Royal Bank of Scotland Group Plc prices. A basis point is 0.01 percentage point.

A lender steering committee, including representatives from Credit Suisse, Standard Chartered Plc and hedge fund Elliott Advisors Ltd., was set up to negotiate with Vinashin, a person with direct knowledge of the matter said. KPMG LLP confirmed earlier this month it had been hired as advisers by Vinashin.

Vinashin Chairman Su and Chief Executive Truong Van Tuyen also didn’t respond to faxed questions about the payment. Officials at the Ministry of Finance weren’t available for comment.

Credit Suisse’s Hong Kong-based spokesman Adam Harper declined to comment, as did Standard Chartered’s Hong Kong-based spokeswoman Joyce Li, citing client confidentiality.

Pledged foreign investment in Vietnam totaled $18.6 billion in 2010, “slightly lower” than expected, according to a statement today on the Vietnam government’s website, which cited figures from the Foreign Investment Agency.

“To allow this deadline to come and go would be a blow to Dung, definitely,” Carlyle A. Thayer, professor of politics at the Australian Defence Force Academy in Canberra, said in a telephone interview.

--Katrina Nicholas in Singapore and Nicholas Heath in Hanoi. Editors: Hugh Chow, Tom Kohn

To contact the reporters on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net; Nicholas Heath in Hanoi at nheath2@bloomberg.net

To contact the editor responsible for this story: Tom Kohn at tkohn@bloomberg.net