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Vietnam’s Ho Chi Minh City Stock Exchange continued to drop Tuesday as investors reacted to a government report indicating that inflation hit a 16-year high of 25.2 percent in May by pulling their capital out of the country. The rapid rise in the cost of living in Vietnam stems from a few sources. In addition to being fueled by an overabundance of credit, inflation has also been boosted by high oil prices, and a rise in global food prices that has taken a serious toll on basic Vietnamese staples. With rising indignation in the labor force and the capital markets beginning to respond, the government has taken notice. However, a series of government measures designed to bring down inflation have failed thus far.
The last time one of the Southeast Asian tigers flirted with financial trouble on this scale was August 1997 in Thailand. There, capital flight — first by locals, then by foreigners — triggered a cascade of financial collapses that swept around the world.
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