Deposit interest rates and USD this year are forecast to be stable, while investment channels such as stocks, cryptocurrencies, gold bars... still have many unknowns.
Savings interest rates continue to be low
At the end of 2022, deposit interest rates fluctuated between 7-10%, sometimes even up to 11-12% at some small-scale banks due to temporary disruptions in liquidity when banks were on the defensive, after the SCB incident and the collapse of some banks around the world. But currently, system liquidity is abundant and even surplus. Interest rates have dropped to a record low, but deposits are still flowing strongly into the system. At the end of 2023, more than 13.5 million billion VND of idle money from people and businesses was deposited in banks, an increase of 14% compared to 2022 and the highest ever.
Abundant liquidity is good, but strong deposits flowing into the system despite the sharp drop in interest rates, according to a bank leader, is also a signal that money is not circulating into production or investment. According to this leader, the economy's credit demand cannot improve soon, so the input interest rate will remain low.
Currently, most banks list interest rates of 5-5.7% for deposits under VND1 billion, with a term of 12 months. Some units even lower interest rates to below 5% for the same common term.
Bank leaders and analysts agree that interest rates will remain low until at least mid-2024, and may then reverse slightly as credit demand increases. However, rates are unlikely to return to the high levels seen in 2022.
Low interest rates help support VN-Index
Discussing the VN-Index scenario this year, the common argument of securities companies and analysts is that the index will rise thanks to two main supporting factors: low interest rates and corporate profit prospects.
Of the two supporting factors, low interest rates are considered the most solid argument. According to Vietcombank Securities (VCBS), the general trend of the VN-Index since Covid-19 is often in line with interest rate fluctuations. With the interest rate level in the fourth quarter of 2023 falling lower than during the pandemic period, VCBS believes that this is the main factor supporting the market's valuation in 2024.
The global financial context also greatly supports the maintenance of current monetary policy. According to TPBank Securities (TPS), the US Federal Reserve (Fed) has reached the final stage of the tightening process and is waiting for the time to reverse the policy. From there, the exchange rate pressure will decrease, giving the State Bank more room to maintain the easing policy.
Lower interest rates also support corporate profits. Mirae Asset Vietnam Securities (MASVN) expects investment, production and consumption to recover further, helping to increase EPS (earnings per share) in most sectors. However, the unit noted that EPS from continuing operations of listed companies has been significantly lower than the level since the outbreak, so they are more vulnerable to global "headwinds" or any material changes.
Holding gold bars is riskier
SJC gold bars achieved good profitability last year. The price of gold bars at the end of last year reached a record of VND80 million per tael, nearly 20% higher than at the beginning of the year. Currently, each tael of gold bars is around VND78-79 million per tael, while gold rings are at an all-time high of VND64-65 million per tael.
The precious metal’s rally, according to analysts, is still supported by the forecast of at least three rate cuts by the US Federal Reserve this year. That will reduce the strength of the USD and US Treasury bond yields but in turn strengthen the strength of gold.
However, gold bars also face risks related to policy changes this year. The State Bank said it will submit to the Government a draft Decree on gold trading in the first month of this year, adjusting regulations that are no longer appropriate. The management agency is also considering eliminating the monopoly of SJC gold bars.
The deputy general director of a state-owned bank said that in the scenario where the State Bank of Vietnam adds gold bars to the market or SJC loses its monopoly on gold bars, the price of gold bars will certainly no longer be as high as tens of millions per tael compared to jewelry gold as it is now. "Accordingly, gold bar holders will suffer if they collect them at prices tens of millions higher than other types of gold on the market," she said.
Gold bars have recorded attractive returns, but a bank leader recommends: "Gold bars are not a good investment idea for non-professionals, especially when prices are rising rapidly. In addition, the factor of gold bar supply is difficult to predict, which is also a risk for those holding this type of gold."
Sharing the same view, Vice President of the Gold Business Association Mr. Huynh Minh Khanh emphasized that gold bars have a high level of volatility and higher risks compared to other types of gold on the market, so non-professionals should consider carefully when investing.
USD yields less than many other forms of investment
Holding USD is often less profitable than many other forms of investment, with an average return of 3-5% per year based on the annual appreciation of the VND/USD exchange rate.
With the State Bank's policy of anti-dollarization of the economy and flexible exchange rate control, USD holders even suffer losses if taking into account the "opportunity cost" compared to saving in VND.
Mr. Dinh Duc Quang, Managing Director of Currency Trading Division, UOB Vietnam, commented that VND deposit interest rates and interbank interest rates may continue to be low when capital demand in the economy has not recovered to a high level. This will be a factor affecting capital and foreign exchange business plans at commercial banks in the short term. In addition, increased demand for foreign currency from customers may create temporary fluctuations in supply and demand in the market.
However, forecasting for the whole year 2024, Mr. Dinh Duc Quang commented that the USD/VN exchange rate will be stable thanks to macroeconomic factors and major balances of Vietnam.
Amid stable macro factors, UOB forecasts that the USD/VND exchange rate will decline slightly as US dollar interest rates may start to be cut from mid-2024. The USD/VND exchange rate will stabilize in the range of 23,500 - 24,500 this year.
Real estate focuses on real housing needs
Since the beginning of the year, investors with projects under development have been stepping up their product sales activities to the market. Homebuyers have also gradually become more open-minded after a series of positive information about interest rates and management policies.
In a recent analysis, VinaCapital stated that the real estate market has begun to recover as some well-located projects developed by large companies have opened for sale with an absorption rate of more than 80%. This unit believes that the Government is determined to deal with the market's problems as it expects revenue from land use fees of projects approved in 2024 to increase by 70%.
According to Mr. Tran Khanh Quang - General Director of Viet An Hoa Company, products with real demand in large urban areas have and will attract good cash flow. In the context of decreasing interest rates, purchasing power is further stimulated when investors continue to launch many supportive sales policies such as promotions, discounts, low payments with extended periods.
Mr. Quang believes that the market has gathered enough factors to enter the recovery phase, the only remaining issue is the legal settlement, which is a major obstacle in many people's psychology. "I hope that around the second quarter, legal issues will be resolved more actively, which will help stabilize psychology and stimulate cash flow again," he predicted.
Will the cryptocurrency "winter" pass?
After Bitcoin surpassed $40,000, Mr. Le Sy Nguyen - Southeast Asia Manager of the world's sixth largest cryptocurrency exchange by trading volume, Bybit, said that compared to the same period last year, the market has warmed up a lot. In addition to price increases, the cryptocurrency market has recorded many projects being launched to attract new investors. Since then, capitalization has also continuously increased.
Not only Bybit representatives, market observers also believe that cryptocurrencies will soon recover next year with two main arguments being the Bitcoin "halving" event (an event that takes place every four years, reducing the rewards of miners by half) and the inflow of money through Bitcoin ETFs. Investment bank Standard Chartered projects that the world's largest cryptocurrency is likely to reach the $100,000 mark this year thanks to the two above-mentioned stimulating factors.
Despite high expectations, Bybit representatives still believe that investors need to be cautious before entering the cryptocurrency market. "The advice for investors in the new year is to do something that you really understand," Mr. Nguyen shared.
Quynh Trang - Tat Dat
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