Which investment channel to choose when savings interest rates hit rock bottom?

Interest rates are low, but other channels such as stocks or real estate are not very attractive options in the face of macroeconomic uncertainties.

Savings

Recently, banks have continuously lowered deposit interest rates. A survey in early October by VnExpress showed that 12-month term interest rates at some major banks have fallen below 5.5% per year, lower than during the Covid-19 period.

According to Mr. Nguyen The Minh, Director of Analysis at Yuanta Securities Company, a number of investors have shifted their deposits to channels with higher profitability, such as stocks. However, the "lesson" of the second half of 2022 - stocks plummeting or the speculative real estate "bubble" deflating too quickly - has prevented the shift from being too massive.

"Investors may only transfer part of their savings to stock investment, because they are worried about going all-in and encountering risks like at the end of 2022," said Mr. Nguyen The Minh. This may be the reason why savings, despite low interest rates, are still the investment channel chosen by many people.

In addition, according to Mr. Pham Hoang Quang Kiet - Deputy Head of Research and Analysis Department at FIDT Investment Consulting and Asset Management Company, savings interest rates have tended to hit bottom with the current developments of the economy.

The room for interest rate reduction at this time is not high because the State Bank has difficulty maintaining excess liquidity when the exchange rate is under pressure. Credit in the last quarter of the year also often increases rapidly, making it difficult for banks to further reduce interest rates. Along with the application of the short-term capital mobilization ratio for new medium and long-term loans, according to Mr. Kiet's forecast, mobilization interest rates will remain stable from now until the end of the first quarter of next year.

Stock

Since the beginning of 2023, VN-Index has increased by more than 14%, however, the market's performance is not an upward trend.

The HoSE index rose sharply in the first month of the year and then leveled off, moving sideways until the end of April. Three months later, the VN-Index jumped more than 20%, from 1,035 to nearly 1,250 points. However, the short-term peak did not last long. The HoSE index hit 1,250 points for the second time in September and then corrected to nearly 1,100 points, losing more than 11% in just over a month.

One difference from the upswing in 2021 is market sentiment.

Interest rates and stocks are considered to move in opposite directions when interest rates increase, stocks decrease and vice versa. However, in the current period when interest rates are continuously falling, stocks have not changed dramatically. Although at times the VN-Index recorded an increase of more than 20%, cash flow is still quite cautious.

According to experts, there are still many unpredictable factors in the macro situation, along with "lessons" from the deep decline of the market in the second half of 2022 with many similarities to the current context, causing investors to no longer "all-in" into a high-risk channel like stocks.

Trading on the floor of a securities company in District 1, Ho Chi Minh City in February 2022. Photo: Quynh Tran — Trading on the floor of a securities company in District 1, Ho Chi Minh City in February 2022. Photo: *Quynh Tran*

Ms. Nguyen Thi Hoai Thu - Director of Investment at VinaCapital - said that the market will continue to fluctuate in the short term, which is also "normal and understandable" because the VN-Index has had a good growth rate for a long time. According to experts from VinaCapital, long-term investors should not worry because in the long term, stocks will perform positively with potential for profit growth and attractive valuations.

However, this unit also noted that the market next year may still have many risks when the macro situation has many uncertain factors, the possibility of recession in major economies, the Fed continues to maintain a tight monetary policy or geopolitical tensions. Domestically, issues of corporate bond maturity, real estate needs more time to recover, inflation or exchange rate pressure will be factors that need to be closely monitored.

From a more positive perspective, Mr. Quan Trong Thanh - Director of Research and Analysis of Maybank Investment Bank Vietnam (MSVN), said that the stock market in the next 6 months may have many similarities compared to 2013 when the economic context is quite similar such as frozen real estate, bad debt in banks tends to increase.

In fact, in 2013, the VN-Index increased sharply in the first half of the year, then had a fairly large correction. However, thanks to monetary easing, bad debt reduction and other management policies, the market welcomed a wave of growth again in the last months of the year.

MSVN believes that the stock market will recover similarly in the coming time, because the current Vietnamese economy has many more positive conditions than in 2013.

Real estate

According to Mr. Tran Khanh Quang - General Director of Viet An Hoa Company, the real estate market is in the early stages of recovery. The government's legal clearance for projects is a good sign, but it will take more time to completely clear the bottlenecks. Besides, bank interest rates have cooled down and there is a large room for credit growth, but banks are still hesitant to lend for real estate.

Recently, some investors have started to reopen for sale. However, Mr. Quang said that this is just a market exploration step. On the customer side, they have started to participate in this channel but only prefer segments with real demand and central locations. Both sides create a "compression" in investment. Therefore, the last months of the year may see seasonal factors that help support the market.

However, at this stage, Mr. Quang noted that not everyone is suitable to invest in real estate. This expert commented that there are two groups of people who can consider participating.

The first are those who have real estate needs, the desire to own real estate arising from population growth, marriage and migration, especially in large cities. In the context of sharp declines in real estate prices, interest rates are cooling down and this group is also more likely to be given priority by banks for loans, this is a good time for them to buy a satisfactory product.

Second are long-term investors who survived the recent crisis. This group has the experience to choose products, negotiate prices and find ways to access capital. With the characteristic of using high leverage ratios, in the context of falling interest rates, long-term investors are more likely to make profits than in the previous period.

Mr. Quang advises new investors to consider and research carefully before investing. Currently, real estate prices are falling sharply, but to fully understand a product, buyers need to have a lot of knowledge and skills. According to him, new investors should avoid properties with unclear legal status, avoid areas where they lack information and are located too far from major cities.

Gold and USD

Domestic gold prices have been on an upward trend for the past two months, increasing by a total of VND2 million per tael. SJC gold has maintained a selling price of around VND69 million per tael since mid-September.

Similarly, the US dollar exchange rate in the banking and free markets recently reached a 9-month high, around 24,000-24,500 VND per 1 USD.

However, according to Mr. Nguyen The Minh, the greenback's rise may only be short-term. "People are worried about the exchange rate, but the USD will hardly increase as hotly as in 2022," commented the analysis director of Yuanta Securities Company.

Last year, the exchange rate "surged" in the third quarter when the bank USD price peaked, reaching nearly 24,900 VND. The bank exchange rate increased by nearly 8.5% compared to the beginning of the year, before cooling down in the last month of the year. The hot increase in the exchange rate in 2022 occurred after the State Bank allowed the spot exchange rate band to be widened by 2%, in the face of unpredictable international developments when the trend of central banks around the world continued to tighten monetary policy.

Regarding the recent increase in the greenback, Mr. Minh said that it was due to the short-term increase in inflation. The US general and core CPI in August increased by 3.7% and 4.3% respectively compared to the same period in 2022, higher than the increase of 3.2% and 4.2% in the previous month. In contrast, retail sales maintained a positive growth rate. This has helped the DXY index maintain its strength.

According to this expert, the medium- and long-term outlook for the USD remains bearish, as the greenback is "rotating" quite a bit according to the Fed's policy trend. The continuous increase in interest rates since 2022 is gradually reaching its peak and may then go sideways or decrease. Monetary policy may loosen again when inflation gradually cools down.

According to Mr. Pham Hoang Quang Kiet, in terms of trends, foreign currencies and gold are contrasting. In the medium term, with US interest rates at historical peaks, a downward trend in the next two years is more feasible. This will be a factor supporting gold prices in the coming time.

The USD exchange rate is at a level where the State Bank may regulate, so there is not much room for the exchange rate to increase. Gold is still a defensive channel and the average growth rate of domestic gold has not exceeded 9% over the past 10 years, so this expert does not recommend increasing the proportion to more than 10% of total assets.

Minh Son - Tat Dat

Source link