Analysts believe that the recent interest rate cut by the US Federal Reserve (Fed) will certainly have a significant impact on the outlook for the global financial market in particular and the Vietnamese stock market in the coming time.
Notably, in Vietnam, stock indices recovered with increased liquidity. At the same time, after a long period of net selling, foreign investors returned to net buying continuously last week, with a total value of thousands of billions of VND.
Scenario VN-Index surpasses 1,300 points
According to Mr. Dinh Quang Hinh, Head of Macro and Market Strategy, VNDirect Securities Corporation (VNDirect), the Fed's official start to loosen monetary policy on September 18 was a move that the market had long been waiting for, with the decision to cut the operating interest rate by 0.5 percentage points. This was a "strong" start by the Fed and also caused controversy when most economists leaned towards the scenario of cutting the operating interest rate by 0.25 percentage points right before the meeting.
"The recent interest rate cut by the US Federal Reserve (Fed) will certainly have a significant impact on the outlook for the global financial market in particular and the Vietnamese stock market in the coming time," said Mr. Hinh.
There are voices saying that the Fed's drastic interest rate cut is due to the risk of recession in the US economy. In Mr. Hinh's opinion, this perspective is not comprehensive.
With inflation lower than expected and concerns about the labor market still under control, the Fed’s 0.5% rate cut was logical. Fed Chairman Jerome Powell said of the “aggressive” rate cut: “There is a view that now is the time to support the labor market, while it is strong, not when layoffs have already started.”
According to Mr. Dinh Quang Hinh, it can be seen that, although still affirming that the US economy is still healthy, the head of the Fed seems to agree with the issues raised by experts, that is, monetary policy has a delay to take effect and with information collected from businesses as well as the slow recruitment speed, Fed officials feel it is necessary to prevent a stronger weakening of the job market.
Therefore, the 0.5% cut in the policy rate is more like a preemptive intervention by the Fed than a stopgap action when it is too late.
Along with the interest rate cut, the Fed also made some fairly consistent changes, such as lowering its forecast for the personal consumption expenditures (PCE) price index - the Fed's preferred inflation measure - to 2.3% by the end of this year, from the previous forecast of 2.6% and continuing to decrease to 2.1% by the end of 2025.
On unemployment, the Fed forecasts 4.4% by the end of this year, up from its previous forecast of 4%, and expects it to remain at that level through 2025. On economic growth, the Fed forecasts 2.1% growth this year and 2% next year, unchanged from its forecast in June.
The positive reaction of the US stock market after the Fed's move also reinforced the "soft landing" scenario of the US economy.
Domestically, the Fed's interest rate reduction trend will have a positive impact on the economy and financial and monetary markets.
The Fed's interest rate cut will support the US economy and boost consumer demand, thereby positively impacting Vietnam's export prospects to the US. It should be emphasized that the US is Vietnam's largest export market, accounting for nearly 30% of our country's total import value.
The Fed's interest rate cut also weakened the US dollar index (DXY), helping to cool down exchange rate and inflation pressures, thereby creating conditions for the State Bank to be more flexible in operating monetary policy, shifting priority to supporting system liquidity and maintaining a low interest rate environment to promote economic growth.
Open market operations (OMO) and foreign exchange reserve purchases to supply dong to the market aim to improve money supply growth, which has been very slow since the beginning of this year.
“With the above expectations, I maintain a positive view on the Vietnamese stock market in the medium term from now until the end of the year,” said Mr. Dinh Quang Hinh, Head of Macro and Market Strategy at VNDirect.
Mr. Hinh maintained a positive view on the prospects of the Vietnamese stock market in the final period of the year and the scenario of VN-Index surpassing the 1,300-point mark this year is completely feasible thanks to a looser monetary policy; business results of listed enterprises continue to improve; new progress in the story of upgrading the market.
According to Mr. Ngo Quoc Hung - Senior Research Expert, Macro and Market Strategy Department, MB Securities Joint Stock Company (MBS), regardless of whether the Fed cuts 25 or 50 basis points and the market's immediate reaction is up or down, we believe this does not keep up with the big picture.
The Fed cut not in response to some crisis like COVID-19 (2020); the global financial crisis (2007) or the Internet bubble (2001) but for a good reason. The Fed funds rate is above 5% while inflation (CPI/PCE) has fallen to around 2.5%, leaving plenty of room for rate cuts to bring rates back to "neutral".
The US stock market is at an all-time high and is still above every Wall Street strategist's 2024 year-end price target and 15.6% above the average target (S&P 500: 4,861 points) with more than 3 months to go.
“We believe that, although there are still concerns about growth, a soft landing in the US economy is still more likely and therefore there will be more interest rate cuts in the near future,” said Mr. Ngo Quoc Hung.
Experts from Vietnam Construction Securities Joint Stock Company (CSI) said that after 3 weeks of relatively gloomy trading, the market is "holding its breath" waiting day by day for the most important event that will change the global financial system, which is the Federal Open Market Committee (FOMC) meeting of the Fed.
According to CSI, the saying "Don't fight the Fed" is considered by investors as a guideline in investment decisions and the wait was worth it when the Fed started the monetary easing cycle by cutting interest rates by 0.5%.
Overall, the Vietnamese market had a relatively successful trading week last week, increasing by more than 20 points, regaining most of the important moving averages and ending a series of 3 "gloomy" weeks of adjustment.
VN-Index experienced a turbulent first session of the week when selling pressure suddenly increased, pushing the index down to nearly 1,240 points. This was also the only correction session of the week, the market quickly regained confidence after that with a breakout of nearly 20 points and maintained a streak of 4 consecutive increasing sessions.
The bright spot last week came from a significant recovery in market liquidity, including leading sectors such as banking and securities.
Foreign investors turned net buyers last week with 4 consecutive net buying sessions. This trend is expected to continue to be reinforced after the Fed began to loosen monetary policy. Closing the trading week of September 16-20, the VN-Index closed at 1,272.04 points, up 20.33 points.
Liquidity has made remarkable progress, approaching the average level of 20 trading weeks. Accumulated to the end of the trading week, the average matched liquidity on the HOSE floor reached 659 million shares (up 32.74% compared to the previous trading week), equivalent to VND 16,306 billion (up 32.18% in trading value).
Market openness had a bright week with 17/21 industry groups gaining points. Strong recovery and breakthroughs last week included industries such as: Aquaculture up 4.71%, telecommunications up 4.21%, securities up 3.37%, banking up 2.48%...
On the contrary, industry groups such as consumer goods down 2.82%, fertilizer down 0.46%, electricity down 0.21%, insurance down 0.18% are still under adjustment pressure.
Foreign investors had a net buying value of VND1,221 billion last week on the HSX. The focus of net buying by foreign investors last week was on stocks: SSI (VND666 billion), FPT (VND363 billion), TCB (VND274 billion)...
In fact, the Fed's interest rate cuts are having positive impacts on global stock markets.
World stocks rise
Overall for the week (September 16-20), the US stock market recorded a weekly increase of over 1%, with the Dow Jones, S&P 500 and Nasdaq Composite indexes increasing by 1.62%, 1.36% and 1.49% respectively.
The S&P 500 has gained 0.8% over the past three weeks, bucking September’s tradition of being the weakest month for growth due to its vulnerability to market volatility. But strategists say the pain is still ahead and could extend into the November 5 U.S. election.
Following the US stock market, European and Asian stock markets both had positive gains on September 19. However, on September 20, most major European stock markets fell, except for Spain. The pan-European STOXX 600 stock index fell a total of 1.4%. However, this index still recorded its second consecutive week of gains.
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