On September 19, European and Asia-Pacific stock markets, including Vietnam, increased positively after the US Federal Reserve (FED) decided to lower interest rates for the first time in four years in the early morning of the same day.
Foreign investors stop net selling
On the night of September 18 and early morning of September 19, the US stock market also skyrocketed after the FED announced a 0.5% interest rate cut, around 4.75% - 5%, but adjusted down at the end of the session due to concerns about the risk of economic recession. The USD index (DXY), a measure of the greenback's volatility against 6 major currencies, fell to around 100.7 points after the FED's decision. Some analysts predict that the USD price will continue to fall next year, when the FED continues to lower interest rates.
Mr. Nguyen Duc Khang, Head of Analysis Department - Pinetree Securities Company, commented that the most positive impact from the FED's interest rate cut is to reduce pressure on the USD/VND exchange rate, thereby helping the State Bank of Vietnam (SBV) maintain its loose monetary policy. In fact, in the past 2 months, the market has almost certainly been certain that the FED will cut interest rates. This is reflected in the world DXY index and domestic exchange rates continuously decreasing after many months of high anchoring.
"The FED's decision has a positive impact. However, investors should not expect the stock market to increase sharply, because this is not something completely new but has been expected by the market and more or less reflected in the price level" - Mr. Nguyen Duc Khang analyzed.
Positive factors for the stock market are still ahead, as the FED continues to reduce interest rates with a target of about 2.75% - 3% by the end of 2026. If the FED really acts decisively, this will be a very positive factor to support the stock market.
"At this time, it is expected that foreign capital will stop the net selling cycle of nearly 2 years and return to net buying. Recently, there have been signs that foreign capital is returning to some surrounding stock markets such as Thailand and Indonesia," Mr. Khang commented.
According to records, foreign investors have also started to return to net buying in the Vietnamese stock market for the last 4 consecutive sessions after a long period of net selling. In particular, on September 17, foreign investors net bought more than 524 billion VND and on September 19, they net bought over 471 billion VND.
Mr. Le Tu Quoc Hung, Senior Manager of Analysis Center - Rong Viet Securities Company (VDSC), said that when the FED enters the interest rate reduction cycle, the interest rate gap between currency pairs will begin to narrow. The USD will weaken relatively compared to other currencies. In other words, the pressure on other currencies will decrease, especially in developing economies like Vietnam, where foreign capital plays a significant role in investment and economic growth.
As the USD interest rate gradually cools down, it will create a favorable environment for the State Bank to maintain a supportive policy with low interest rates to help the economy maintain its potential growth rate in the current period (6% - 7%/year). Most industry groups can also expect brighter business when interest rates decrease.
The stock market is placing high hopes on the FED's interest rate cut and the upgrade roadmap to attract foreign investors back to Vietnam. Photo: LAM GIANG
Clearer path to upgrade
Another very positive news related to the stock market is that the Ministry of Finance has just issued Circular 68/2024/TT-BTC, allowing foreign institutional investors to buy stocks without having to deposit 100% of the money. Accordingly, foreign institutional investors can buy securities on the same day (T+0) and pay on the following days (T+1/T+2). This Circular will take effect from the beginning of November 2024.
According to experts, Circular 68 is an important step for the Vietnamese stock market to be considered for upgrading to emerging market status by FTSE Russell by 2025. The analysis department of Mirae Asset Securities Company (MAS) commented that the step of removing bottlenecks for foreign investors in securities transactions will help reduce financial costs and increase flexibility for investors.
Once upgraded, Vietnam's stock market can attract cash flows from large funds such as Vanguard FTSE Emerging Markets ETF. Mirae Asset experts estimate that by attracting only about 0.6% of the investment weight of large funds, Vietnam can disburse about 474 million USD. Foreign cash flows will not only come from funds using the FTSE Emerging Markets Index as a reference but also from other funds when the stock market is upgraded.
Experts from the Analysis Center - SSI Securities Company said that Circular 68 has amended 4 circulars related to foreign institutional investors being able to trade and buy shares without requiring sufficient funds (Non Pre-funding) and the roadmap for information disclosure in English. This is a step closer for the Vietnamese stock market to meet the requirements for upgrading to an emerging market by FTSE Russell.
"With the upgrade to emerging stock market, preliminary estimates show that capital flows from ETFs could reach up to 1.7 billion USD, not including capital flows from active funds. FTSE Russell estimates that total assets from active funds are 5 times higher than those from ETFs," said SSI experts.
According to Mr. Hoang Huy, a strategy analyst at Maybank Securities Company, FTSE may need 6 months or more to assess the stability of the new mechanism and consult with their investors to upgrade the Vietnamese stock market in September 2025, more optimistically in March 2025. Observing the stock markets that have undergone similar upgrades, with strong stock performance growth before and after being upgraded, many people expect a similar development to happen to the Vietnamese stock market in the next 12 months.
"In fact, foreign capital flows have partly supported the outlook with net selling value falling to 147 million USD in August 2024, only 1/4 compared to May or June 2024. It is expected that the steady progress towards upgrading the stock market will gradually attract foreign investors to return to the Vietnamese market, switching to a net buying status in the coming months," Mr. Hoang Huy emphasized.
Gold price could rise to $2,700/ounce
Oil prices rose on September 19 after the FED cut interest rates. Accordingly, Brent crude oil prices were traded around $74.47/barrel, while WTI oil prices increased to around $70.98/barrel.
The Fed’s rate cuts typically boost economic activity and energy demand, but many also see them as a sign of a weakening U.S. labor market that could slow economic growth. Markets are also watching tensions in the Middle East after a series of pagers and walkie-talkies used by the militant group Hezbollah exploded, apparently by Israeli intelligence.
Gold prices also rose to around $2,583 an ounce on September 19 after adjusting down. In the previous session, gold prices hit a record high of $2,599 an ounce. Kelvin Wong, senior market analyst for Asia-Pacific at Oanda (USA), said that gold prices are likely to reach a new high of around $2,640 - $2,700 an ounce this year.
Source: https://nld.com.vn/chung-khoan-huong-loi-nho-fed-giam-lai-suat-196240919220343425.htm
Comment (0)