The central exchange rate remained unchanged; the interbank VND overnight interest rate traded around 0.18%; the VN-Index decreased by 5.83 points (-0.49%) compared to the previous weekend... are the economic news to watch in the week from January 22-26.
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Overview
Data shows that the price of gold climbed to $2,125/ounce in mid-December 2023, setting the highest price since 2020. The price of gold closed the last session of 2023 at $2,030/ounce, up 13% compared to the end of 2022.
According to the World Gold Council's Gold Outlook 2024 report, in 2023, the following three events are considered to have the strongest impact on gold prices: on October 7, the Israel-Hamas war broke out; on November 14, the US inflation index was announced to decrease faster than expected, leading to the possibility that monetary policy may be loosened sooner; and on December 13, the US Federal Reserve FED sent a soft message about monetary policy.
In addition, there are three factors that strongly affect gold demand in 2023: the collapse of Silicon Valley Bank and the Hamas-Israel war; these two factors are assessed by WGC to contribute about 3-6% to the increase in gold prices in the past year; the third factor is related to the FED's message.
In addition, central banks of many countries, especially central banks of G7 countries and China, have increased their gold purchases to add to their reserves, totaling more than 800 tons of gold in the first three quarters of 2023, 14% higher than the same period last year. JP Morgan Research estimates that global central bank purchases this year will reach 950 tons.
The world gold price is forecast to reach a record high in 2024, possibly reaching $2,300/ounce. This forecast is based on the message that the FED has sent out that there will be at least three interest rate cuts next year; geopolitical instability due to Israel-Palestine tensions in the Middle East shows no signs of abating in the short term; central banks continue to buy physical gold at a steady pace.
Domestic gold prices fluctuated abnormally throughout the year and especially at the end of 2023, at times the domestic SJC gold price was nearly 20 million VND/tael higher than the world price, the difference between buying and selling prices was up to 3 million VND/tael.
According to the General Statistics Office, the gold price index in December 2023 increased by 3.98% compared to the previous month; increased by 13.13% compared to the same period last year; the average gold price in 2023 increased by 4.16%. Domestic gold prices last year fluctuated strongly due to dependence on two factors: fluctuations in the same direction as world gold prices and factors from the domestic market.
Specifically, factors from the domestic market including low savings interest rates and a difficult real estate market have led to gold becoming a safe haven for many people, creating great demand in the market. While Vietnam is not producing more SJC gold bars, the increased demand has strained the liquidity of SJC gold bars, further increasing the price of gold.
On December 27, Prime Minister Pham Minh Chinh signed Official Dispatch 1426/CD-TTg on solutions to manage the gold market. Accordingly, the Prime Minister requested the State Bank to urgently have effective solutions to manage and operate domestic gold bar prices according to market principles, not to let the gap between domestic and international gold bar prices at high levels as in the past negatively affect macroeconomic management, and report the implementation results in January 2024.
At the same time, strengthen the inspection, examination, control, and strict, comprehensive, focused, and key supervision of the gold market, the activities of gold trading enterprises, stores, agents distributing and trading gold bars, and other entities participating in the market; promptly detect loopholes and shortcomings to proactively, positively, and effectively handle them according to authority and report issues beyond authority, propose appropriate and correct handling measures to competent authorities...
The Prime Minister also assigned the State Bank to make a comprehensive assessment of the domestic gold market situation and the state management of the gold market; summarize the implementation of Decree No. 24/2012/ND-CP dated April 3, 2012 of the Government on the management of gold trading activities to promptly propose to competent authorities to consider amending and supplementing regulations, ensuring the improvement of the effectiveness and efficiency of state management tools for the gold market, developing a transparent, healthy, effective and sustainable market, to be completed in January 2024.
Domestic market summary from January 22 - January 26
Foreign exchange market: During the week from January 22 to January 26, the central exchange rate was adjusted down slightly by the State Bank of Vietnam at the beginning of the week and then increased again in the last two sessions. At the end of January 26, the central exchange rate was listed at 24,036 VND/USD, not much changed compared to the previous weekend session. The State Bank of Vietnam continued to list the spot buying rate at 23,400 VND/USD. The spot selling rate at the end of the week was listed at 25,187 VND/USD, 50 VND lower than the ceiling exchange rate.
The LNH exchange rate continued to fluctuate upward last week. At the end of the session on January 26, the LNH exchange rate closed at 24,598 VND/USD, an increase of 62 VND compared to the previous weekend session.
The exchange rate on the free market has tended to increase sharply in the past week. At the end of the session on January 26, the free exchange rate increased by 265 VND for buying and 235 VND for selling compared to the previous weekend session, trading at 25,065 VND/USD and 25,115 VND/USD.
LNH money market: From January 22 to January 26, VND LNH interest rates tended to decrease slightly in most terms. Closing on January 26, VND LNH interest rates were traded around: overnight 0.18% (-0.01 percentage points); 1 week 0.30% (unchanged); 2 weeks 0.53% (-0.05 percentage points); 1 month 1.13% (-0.13 percentage points).
USD LNH interest rates increased slightly in short terms while remaining unchanged in 1M terms. At the end of the week, January 26, USD LNH interest rates closed at: overnight 5.13% (+0.03); 1 week 5.24% (+0.03 percentage points); 2 weeks 5.30% (+0.01 percentage points) and 1 month 5.39% (unchanged).
Open market : In the open market from January 22 to January 26, in the mortgage channel, the State Bank bid for a 7-day term, with a volume of VND 5,000 billion, with interest rates at 4.0%. There was no winning volume and at the same time, there was no maturity volume from the market.
The State Bank of Vietnam continued not to offer State Bank bills for auction last week. There are no more bills circulating on the market.
Bond market: On January 24, the State Treasury successfully mobilized VND7,244 billion/VND8,500 billion of government bonds called for bid, equivalent to a winning rate of 85%. Of which, the 10-year, 20-year and 30-year terms mobilized the entire call volume, respectively VND2,000 billion, VND1,000 billion and VND1,500 billion; the 5-year term mobilized VND1,634 billion/VND2,000 billion and the 15-year term mobilized VND1,110 billion/VND2,000 billion called for bid. The winning interest rate for the 5-year term was 1.37% (-0.02 percentage points compared to the previous session), 10-year 2.23% (+0.03 percentage points), 15-year 2.43% (+0.03 percentage points), 20-year 2.65% (-0.10 percentage points) and 30-year 2.85% (unchanged).
This week, on January 31, the State Treasury offered VND10,000 billion in government bonds, of which the 5-year term offered VND3,500 billion, the 1-year and 1-year terms offered VND3,000 billion each, and the 30-year term offered VND500 billion.
The average value of Outright and Repos transactions in the secondary market last week reached VND9,440 billion/session, up from VND8,651 billion/session the previous week. Government bond yields last week tended to increase and decrease alternately. At the close of the session on January 26, the Government bond yield traded around 1-year 1.12% (-0.01 ppt); 2-year 1.14% (-0.01 ppt); 3-year 1.19% (-0.01 ppt); 5-year 1.40% (-0.02 ppt); 7-year 1.82% (-0.01 ppt); 10-year 2.28% (+0.04 ppt); 15-year 2.48% (+0.04 ppt); 30-year 3.01% (unchanged).
Stock market: From January 22 to January 26, the stock market increased and decreased alternately through the sessions. At the end of the week on January 19, VN-Index stood at 1,175.67 points, down 5.83 points (-0.49%) compared to the previous weekend; HNX-Index decreased slightly by 0.05 points (-0.02%) to 229.43 points; UPCom-Index increased slightly by 0.24 points (+0.27%) to 87.70 points.
Market liquidity dropped to VND15,700 billion/session from VND18,200 billion/session the previous week. Foreign investors net bought more than VND26 billion on all three exchanges.
International News
The US economy has received many important indicators, notably the GDP in Q4/2023 is much stronger than forecast. Specifically, the US Census Bureau announced that the country's GDP increased by 3.3% q/q in Q4/2023, slowing down compared to the 4.9% of the previous quarter, but much higher than the forecast of only 2.0%. Thus, the US economy will grow by about 2.5% in the whole year of 2023.
In terms of inflation, the US core PCE price index rose 0.2% m/m in December after rising 0.1% in the previous month, matching the experts' forecast. Compared to the same period in 2022, the core PCE increased 2.9% y/y, the lowest level since March 2021. In the labor market, the number of initial jobless claims in the US in the week ending January 20 was 214 thousand, up from 187 thousand the previous week, and surpassing the forecast of 199 thousand.
The four-week moving average was 202.5 thousand, down slightly by 1.5 thousand from the previous four weeks. US core durable goods orders rose 0.6% m/m in December, following a 0.4% increase in November and beating expectations for a 0.2% increase. However, total durable goods orders were flat (0.0% m/m) in December after rising a strong 5.5% in November, against expectations for a further 1.2% increase.
Finally, on the housing market, pending home sales in the US increased sharply by 8.3% m/m in December after a slight decrease of 0.3% in the previous month, higher than the forecast of 2.1%. New home sales in December were also positive, recording 664 thousand units, higher than the 615 thousand in November and at the same time higher than the expected 648 thousand. This week, the market is waiting for the first meeting of the year of the US Federal Reserve. The results of the meeting will be announced early on the morning of February 1, Vietnam time.
The European Central Bank (ECB) did not change its interest rate policy at its first meeting of the year, while the Eurozone also received some notable economic indicators. Regarding the ECB, in its meeting on January 26, the agency assessed that inflation in the Eurozone was in the process of cooling down, but remained high. The ECB affirmed that it would bring inflation back to its medium-term target of 2.0% in a timely manner, avoiding persistent risks to consumers and the economy.
Accordingly, the ECB decided not to change the interest rate policy at this meeting to achieve the above objectives. The refinancing rate, marginal lending rate and deposit rate at the ECB are currently at 4.5%; 4.75% and 4.0% respectively, which will be applied by this agency starting from September 20, 2023. The ECB said it will ensure that the interest rate policy is set at a sufficiently restrictive level for as long as necessary, continuing to rely on inflation and economic data to make further decisions related to the interest rate policy.
Regarding the Eurozone economy, the manufacturing PMI index in this region was at 46.6 points in January, up from 44.4 points in the previous month, and surpassing the forecast of 44.8 points.
In contrast, the Eurozone services PMI came in at 48.4 this month, down from 48.8 the previous month and against expectations of an improvement to 49.1. Finally, the Eurozone consumer confidence index came in at -16 in January, down from -15 the previous month and against expectations of an improvement to -10.
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