Fed cuts interest rates deeply, good news for Vietnamese businesses?

Vietnam's financial market is expected to be positively impacted by the Fed's decision to cut interest rates when there is more space to operate monetary policy.

According to Mr. Suan Teck Kin, Director of Global Market and Economic Research, UOB Bank (Singapore), the Fed's latest decision was a surprise compared to UOB's forecast of a 0.25% interest rate cut scenario in the context of a relatively stable economy and cooling inflation.

Following the September Federal Open Market Committee (FOMC) meeting, UOB expects the Fed to continue its rate-cutting cycle in the remaining meetings of 2024. UOB forecasts the Fed to cut by 50 basis points in the remainder of 2024 and expects another 100 basis points in 2025.

Assessing the impact of the Fed's interest rate cut on Vietnam's financial market, Mr. Suan Teck Kin commented that despite the impact of the recent storm and the significant recovery of the VND exchange rate since July, UOB still expects the State Bank to maintain key policy interest rates for the rest of 2024 due to concerns about inflation risks.

The headline CPI rose 4% year-on-year in August 2024, just short of the 4.5% target. Inflationary pressures could intensify following disruptions to agricultural output, as food accounts for 34% of the CPI.

"The SBV is likely to adopt a more targeted approach to support affected individuals and businesses in their region, rather than deploying a broad nationwide tool such as cutting interest rates. Therefore, we expect the SBV to maintain the refinancing rate at the current 4.5%, while focusing on facilitating credit growth and other support measures," said Mr. Suan Teck Kin...

Dragon Capital experts said that the Fed's decision has had a clear positive impact on Vietnam's monetary policy. First, the interest rate cut helps reduce pressure on the exchange rate. The foreign exchange rate is currently trading at 24,650 VND/USD and the VND has increased by more than 3% compared to 2 months ago.

In addition, the Fed's interest rate cut also creates the premise for more stable deposit and lending interest rates in Vietnam, contributing to promoting disbursement for public investment and credit growth for businesses, supporting the Government's growth target.

Regarding the impact on asset classes, Dragon Capital experts believe that investment channels such as stocks will benefit greatly from this move. As corporate input interest rates remain low, companies will have good conditions to cut financial costs, expand their businesses and thereby increase profits. This will have a positive impact on corporate value, promoting the growth of the stock market.

Not only does it support the State Bank to have more space to implement monetary policy in a way that supports the economy, the Fed's deep interest rate cuts also actively support businesses and growth in the coming time.

According to Mr. Tran Duc Anh, Director of Macro and Investment Strategy of KB Securities Vietnam Joint Stock Company (KBSV), the Fed's sharp interest rate cut will have a positive impact on the macro and Vietnamese stock market.

First, the Fed's interest rate cut, leading to the weakening of the USD, will give the State Bank room to continue applying a supportive monetary policy, maintaining low interest rates to help stimulate economic growth.

In particular, the US is the leading trading partner consuming Vietnamese goods, the Fed's interest rate cut is expected to support US consumption and economy. Thereby helping Vietnam's export activities to flourish, leading to GDP growth.

Besides, when the Fed and major central banks in the world lower interest rates, cash flow will tend to shift to emerging stock markets, including Vietnam.

According to PV/VTV

Source: https://doanhnghiepvn.vn/doanh-nhan/fed-giam-sau-lai-suat-tin-vui-cho-doanh-nghiep-viet/20240921043753388