Interest rates drop sharply, money still goes into banks, "brake" on stocks

Deposit interest rates hit a new low of 6% per year.

Since the end of 2022, the downward trend in interest rates has become increasingly evident. From a general rate of 9% per year for a 12-month term, this rate is now only 6%.

Specifically, currently, the Big4 group (including state-owned banks: Joint Stock Commercial Bank for Foreign Trade of Vietnam - Vietcombank, Joint Stock Commercial Bank for Industry and Trade of Vietnam - VietinBank, Joint Stock Commercial Bank for Investment and Development of Vietnam - BIDV and Vietnam Bank for Agriculture and Rural Development - Agribank ) together have the lowest interest rates in the market.

Within this group, the highest rate is only 5.5%/year, applicable to terms from 12 months to 36 months. For 6-month and 9-month terms, the interest rate is 4.5%/year. A rate of 3.5%/year is applied to some terms under 6 months.

Interest rates fall after money still goes into the bank, braking with securities (Figure 1). — Deposit interest rates continued to fall sharply and reached a new low, but the flow of money into the stock market unexpectedly slowed down and continued to flow strongly into banks. (Illustrative image)

At joint-stock commercial banks, the average interest rate for long-term deposits is 6% per year. Very few institutions list interest rates above 7% per year. Some examples include DongA Bank (7% per year).

Furthermore, deposit interest rates are projected to continue falling.

This has led many to worry that money will "flow" from low-yield channels (bank deposits) to riskier investment channels such as stocks, real estate, gold, cryptocurrencies, etc.

Money is still in the bank

After the interest rates continuously decreased and reached new lows, the trend of cash flow appeared quite clearly. Real estate is not the channel of choice for investors when the price of land and houses is said to be still high and has much room for further decline. Therefore, real estate investors are not in a hurry to "put down money" to buy houses.

Ms. Duong Thanh Binh, an investor, shared about her money circulation: “When interest rates decreased, I withdrew some money from savings to find a new investment place. In my opinion, the real estate market will continue to decrease as investors still face many difficulties. Besides, the cash flow from banks and bonds for real estate, although loosened, is still not really bright. Therefore, the earliest is the end of 2024, the latest is 2025 is the time to buy a house.”

Regarding gold, Ms. Binh explained that about 10 years ago, gold was always part of her investment portfolio. However, in recent years, due to the significant difference between the price of SJC gold and the world gold price, the risk for buyers has been very high. Therefore, she no longer chooses gold.

Over the past period, Ms. Thanh Binh has chosen the stock market as a safe haven for her money. In fact, she has earned a 24% profit in the past six months by taking profits from stocks.

Many people share Ms. Thanh Binh's opinion that the number of new securities accounts being opened is constantly reaching new records.

This data shows that the flow of money into the banking system is under pressure. However, the figures indicate that money is still "flowing" into banks.

According to the latest report from the General Statistics Office, as of September 20, 2023, total means of payment increased by 4.75% compared to the end of 2022. Capital mobilization by credit institutions increased by 5.8%, while credit growth in the economy only reached 5.73%.

This is not the first time the deposit mobilization indicator has shown positive growth. Previously, data from the State Bank of Vietnam showed that total deposits mobilized by the credit institution system increased by 4.6% by the end of June 2023 compared to the beginning of the year.

Thus, from July until now, the banking system's capital mobilization has continued to grow positively, despite deposit interest rates falling to record lows.

Money "brakes" on stocks

The massive influx of capital into the stock market has created billion-dollar trading sessions; in some sessions, the trading value on the HOSE alone exceeded 30,000 billion VND. This is a record high for the Vietnamese stock market.

However, in the last days of September 2023, the flow of money into the stock market unexpectedly slowed down. Trading volume tended to drop sharply.

Specifically, on September 28th, the trading volume (including both order matching and negotiated transactions) was only 525 million shares, equivalent to 13,804 billion VND. Previously, the Ho Chi Minh City Stock Exchange regularly had trading volumes exceeding 1 billion shares.

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