Actual lending interest rates have not decreased accordingly, and the ability to access cheap credit capital is not yet positive. Analysts from VPBankS believe that the current period is not yet a period of cheap money.
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| Seminar "Stock Market: Building Foundation - Accumulating - Accelerating" organized by Investment Newspaper on March 5. |
Low interest rates but not cheap
Sharing at the seminar "Stock Market: Building the foundation - Accumulating - Accelerating" with the participation of representatives of the State Securities Commission and securities companies organized by Dau Tu Newspaper on March 5, Mr. Tran Hoang Son, Director of Market Strategy of VPBank Securities Joint Stock Company, said that the current time is still not the period of cheap money, even when the operating interest rate level is lower than the period of 2019.
According to experts from VPBankS, credit growth has accelerated quite rapidly in the second half of 2023, but it is more technical. Meanwhile, although the operating interest rate level is lower than in 2019, the actual lending interest rate has not decreased correspondingly compared to the mobilization interest rate level when there is still a large "difference". At the same time, the ability to access cheap credit capital has not been as positive as the cheap money cycle during the period affected by the epidemic.
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| Mr. Tran Hoang Son, Director of Market Strategy, VPBank Securities JSC . |
Mr. Son said that interest rate management will need to wait for other factors such as the timing of the Fed's interest rate cut and the specific interest rate cut. Previously, the market expected the US Federal Reserve (Fed) to lower interest rates in March - May, but now it has been postponed to the second half of the year. Meanwhile, in Vietnam, when the interest rate gap between VND and USD remains high, further lowering the operating interest rate while the USD interest rate has not been lowered will put pressure on the exchange rate. Therefore, it will be very difficult to lower it further in the near future.
Cash flow finds highly effective investment channels
However, the low interest rate is still a positive factor in creating a capital flow from low-efficiency areas to higher-efficiency areas. According to Mr. Son, the stock market is still the place to receive this cash flow.
Looking back at the recovery of the Vietnamese stock market in the second half of 2023 and early 2024, Mr. Son pointed out many major influencing factors.
First, in terms of the international market, risks have been reduced as concerns about the world economy falling into recession in early 2023 have not occurred. After the Fed's very tight monetary tightening period in the second half of 2023, the consequences of Silicon Valley Bank's bankruptcy have forced the Fed to take drastic actions to support liquidity for the financial system and especially support liquidity for small banks. The Fed has also paused raising interest rates recently and is expected to lower interest rates in 2024. With these factors, US stocks have steadily risen to the bottom, although there was also a period of adjustment in August-October 2023.
The second is the strong growth wave of technology stocks, when the investment trend in AI increased many technology stocks and "heated up" the S&P 500 index. In the context of the world economy still having difficulties, this positive factor affects the global stock market in general and Vietnam in particular.
In the domestic market, the interest rate level in recent times has been a positive factor affecting the market. The State Bank has lowered interest rates earlier than global central banks. This move took place from April 2023 with a total of 4 interest rate cuts so far, shifting large investment capital flows, allocating them to asset channels with increasing efficiency, thereby the Vietnamese stock market recorded a growth period from April 2023 to the second half of September 2023.
At the same time, another big driving force is the Government's determination to upgrade, which was strongly demonstrated in the second half of 2023, giving investors more confidence in the market and the possibility of upgrading.
“We are at a pivotal year close to the door to upgrading. The change in substance is that the legal foundation is clearly changing, helping to ensure the criteria of international organizations for the Vietnamese market,” Mr. Son emphasized. At the same time, thanks to pursuing the upgrading goal, the new trading infrastructure also supports attracting cash flow into the market.
According to Mr. Son, the old trading infrastructure system was congested during many hot market periods. Changing the trading infrastructure can help ensure transparency, investors can trade faster, and many organizations can place automatic trading orders. In addition, on the new infrastructure, there will be many new products, shortening the trading time from T+2.5 to T+2. Citing previous changes such as the extension of trading time and the launch of the derivatives market, Mr. Son said that the liquidity of the market has increased.
“The return of confidence, along with the expectation of the KRX trading system coming into operation and the upgrade story will have a positive impact on the domestic market in the second half of 2023 and early 2024,” VPBankS analyst emphasized.
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