Interest rates are the most important focus of attention this year as many believe after a year implementing the loose monetary policy, the authorities concerned are going to tighten them.
Will the recent surge in interest rates on the interbank money market (Market 2) exert adverse effects on the market between banks and their corporate and individual clients (Market 1)?
|When it comes to capital inflows, banks have considerably built up their charter capital in recent years and set out plans for drastic capital hike this year. – SGT Photo: Tran Ngoc Linh|
Interest rates on the Interbank market, the channel allowing banks to lend and borrow money among them, suddenly surged in late April. More precisely, the overnight rate climbed to 1.2% per annum, the highest during this past year. Such a level is also nearly three times higher than in the preceding week, 4.5 times higher than in the beginning of the month and 100 basis points higher than in early this year.
Similarly, the interest rates for the one-week, two-week and one-month terms picked up 100-120 basis points against the beginning of the year, and 2.5-3.5 times greater than in early April. The hike worries quite a few people as they fear the liquidity pressure in the banking system is returning and the interest rate rise may send its ripple effect to Market 1, which means that banks may start to revise up their deposit rates again.
According to analysts, interest rates are the most important focus of attention this year, as many believe after a year implementing the loose monetary policy, the authorities concerned are going to tighten it. Recent reports by several institutions also forecast interest rates may start to rise again in the second half of this year, as a number of countries are showing signs of beginning their tightening monetary policy.
As per statistics of the General Statistics Office, credit growth in the banking industry as of March 19 was 1.47%, 2.7 times higher than the rate of only 0.54% in capital mobilization. The most up-to-date credit growth figure was 3.34% in mid-April, which might mean the demand for loans has further risen and the growth in deposits until now has probably failed to keep pace with the credit growth rate.
If this trend continues, it is inevitable that the system’s liquidity will further decline. If this is the case, one cannot rule out the possibility of banks competing for deposits once again. However, there are still factors that help stabilize interest rates, while the recent rise of interbank interest rates is probably just temporary.
Prior to any long holiday, interest rates on Market 1 often grow rapidly as banks are in need of capital to meet their liquidity safety and short-term solvency ratios. They will later slide back.
For example, in the latest surge, although the lending rates in Market 2 increased sharply for the shorter terms, there was hardly any change in the rates for the three-month, six-month and nine-month terms compared to the beginning of the month. Moreover, they even significantly went down against the beginning of the year. Therefore, if this demand for liquidity is only temporary, it will probably not exert any pressure onto the bank-to-customer market.
Interest rates supporters
Meanwhile, at present and in the immediate future, there are factors that help interest rates remain stable as mentioned above. The first is inflation is still at a low level, evidenced by the fact that the consumer price index (CPI) in April recorded the second consecutive month of reduction compared to the preceding month, with a slight decrease of 0.04%. So far, the CPI has only picked up 1.27% against the beginning of the year and 2.7% year-on-year, far from the target of 4% for the whole year.
Notably, from the third quarter onward, a handsome sum of the dong will possibly be pumped out from the six-month foreign currency sales contracts that commercial banks signed with the State Bank of Vietnam (SBV) early this year. That amount of money may help stabilize the liquidity of the dong in the system. In recent years, the volume of the dong pumped out via the foreign currency buying activities carried out by the SBV has played a key role in supporting the liquidity of the system.
Faced with accusations of currency manipulation by the U.S. Department of the Treasury in late 2020, the SBV has switched to buying foreign currencies in a six-month term early this year, but basically this policy may be supportive to the liquidity of the system. In addition, the United States has lately removed Vietnam from her list of currency manipulators. This indicates the intervention in the market for foreign exchange spot transactions may no longer have to bear great pressure. In other words, the central bank may resume the policy on buying foreign currencies via both spot and forward contracts.
Another supporting factor is considering the fact that prices in the real estate market are on the constant rise in an unhealthy way in some localities, which means probably a certain volume of bank loans has been spent on swing trading in this investment channel, the agencies in charge will tighten their grip to cool down the steep housing prices. The SBV, meanwhile, will probably formulate other policies in a bid to limit the volume of credit poured into risky industries, such as real estate or securities, thereby curbing credit growth in the process.
When it comes to capital inflows, banks have considerably built up their charter capital in recent years and set out plans for drastic capital hike this year. Also, they have successfully issued long-term bonds and valuable papers, which helps reduce the dependence on deposits from individual customers, who often come only when offered high interest rates.
As per deposit rates, in April, whereas several banks lifted their deposit rates (up 0.6 percentage point for terms of six months or longer at GPBank, up 0.2 percentage point also for terms of six-month or more at VPBank, and up 0.2 percentage point for terms of 1-3 months at PGBank), some others further lowered such rates: down 0.1 percentage point for terms of six months or longer at Kienlongbank, down 0.2-0.3 percentage point for terms of 6-11 months at VIB, down 0.2 percentage point for 3-5 month terms and 0.1 percentage point for terms of 12 months or more at Techcombank, down 0.2-0.4 percentage point for all terms at MBBank, etc.
Excited but anxious: Hanoi business owners reopen
Though they eagerly reopen after being closed for 27 days due to the Covid-19 outbreak, many Hanoi businesses are also worried about changing consumer behaviors.
Closed restaurants inside a shopping mall in Ha Dong District, Hanoi, June 20. Photo by VnExpress/Duc Minh.
After Hanoi authorities announced that indoor dining and hairdressing can resume on Tuesday, Bui Quang Hung, co-founder of barber shop chain 30Shine, showed his excitement with a post on social media saying, “see you Hanoians on Tuesday morning.”
He said the shops would open from 7.30 a.m. until late night to clear a backlog of almost a month.
“Men have to visit the barber once every three weeks on average because they feel irritated if their hair is one to two centimeters too long.”
There would be two or three times the usual number of customers for two weeks, he said based on his experience from previous waves.
But some other businesses are less hopeful.
Trieu Nguyen Quan, owner of the Goofoo Gelato chain of ice cream shops, does not expect many customers for 10 days after reopening since people are afraid of the pandemic.
Hoang Tung, CEO of fast-food restaurant chain Pizza Home, said the outbreak could cause him to lose a number of customers since people have adopted a new habit of eating at home.
To survive the stop-start nature of their business amid the pandemic, many have sought to improve their business model. Tung said Pizza Home has closed some stores that were not doing well but has expanded into home delivery and apps.
“The restaurants have to operate both online and offline, and must be prepared for the worst, which is closure, amid the pandemic.”
Goofoo Gelato too has managed to pull on thanks to online sales.
Quan said he plans to increase the number of outlets but only after vaccination. He said vaccination is the only way to make him feel secure and the ultimate solution for businesses to open and the economy to revive.
Around 2 percent of the population has received the first shot, and 0.1 percent has received both.
Vietnam has received delivery of around three million vaccine doses so far, and is expected to get over 120 million this year.
It seeks around 150 million in all to cover 70 percent of its population.
Market falls on strong selling forces
HÀ NỘI — Shares inched down on Wednesday, weighed by strong selling pressure across most sectors despite gains in some large-cap stocks.
The market benchmark VN-Index on the Hồ Chí Minh Stock Exchange (HoSE) declined by 0.22 per cent to 1,376.87 points. The market’s breath stayed negative with 298 stocks falling, while 94 stocks rose and 51 ended flat.
The liquidity was high as more than 710.77 million shares were traded on the market, worth over VNĐ21.1 trillion (US$528.6 million).
The market was weighed by selling forces despite rallies in large-cap stocks, especially bank stocks.
The VN30-Index, which tracks 30 biggest stocks in market capitalisation on HoSE, climbed slightly 0.02 per cent to 1,489.53 points. Twenty stocks of the VN30 basket plummeted, while only nine jumped and one stayed unchanged.
Stocks in many sectors posted negative performance yesterday with material stocks leading the market’s trend. Vietnam Rubber Group (GVR) witnessed the biggest losses, down 2.47 per cent, followed by No Va Land Investment Group Corporation (Novaland, NVL), Vingroup JSC (VIC) and Mansan Group (MSN), down 0.5 – 1.57 per cent.
However, the losses were limited by gains in bank stocks. Of which, Vietcombank (VCB) was the biggest gainer in the market, up 1.95 per cent. Other stocks witnessing big increases were Vietinbank (CTG), VPBank (VPB) and Saigon Beer – Alcohol – Beverage Corporation (SAB), up more than 1.5 per cent.
The market has fluctuated since the beginning of the week with alternative up and down sessions.
Analysts from Saigon – Hanoi Securities JSC (SHS) said that based on Elliot Theory, there is still room for an upward trend with a resistance level of around 1,400 points.
Investors who took profits last week should refrain from opening long positions at the current price and wait until the market corrects deeper to come back, SHS added.
On the Hà Nội Stock Exchange (HNX), the HNX-Index plunged 0.41 per cent to 315.8 points.
During the trading session, more than 126.2 million shares were traded on the northern bourse, worth nearly VNĐ3 trillion.
Meanwhile, foreign investors returned to the market as they net bought a value of VNĐ159.5 billion on both exchanges. Of which, they net bought a value of VNĐ144.44 billion on HoSE, and a value of VNĐ15.06 billion on HNX. —
Local stocks experience gloomy trading day
|An investor browses his mobile phone while sitting in front of stock information screens. The local stock market ended lower today, June 23 – PHOTO: VNA|
HCMC – Thanks to the support of securities stocks and largecaps in the banking sector, the benchmark VN-Index of the HCMC stock market only fell slightly amid lackluster trading today, June 23.
At the close, the main index shed 3.1 points, or 0.22% against the previous session at 1,376.87, with 94 stocks rising and up to 298 others dropping.
Turnover on the southern bourse continued its downward trend, contracting 4.8% in volume and 5.7% in value at over 710 million shares and more than VND21 trillion. Shares traded in block deals contributed VND2.050 trillion to the overall value.
In the group of bank stocks, largecaps extended rally which helped the VN-Index to avoid a deep decline.
Private lender VPB was the biggest winner as it soared 4.5% with 30.7 million shares changing hands. Also, State-owned lender VCB added 2%, and its fellows CTG and BID rose 1.5% and 0.9%, respectively. TPB, ACB, and TCB increased slightly by 0.4-0.8%.
Meanwhile, lender LPB was the biggest loser, dropping 2% to its intraday low. Similarly, lenders SSB and EIB lost around 1%.
Many securities stocks maintained their good performance, with HCM surging 3.6%, VDS improving 2.6%, CTS edging up 1.4%.
A lot of fuel and property stocks ended deep in the red.
Among speculative stocks, while a host of them suffered from huge losses, investment firm FIT hit its upper limit, real estate firms SCR and IJC rose slightly.
Property developing group FLC recorded the third straight losing session with a 5.8% drop, but it led the HCMC market by liquidity with 47 million shares changing hands.
On the northern bourse, the HNX-Index lost 1.29 points, or 0.41% over the session earlier to close at 315.8, with 73 advancers and 133 decliners. Over 126 million shares worth more than VND2.8 trillion were transacted on the bourse, falling 22.9% in volume and 21.7% in value versus the previous day.
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