Fed’s rate cut a fillip for Vietnam stock market: expert

The U.S. Federal Reserve’s (Fed) recent 0.5-percentage-point interest cut is hoped to provide a positive boost to the Vietnamese stock market, said Nguyen The Minh, head of retail research at Yuanta Securities Vietnam.

Despite this positive news, investor sentiment remained cautious in the context of significant events on Thursday and Friday, including the expiration of derivatives contracts and two investment funds’ portfolio restructuring.

Closing Thursday, Vietnam's benchmark VN-Index rose just 6.37 points, or 0.5%, to 1,271.27, with 240 gainers and 122 losers on the Ho Chi Minh Stock Exchange (HoSE).

The trading value on the major bourse hit VND14.28 trillion ($581.5 million) with more than 607.5 million shares changing hands, down 23% and 24% from the previous session, respectively.

On Friday, the benchmark index inched up 0.06% to 1,272.04 points, with 898 million shares traded for VND21.8 trillion ($888.35 million), much higher than Thursday’s figures.

Minh noted that with Thursday being the expiration date for the VN30F2409 derivatives contract and Friday marking the rebalancing of the FTSE Vietnam Swap UCITS ETF and the VanEck Vectors Vietnam ETF, investors were somewhat cautious and hesitant to trade.

"Nevertheless, the positive point is that the cash flow has gradually returned to the stock market, with the VN-Index gaining for three consecutive sessions from Tuesday to Thursday."

The Fed's interest rate cut has positively affected foreign capital inflows, he observed. From September 11 to 19, foreign investors net bought VND1.7 trillion ($69.2 million) of Vietnamese stocks.

“The Fed’s rate cut not only weakens the USD but also helps narrow the USD-VND interest rate differential. This is a crucial factor for the domestic stock market to attract foreign capital in the medium and long term. Furthermore, the State Bank of Vietnam (SBV) may maintain the current interest rate levels.

"If the Fed makes a larger cut, the SBV could loosen its monetary policy further, boosting recovery and growth of the economy in general and companies,” Minh said.

A low-interest-rate environment will positively impact the stock market, as this investment channel will become more attractive, he said, recommending that investors closely monitor economic indicators in the U.S..

“There are forecasts of 'hard landing' risks and potential crises in the U.S. economy. Usually, during recessions, the Fed tends to cut interest rates sharply. Currently the U.S. economy remains strong and is recovering. However its slow growth is a reason for market concerns about a recession in 2025,” Minh commented.