Higher interest rates to accelerate shift toward quality stocks: brokerage exec

Persistently high global interest rates are expected to accelerate a shift toward quality-driven investing, with capital increasingly flowing into companies that demonstrate strong financial fundamentals, sustainable earnings growth and resilience to economic volatility, according to a senior executive at Hanoi-based Smart Invest Securities (AAS).

After years of benefiting from low borrowing costs and abundant liquidity, the global economy has entered a new cycle marked by tighter monetary conditions. Major central banks have kept interest rates elevated to curb inflation, increasing financing costs and making investment opportunities narrower.

In this context, the story of asset management and personal finance is no longer just a concern for the wealthy, but is becoming a practical need for every family. Especially in Vietnam, as the economy enters a period of strong transformation with many changes in institutions, infrastructure and the investment environment, asset management is playing an increasingly important role in protecting and increasing the value of capital.

Global economy enters a new cycle

Speaking at the "Asset Box" talk show broadcasted on TV channel VTV8, Tran Thanh Mai, director of financial advisory at Smart Invest Securities, said approaches to wealth management are undergoing significant changes in response to shifts in the global economy.

Mai noted that the current environment differs significantly from the post-pandemic period, when central banks injected large amounts of liquidity into the economy to support growth. Prolonged monetary easing fueled strong gains across a wide range of asset classes, but also contributed to a surge in inflation worldwide.

The shift began in 2022 as central banks worldwide tightened monetary policy to contain inflationary pressures. In the United States, expectations that the Federal Reserve would rapidly cut interest rates have been tempered by inflation that remains above the central bank's 2% target.

At the same time, the U.S. labor market has remained resilient, with strong job creation and stable unemployment levels, giving the Fed greater scope to maintain a cautious monetary policy stance rather than begin easing as early as markets had anticipated.

In Europe, economic recovery across the Eurozone has been sluggish while inflation remains elevated, partly due to energy prices and geopolitical tensions. As a result, the European Central Bank continues to prioritize inflation control over growth support.

"The era of cheap money is gradually coming to an end," Mai said. "Higher capital costs mean investment opportunities are no longer easy to capture, while risk management has become more important than ever."

Mai said prolonged high interest rates in major economies could increase pressure on exchange rates, capital flows and funding costs in emerging markets, including Vietnam. Elevated global commodity and energy prices also raise the risk of imported inflation. However, Vietnam continues to benefit from several notable advantages.

Vietnam's economic growth remains among the strongest in the region and well above the global average, supported by domestic drivers even as the world economy slows. The country is also benefiting from public investment, infrastructure development, institutional reforms and administrative streamlining, which could provide longer-term growth momentum and reduce dependence on global economic cycles.

"We should not be overly optimistic because external risks remain, including weaker global consumer demand, trade tensions and volatile international capital flows," Mai said. "However, ongoing institutional and policy reforms are creating unique growth drivers for Vietnam."

Shift toward quality investments

According to Mai, one of the most significant changes in financial markets is a move away from trend-driven investing toward quality-focused investment strategies.

During the low-interest-rate era, abundant liquidity supported broad-based gains across asset classes, including equities, real estate and commodities. Many investors generated returns simply by participating in favorable market cycles.

As financing costs rise and liquidity becomes more selective, performance differences among asset classes are becoming increasingly pronounced.

In the stock market, investors are showing greater preference for companies with healthy balance sheets, sustainable profit growth, limited reliance on leverage and strong adaptability to economic fluctuations.

Opportunities remain in the property market, but investors must pay closer attention to project legality, cash-flow generation, genuine housing demand and infrastructure development prospects, Mai said.

She added that other assets, including gold, corporate bonds and financial products, also require investors to fully understand their characteristics and associated risks before making decisions.

"Opportunities always exist, but asset selection is now far more important than simply participating in the market," she said.

Mai advised households to adopt a holistic approach to wealth management rather than focusing solely on individual investments.

The first priority should be building an emergency fund sufficient to cover six to 12 months of expenses, providing protection against unexpected events such as job losses, illness or economic shocks.

The second principle is diversification. A balanced portfolio may include cash, deposits, bonds, equities, gold, insurance products and real estate, depending on individual circumstances and financial goals.

Under current market conditions, Mai said investors may consider allocating more capital to assets with underlying value, such as real estate and shares of fundamentally strong companies, while maintaining adequate bank deposits to minimize risks and capture opportunities during market corrections.

She also cautioned against excessive use of leverage, noting that heavily indebted investors tend to face the greatest risks during periods of market volatility and elevated borrowing costs.

Finally, Mai emphasized the importance of financial literacy, saying investors should only commit capital to assets they fully understand.

"When investors expand their knowledge, they gain access to more options that align with their objectives and long-term vision," she said.

As global liquidity becomes less abundant, wealth management is increasingly about building financial resilience and seizing long-term opportunities rather than simply maximizing returns, reflecting a broader investment mindset emerging in the era of higher capital costs.