Right time for stock investment as deposit interest rates hit historic low: brokers

Low deposit interest rates along with banks looking to pump money into the economy have benefitted the stock market in Vietnam, said leading Vietnamese brokers.

Deposit interest rates have continuously decreased over the past several months and are experiencing a sharp decline in the last month of 2023 to their lowest level in history.

The first shot in this wave came from giant Vietcombank. Its deposit interest rates have dropped to 2.4% per year for terms of less than three months and 4.8% per year for terms of one year or more.

Following Vietcombank, Techcombank has announced interest rates of 3.25% per year for terms of less than six months and 4.85% per year for terms of 12 months or more, applicable from December 4. Other large banks such as Agribank, BIDV and VietinBank have listed interest rates for terms of one year or more at 5.3%, equal to those during the 2020-2021 Covid-19 period.

Bui Nguyen Khoa, head of the Macro and Market Group at BIDV Securities Company (BSC), said that there are two factors that trigger cash flow into the stock market, including low deposit interest rates and banks pumping money into the economy. "Everything is supporting the flow of cheap money into the stock market," Khoa noted.

Theoretically, falling deposit interest rates are a driving force for cash to flow into other investment channels, including stocks. The lower the interest rates, the greater the need for loans and investments, he said.

In addition, credit growth this year has been low, and the State Bank of Vietnam (SBV) and commercial banks are facing greater pressure to disburse. Banks have loosened lending conditions, and lending interest rates have also dropped to about 7-8% per year, making it easier for businesses and individuals to access credit.

Normally, Khoa said when businesses mobilize capital, they do not use it all immediately. In the context of low deposit interest rates, they can allocate money to other investment channels to optimize efficiency.

However, he warned that there are still some risks amid domestic and world economic uncertainties, so investors are opting for the savings channel as a safe haven despite low interest rates.

A report by FIDT JSC, operating in the field of investment consulting and asset management, stated that Vietnam's economy in November continued to recover on a large scale. Production activities recovered at a fast pace, increasing 3% month-on-month and recording seven consecutive gaining months, with motivation coming from cheap credit, public investment disbursement acceleration, and improved domestic consumption and export demand.

Foreign investment attraction slowed somewhat in November, but capital flows into production increased rapidly after Vietnam expanded diplomatic and economic relations with the U.S. On the other hand, inflation remains low, at 3.2-3.5% compared to the target of about 4.5%.

Regarding the global situation, the U.S. consumer price index in October continued to cool down with an increase of only 3.5% and 3% in the overall and core personal consumption expenditure (PCE) price indexes, respectively, down from 3.7% and 3.4% recorded in September.

The U.S. Purchasing Managers' Index (PMI) was weaker than expected, showing that the U.S. economy is slowing down, anticipating an interest rate cut by the Federal Reserve (Fed) at its meeting next March, said top Vietnamese broker Saigon Securities (SSI).

The U.S. dollar has also tended to decrease, easing the USD/VND exchange rate. At the end of November, the exchange rate was at VND24,650 per USD, an increase of 3.7% compared to the end of 2022.

Khoa said that the context is much different from last month, with lower risks. Accordingly, cash flow from the deposit channel can find other investment channels, first of all the stock market due to high liquidity, easy investment and more options.

A recent report by broker VNDirect also stated that this is the right time to invest in medium- and long-term in the stock market due to attractive market valuation in the context of low deposit interest rates and improving corporate profits from the fourth quarter.

This organization forecasts that the VN-Index, which represents the Ho Chi Minh Stock Exchange (HoSE), will hover around 1,080-1,150 points in December and reach 1,400-1,450 points in 2024.

The VN-Index closed Tuesday at 1,115.97 points, down 0.4% from the previous session.