At a securities company (Photo: VNA) Hanoi (VNS/VNA) - The recent interest rate cuts by the State Bank of Vietnam(SBV) have little impact on the Vietnamese stock market, analysts have said.
The central bank made its last rate cut on May 13. The action is widelyexpected to help local companies enjoy low-interest-rate loans so they canrecover in the post-pandemic stage.
Other central banks around the world have curbed interest rates and boughtcorporate and government bonds to inject cash into the market.
Vietnam International Securities CEO Duong Ky Hiep said that the rate cut maybe helpful enough to boost all sectors after the disease is contained.
“The consumer price index (CPI) is still under control, so increased cashsupply may not worry the market like it did 10 years ago,” he said, implyingsuch action may cause concerns about inflation and economic downturn.
According to KB Securities Vietnam Co (KBSV), liquidity of the banking sectoris still abundant as overnight interbank rate is low at 2 percent per annum and10-year government bond rate is 3 percent per annum – which are much lower thanthe average rate of frontier markets.
Borrowing demand of local firms is declining as credit growth in the first fourmonths of the year was at a six-year low of 1.32 percent. Credit growth in thesame period last year was 4.5 percent.
The market is hoping for more capital inflow, Bao Viet Securities’ macroanalyst Tran Hai Yen told Viet Nam News.
The market sentiment is lifted on expectations that companies will enjoy lowerfinancing rates and perform better, she said.
After the latest rate cut, rates for short-term deposits with below-six-monthterms have fallen 0.3-0.5 percentage point but long-term rates haven’t changedmuch, she said.
Lending rates have also been the same. Rates are cut for customers that work inpriority sectors such as manufacturing and processing, retail and wholesale,and agriculture-aquaculture-forestry.
“But that is not enough to help the local stock market move up firmly,” TranThi Khanh Hien, analysis director at VNDirect Securities, told Viet Nam News.
“The rate cuts aim to help local companies and support economic growth, thusmaking investors feel good.”
But the impact would be modest, she said.
Cash supply is controlled on banks’ credit growth and means of payment, shesaid.
“A large proportion of loans are long-term, so the rate cuts hardly have anyimpact on long-term lending rates.”
The central bank this year has made two rate cuts with the last one on May 13.
Since then, the stock market has not rocketed up as expected and tradingliquidity is averaged at 6.06 trillion VND (260.47 million USD) per day.
The local market has been boosted mainly by investors’ purchasing of cheapstocks since the VN-Index hit its three-year low of 660 points in late March.
“Securities firms and investors had seen the rate cut coming,” she said.
“Short-term borrowers may enjoy the rate cuts, not the long-term ones.”
Commercial banks will see little change in their interest margins because theyare able to cut lending rates on lower input costs and the policy is applied tovirus-hit borrowers only, she said.
Both analysts shared the view that the central bank could be more open tosimilar actions in the near future.
“The SBV may continue this policy in the second half of the year to support theeconomic recovery by loosening the controlling rate by 0.25-0.5 percentagepoint while inflation growth is expected to slow down in the third quarter,” Hiensaid.
The central bank may make further cuts if needed because the policy making mustdepend on inflation and banks’ bad debt ratios, capital adequacy ratios andliquidity, Yen said./.
The central bank made its last rate cut on May 13. The action is widelyexpected to help local companies enjoy low-interest-rate loans so they canrecover in the post-pandemic stage.
Other central banks around the world have curbed interest rates and boughtcorporate and government bonds to inject cash into the market.
Vietnam International Securities CEO Duong Ky Hiep said that the rate cut maybe helpful enough to boost all sectors after the disease is contained.
“The consumer price index (CPI) is still under control, so increased cashsupply may not worry the market like it did 10 years ago,” he said, implyingsuch action may cause concerns about inflation and economic downturn.
According to KB Securities Vietnam Co (KBSV), liquidity of the banking sectoris still abundant as overnight interbank rate is low at 2 percent per annum and10-year government bond rate is 3 percent per annum – which are much lower thanthe average rate of frontier markets.
Borrowing demand of local firms is declining as credit growth in the first fourmonths of the year was at a six-year low of 1.32 percent. Credit growth in thesame period last year was 4.5 percent.
The market is hoping for more capital inflow, Bao Viet Securities’ macroanalyst Tran Hai Yen told Viet Nam News.
The market sentiment is lifted on expectations that companies will enjoy lowerfinancing rates and perform better, she said.
After the latest rate cut, rates for short-term deposits with below-six-monthterms have fallen 0.3-0.5 percentage point but long-term rates haven’t changedmuch, she said.
Lending rates have also been the same. Rates are cut for customers that work inpriority sectors such as manufacturing and processing, retail and wholesale,and agriculture-aquaculture-forestry.
“But that is not enough to help the local stock market move up firmly,” TranThi Khanh Hien, analysis director at VNDirect Securities, told Viet Nam News.
“The rate cuts aim to help local companies and support economic growth, thusmaking investors feel good.”
But the impact would be modest, she said.
Cash supply is controlled on banks’ credit growth and means of payment, shesaid.
“A large proportion of loans are long-term, so the rate cuts hardly have anyimpact on long-term lending rates.”
The central bank this year has made two rate cuts with the last one on May 13.
Since then, the stock market has not rocketed up as expected and tradingliquidity is averaged at 6.06 trillion VND (260.47 million USD) per day.
The local market has been boosted mainly by investors’ purchasing of cheapstocks since the VN-Index hit its three-year low of 660 points in late March.
“Securities firms and investors had seen the rate cut coming,” she said.
“Short-term borrowers may enjoy the rate cuts, not the long-term ones.”
Commercial banks will see little change in their interest margins because theyare able to cut lending rates on lower input costs and the policy is applied tovirus-hit borrowers only, she said.
Both analysts shared the view that the central bank could be more open tosimilar actions in the near future.
“The SBV may continue this policy in the second half of the year to support theeconomic recovery by loosening the controlling rate by 0.25-0.5 percentagepoint while inflation growth is expected to slow down in the third quarter,” Hiensaid.
The central bank may make further cuts if needed because the policy making mustdepend on inflation and banks’ bad debt ratios, capital adequacy ratios andliquidity, Yen said./.
VNA
