Decreasing deposit interest rates may divert cash flow to other investment channels. Interest rate cut will not greatly affect the mobilisation of capital from residents and businesses. Other investment channels must be really attractive to attract cash flow.
Commercial banks continue to reduce 10-30 basis points by terms, according to SSI Securities Joint Stock Company SSI Research. Currently, the interest rate is at 3.5-4.25 percent per year for terms of less than six months, 4.9 to 6.9 percent per year for terms of six to less than 12 months, 6-7.6 percent per annum with terms of 12-13 months.
Since the beginning of the year, interest rates of large commercial joint stock banks have dropped by 60-75 basis points for terms of less than 12 months and 65-100 basis points for terms of 12 and 13 months. This figure at commercial banks with small market share is 30-50 basis points.
According to expert Nguyen Tri Hieu, the move to lower interest rates of banks will probably continue because the State Bank of Vietnam (SBV) has a policy of reducing lending rates. With abundant capital in market 2, banks can continue lowering deposit interest rates.
Hieu said that lowering interest rates would not affect the mobilisation of capital from people and businesses. The markets of gold, real estate, foreign exchange, etc. are not attractive at the moment, because of potential risks, unstable and small profits. “Gold is highly volatile, the market is stable and the real estate market has some difficulties,” Hieu commented.
Particularly for the stock market, the VN Index recently increased and exceeded 900 points. The number of newly opened securities accounts reached more than 30,000 accounts per month in the last three months, 1.5 times higher than the average level of the previous period.
Besides, the market liquidity continued to increase. In May, the matched trading value reached nearly 83.735 trillion dong, more than double the January. On June 8, the trading volume exceeded 10.14 trillion dong, the highest since May 2019, of which matching transactions order was over 8.754 trillion dong. In the stock market, VN Index recently gained and surpassed 900 points. The number of newly opened securities accounts reached more than 30,000 accounts per month in the last three months, 1.5 times higher than the average of the previous period.
According to Hieu, it shows that a part of the deposits may be added to the stock market.
In early June, Andy Ho, Head of VinaCapital Investment, said that lowering deposit interest rates compared to the current level of 6-7 percent could encourage capital flow to seek new investment channels. Following this position, when deposit rates fall, people may invest in other channels, including stocks.
According to SBV data, by the end of May 29, the total payment means (M2) increased by 3.4 percent compared to the end of 2019. At the end of March, M2 grew by 1.72%, of which deposits from business organisations decreased by 3.2 percent and deposits of residents increased by 3.24%.
