In April 2018, the State Bank of Vietnam (SBV) continued to net inject capital to the market, helping the liquidity avoid pressure when the lending activity was promoted more strongly after the Lunar New Year holiday. However, the rise of mobilisation interest rates has given cautious signals.
The study of the Capital and currency business team of Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) stated that although the liquidity on the interbank market was less abundant in April 2018, it remained basically stable compared to the same periods of the previous years.
Accordingly, the deposit rate level sharply rose by about 80-90 percentage points on terms of less than one month, and increased slightly by about 20-50 percent percentage points on terms from one to three months. The rate by the end of April was 1.7-1.9 percent per annum on overnight and one-week terms and 2.2-2.4 percent per annum on one to two months.
Thus, on average, in April 2018, the one-week interbank rate was 1.29 percent per annum, up by 0.15 percent per annum compared to the previous month, but 3.6 percent less than the same period of 2017. The 3-month rate was 2.7 percent per annum, down by 0.2 percent per annum compared to the previous quarter, and 2.3 percent per annum less than the same period of 2017.
According to calculations, the average trading value in April sessions reached about 28.5 trillion dong, up by 1.5 percent compared to the trading value of the previous month, mainly on overnight to one-week terms (accounting for about 76 percent of the total trading).
Sharing with Dau Tu Chung Khoan newspaper, a leader of BIDV’s Capital Division said that the deposit rate level tended to rise sharply in April 2018 due to the consonant impact from the shift of cash flows and psychological factors.
Specifically, the outstanding deposits of major institutions such as the State Treasury and Ministry of Finance at the system of commercial banks have fluctuated more frequently as the budget spending, particularly spending on development investment, has been accelerated faster in April 2018. Data of the Gneral Statistics Office showed that by April 15th 2018, the spending on development investment reached 54.6 trillion dong, equivalent to 13.7 percent of the plan, and up by 55 percent compared to the end of March 2018.
In addition, the lending in dong (VND) in April tended to grow more positively and faster than the VND mobilisation by about 0.35 percent, leading the difference in capital mobilisation and lending to shrink by about 15-17 trillion dong compared to March 2018. At the same time, market psychology tended to be more cautious before the overall fluctuations on both securities, currency and government bond markets, due to concerns about risk aversion in a long period of full optimism, said BIDV’s leader.
Nevertheless, the market assessed that with the move to maintain flexible monetary policy easing of SBV, the market liquidity was still fairly stable, because the agency has net injected nearly 60 trillion dong in April 2018, mainly via bill channel, in order to limit the sharp rise of deposit rates with much lower levels compared to the same period of previous years.
Difficult to cut lending rates, the Capital and currency business team of BIDV forecasted that the VND liquidity on the interbank market in May 2018 will be more abundant. Accordingly, the mobilisation interest rates can be adjusted lower on short terms, but cannot fall deeply to low levels like the first half of March 2018, ranging around 1.3-1.8 percent per annum on one-week term and about 2.6-2.8 percent per annum on three-month term.
Leader of banks assessed that the influencing factors in general are still supporting the stabilisation of interest rates. Specifically, the capital supply for supporting market liquidity continues to be high in May 2018, including over 66 trillion dong of SBV’s bills matured and nearly 27 trillion dong from the cash flows of commercial banks that sold foreign currency on three-month term to SBV.
In addition, the mobilisation of capital is expected to grow more positively than lending in May 2018 by cyclical factor, resulting in an expansion of the VND mobilisation-lending difference by about 15-25 trillion dong. Particularly, the outstanding deposits of the State Treasury are said to be maintained at fairly high level as the balance of state budget collection and spending as of April 15th 218 was still at a surplus of 11 trillion dong, much higher than the same period of the previous years.
However, BIDV’s leader shared that “the market psychology will continue to maintain cautious status as the lending rate level is currently low, or it may be slightly increased when the cash flows record more fluctuations due to the impact of the share trading transactions or the strong shift of the state budget (spending on development investment is accelerated, and the income from the divestment in state-owned enterprises is lower, etc.).
Talking to Dau tu Chung khoan newspaper, a senior leader of the National Financial Supervisory Commission said that since the inflation pressure in 2018 is larger than 2017, the reduction of lending rates may face difficulties. Thus, the adjustment of monetary policy operation should be more flexibly, more active, in order to keep the interest rate level stable.
