Good short-term effects for Vietnam after Fed's rate cut

The US Federal Reserve’s latest rate cut will benefit commodity and equity markets in the short term, according to specialist Nguyen Tri Hieu.

Good short-term effects for Vietnam after Fed's rate cut
Inside a BIDV office. Local commercial banks slashed lending rates by 0.5-1 per cent after the US Federal Reserve announced a rate cut on August 1. — Photo vietnamplus.vn

The US central bank on Thursday announced its first rate cut since 2008 by 25 basis points to the range of 2-2.25 per cent.

The rate cut would increase the value of investment into equity and commodity assets as the US dollar was weakened, encouraging international investors to purchase more local assets, Hieu said.

The rate cut was among reasons for US stocks to decline on Wednesday. However, the main reason was still worries about US-China trade tension, which has remained unsolvable, he added.

In the short term, the rate cut may benefit Viet Nam’s economy and equity assets, he said, adding gold would go up and the real estate market would be stabilised.

The Fed’s rate cut may allow Viet Nam’s banks to lower their interest rates in some priority sectors, but the average level may not decline further, analysts have said.

On August 1, commercial banks in Viet Nam cut interest rates on Vietnamese dong loans in the Government’s priority sectors for the second time this year to support the business community.

Vietcombank, Bank for Investment and Development of Vietnam (BIDV), VietinBank and Techcombank reduced their short-term interest rates by 0.5-1 per cent and capped them at 5.5-7.5 per cent.

Lending rates in Viet Nam were high, therefore, the Fed’s small rate cut would not have a direct and immediate impact on the local credit market, Hieu said.

 

In the long term, the Vietnamese dong would not depreciate, he said. “Viet Nam depends on a weak Vietnamese dong to support its exports. As the Fed’s rate cut weakens the US dollar, the dong may not be devalued further so that it could stabilise.”

According to specialist Le Xuan Nghia, the Fed’s rate cut helps increase the supply of the dollar to the market and devalue the greenback, making the dong and other currencies weaken further accordingly. That means the VND/USD exchange rate is unchanged but Vietnamese exports may be hurt if the dong weakens too much against other currencies.

If the Fed continues loosening its interest rates, other central banks can do the same to depreciate their currencies. In that case, the supply of cash increases and global long-term inflation occurs, requiring the Vietnamese Government to work on detailed solutions to deal with it.

Accordingly, the Vietnamese dong is forecast to gain 1-3 per cent in value against the US dollar in the remaining months of 2019 given the unpredictability of the global markets.

As the Fed chairman Jerome Powell gave no clues about further rate cuts this year, central banks of emerging markets must be more cautious with their monetary and interest policies in the future, according to Bao Viet Securities Co (BVSC).

A number of central banks, including Viet Nam’s, have lowered their lending rates to counter a worldwide economic slowdown since the beginning of the year when the Fed signalled it may lower interest rates. But after Thursday, those central banks have halted their monetary loosening plans until further announcements by the Fed instead of acting in advance.

Though Vietnamese banks recently cut rates to boost their lending volumes, the practical impact may not be enormous, BVSC report says.

Unlike other central banks, the State Bank of Vietnam (SBV) tries to control the total cash loaned to the market and the total savings and deposits. Meanwhile, the connection between interbank interest rates and market interest rates and the liquidity of the banking system, despite remaining high on low interbank interest rates, doesn’t mean lenders have sufficient cash on the market. Cash liquidity among banks is highly differentiated, making deposit and saving interest rates still high, thus lending rates will not be reduced much. — VNS

 
 

Other News

.
Proper mechanism needed to export farm produce by sea to China
Proper mechanism needed to export farm produce by sea to China
BUSINESSicon  15/01/2022 

The Ministry of Agriculture and Rural Development and the Ministry of Transport recently co-hosted a conference on promoting the export of agricultural products through maritime transport as a way of devising a proper mechanism for farm exports.

Hanoi to establish 2-5 new industrial parks by 2025
Hanoi to establish 2-5 new industrial parks by 2025
BUSINESSicon  15/01/2022 

The Hanoi government has approved a plan to establish an additional two to five new industrial parks (IPs) in the 2021-2025 period.

What’s behind Tan Hoang Minh’s sky-high bidding price?
What’s behind Tan Hoang Minh’s sky-high bidding price?
BUSINESSicon  15/01/2022 

Tan Hoang Minh won the bid in a ‘duel’ to buy the 3-12 land plot in Thu Thiem new urban area in HCM City, but finally gave up.

Vietnamese FDI attraction likely to hit US$40 billion this year
Vietnamese FDI attraction likely to hit US$40 billion this year
BUSINESSicon  15/01/2022 

Amid rapid economic recovery following the COVID-19 pandemic, Vietnam’s foreign direct investment (FDI) attraction this year is anticipated to record positive signs and hit US$40 billion, according to insiders.

Agriculture Ministry denies that cross-border exports are low-quality products
Agriculture Ministry denies that cross-border exports are low-quality products
BUSINESSicon  15/01/2022 

Vietnam exported $3.52 billion worth of vegetables and fruits in 2021, an increase of 8.6 percent over the year before. China remains the biggest client consuming 54.5 percent of the exports.

Online shoppers warned of cunning tricks
Online shoppers warned of cunning tricks
BUSINESSicon  15/01/2022 

Along with the popularity of online shopping in Vietnam come several cunning tricks of criminals to steal money from consumers. 

Vietnam to be Asia's next startup hub
Vietnam to be Asia's next startup hub
BUSINESSicon  14/01/2022 

In an interview with Bloomberg recently, Binh Tran - co-founder of Ascend Vietnam Ventures - said that Vietnam's nascent start-up sector is developing and Vietnam is becoming the next technology hub of Southeast Asia.

Police ask for documents of 11 Hanoi-based projects of Tan Hoang Minh Group
Police ask for documents of 11 Hanoi-based projects of Tan Hoang Minh Group
BUSINESSicon  14/01/2022 

The Police Agency for Investigation of Crimes on Corruption, Economy and Smuggling (C03) of the Ministry of Public Security has asked the Hanoi People's Committee to provide documents related to projects based in Hanoi of the Tan Hoang Minh Group.

US$15 billion bailout package a stimulus to economic recovery
US$15 billion bailout package a stimulus to economic recovery
BUSINESSicon  15/01/2022 

Given the severe impact of COVID-19, the National Assembly’s recent approval of a VND350 trillion (US$15 billion) economic recovery package is considered by businesses and experts as an extremely important leverage and motivation moving forward.

HAGL sells over 48 million shares to pay debts
HAGL sells over 48 million shares to pay debts
BUSINESSicon  14/01/2022 

Hoang Anh Gia Lai Joint Stock Company will sell more than 48.1 million shares of its subsidiary HAGL Agrico (HNG) from January 17 to February 15 to pay debt.

Lang Son to stop receiving fresh fruit vehicles from Jan 17 to Tet
Lang Son to stop receiving fresh fruit vehicles from Jan 17 to Tet
BUSINESSicon  14/01/2022 

The northern province of Lang Son has announced that it would stop allowing vehicles transporting fresh fruits to its border gates for export to China from January 17 until the lunar New Year holiday or Tet.

VIETNAM BUSINESS NEWS JANUARY 14
VIETNAM BUSINESS NEWS JANUARY 14
BUSINESSicon  14/01/2022 

Cashless payments account for over 70 percent of retail transactions in 2021

Stock market sets new record on billion dollars of capital inflow
Stock market sets new record on billion dollars of capital inflow
BUSINESSicon  14/01/2022 

The Vietnamese stock market continued to reach another historic record, with the largest number of new accounts opened in December after 21 years of operation.

WB forecasts Vietnam’s growth at 5.5 percent in 2022
WB forecasts Vietnam’s growth at 5.5 percent in 2022
BUSINESSicon  14/01/2022 

The World Bank (WB) has forecast that Vietnam’s economic recovery is likely to accelerate in 2022 as GDP growth is expected to rise to 5.5 percent from 2.6 percent in the year just ended.

Vietnam reconsiders electricity sources after making international energy commitments
Vietnam reconsiders electricity sources after making international energy commitments
FEATUREicon  14/01/2022 

Vietnam’s commitments at 26th United Nations Climate Change Conference of the Parties (COP 26) will have a big impact on the country’s energy system. 

Vietnam’s economic growth forecast to rebound strongly in 2022
Vietnam’s economic growth forecast to rebound strongly in 2022
BUSINESSicon  13/01/2022 

Some foreign financial organisations have issued relatively positive predictions for Vietnam’s economy this year, with growth expected at 6.5 - 6.7 percent.

Three factors behind FDI attraction in Vietnam
Three factors behind FDI attraction in Vietnam
BUSINESSicon  13/01/2022 

Low labour costs, a geographical location close to Asian supply chains, and Japan and the Republic of Korea (RoK)'s efforts to promote greater overseas investment are considered as three factors in boosting Vietnamese foreign direct investment (FDI).

Live streaming attracts young people to earn money
Live streaming attracts young people to earn money
BUSINESSicon  13/01/2022 

Making money on online platforms and social networks is increasingly popular in the labor market, streamer jobs have become popular keywords for many young people.

Ample room for Vietnam's aviation investment
Ample room for Vietnam's aviation investment
BUSINESSicon  16/01/2022 

Private investors will have more options to invest in aviation infrastructure, which has been dominated by state-owned enterprises. 

Power Development Plan VIII under revision again
Power Development Plan VIII under revision again
BUSINESSicon  13/01/2022 

The draft Power Development Plan VIII is being revised again and expected to be submitted to the Prime Minister for approval in the first quarter of 2022.

 
 
 
Leave your comment on an article

OR QUICK LOGIN