Nearly half a million dong in deposits will mature in the second half of the year. Will new capital flow heavily into stocks?

After four consecutive adjustments, the current operating interest rate has almost reached its lowest level in 2020. The recently updated report presents statistics from Yuanta Vietnam Securities shows that deposit growth increased by 6.4% quarter-on-quarter in the fourth quarter of 2022 after the SBV increased interest rates in October 2022. At the same time, the majority of deposits during this period are deposits with terms of 6 to 12 months.

Therefore, Yuanta experts expect the deposit worth around VND496,000 billion to mature between June and December 2023 and will likely result in more capital flowing into stocks in the second half of 2023.

However, Yuanta does not expect that all deposits due will be redirected to the exchange. The analysis team estimates that 10% of the above deposits will flow into the market, which is approximately VND 49,000 billion (transaction value on the exchange in about 2 days).

I share the same opinion, sir Petri Deryng, manager of the Pyn Elite Fund in one Recent commentary suggests that 12-month term deposits maturing at the end of 2022 will mature in late fall 2023, so the Pyn Elite fund expects cash flow to be reallocated into other investments, typically such as stocks.

“We believe that the Vietnamese economy will accelerate thanks to a series of policies enacted and that 2024 will be a year of strong economic growth. Domestic cash flow will return to the equity investment channel and the stock market will continue to recover in this third quarter.“, commented the fund boss from Finland.

In fact, although the stock market has regained momentum and deposit interest rates are continuously falling, the amount of people’s deposits is still increasing continuously. Newly released data from the State Bank shows that people’s deposits in credit institutions reached VND 6.38 million by the end of June 2023, a slight increase compared to the end of May and increased to 8.82% compared to the beginning of 2023.

There will be a further reduction in operating interest rates at the end of 2023 or beginning of 2024

Yuanta analysis group believes that the state bank still has room to further reduce operating interest rates in the coming period, but it is necessary to think about the Fed’s next move to make an appropriate decision.

According to Yuanta’s statistical results, the SBV could reduce operating rates by another 50 basis points in late 2023 or early 2024.

The current interest rate on 12-month term deposits at 4 state-owned commercial banks is 6.3% (August 16, 2023). Therefore, if the State Bank of Vietnam grants an additional interest rate cut of 50 basis points, Yuanta predicts that four state-owned commercial joint-stock banks will adjust the interest rate on 12-month fixed deposits to 6%/year or less.

Analysts also expect banks’ capital mobilization costs to decline from the third quarter of 2023 after the State Bank of Vietnam cut operating interest rates four times in 2023. However, loan interest rates will also fall. Accordingly, decrease and even faster than the mobilization interest rate in accordance with the State Bank’s policy to support the economy, resulting in a slight decrease in the NIM for the entire industry in 2023.

On the other hand, credit growth slowed to 4.7% in the first 6 months of the year compared to the beginning of the year due to weak economic growth and high interest rates. Yuanta expects lending rates to start falling from the third quarter and the economy to recover by the end of the year. Yuanta forecasts that loan growth in 2023 will increase by 12-13% over the same period.