Interest rate support package has little effect on stock market

As securities and real estate sectors are not on the list to receive support, the two per cent interest rate supportnbsp;package's positive effects on the stocks market are not strong.nbsp;

A group of brokers and investors looking at the stock trading board. Photo vietnamnet.vn

As securities and real estate sectors are not on the list to receive support, the 2 per cent interest rate support package's positive effects on the stock market are not strong.

The Government officially issued a decree on interest rate support in loans of enterprises, co-operatives and business households on May 20.

The application period is in 2020 and 2023, or the package can end sooner when the total loans with interest rate support reach around VNĐ40 trillion (US$1.7 billion).

After the market benchmark VN-Index plunged up to 24 per cent from its peak in nearly two months, from 1,524 points to 1,150 points, the 2 per cent interest rate support package's announcement is a lifesaver for the market on expectations of the return of cheap cash flows.

In fact, the index had witnessed outstanding recoveries for two weeks with gains of nearly 150 points. There are rising expectations about the cheap cash flows created from the package worth VNĐ40 trillion, equivalent to a preferential credit of up to VNĐ1 quadrillion.

However, experts said that this package only has indirect effects on the stock market. Therefore, investors shouldn't put high hope on a strong performance of the market following the package issuance.

On the positive side, Agribank Securities Corporation (Agriseco) said that this support package is expected to create a boost for enterprises to accelerate their recovery speed, contributing to the whole economic growth to reach the Government's target of 6-6.5 per cent. But if companies spend the Government-supported capital for the wrong purpose, it can lead to unwanted results for the economy.

Right after the supporting announcement, many were concerned that the interest rate package will cause the stock market to experience what had happened in 2009.

Experts from Agriseco said that, 13 years ago, Việt Nam also carried out an interest rate support package from the State Bank of Việt Nam (SBV) and applied for short, medium and long-term loans. The policy was a part of the fiscal and monetary policies aimed to stimulate the economy that was affected by the global crisis.

The interest rate of the package was 4 per cent a year in 2009 and was declined to 2 per cent a year in 2010 for medium- and long-term loans.

After the package was applied, from 2009 to 2011, there were speculative cash flows flocking into asset markets like gold, foreign currencies and real estate, which raised pressure on inflation since 2010. The consumer price index (CPI) soared 9.19 and 18.58 per cent year-on-year in 2010 and 2011, respectively.

On the stock market, the VN-Index posted an impressive gain from 230 points to nearly 500 points, equal to an increase of over 100 per cent in 2009, with the first appearance of the speculative cash flow on the stock market when the interest rate for production and business activities gradually decreased.

However, the market was on a bearish trend for the next two years. In 2011 only, the VN-Index and HNX-Index dropped over 25 per cent and nearly 50 per cent compared to the beginning of the year, respectively, with average liquidity down up to 60 per cent.

At the moment, Agriseco expected that the interest rate support package will have positive effects but not too strong on the stock market as the market's size is now much bigger than that of 2009. Specifically, the market capitalisation at the end of 2009 was VNĐ620 trillion, accounting for 45 per cent of GDP, while the value at the end of 2021 reached nearly VNĐ5.8 quadrillion, hitting nearly 93 per cent of GDP.

"We also think that the market's growth is driven by the improvement of business results and the inner strength of enterprises, instead of boosts from speculative cash flow," Agriseco said.

According to the securities firm, there are two subjects benefiting from the policy, which are banks and businesses operating in supported sectors.

Business sectors in the support list include aviation, tourism, agriculture, marine product and manufacturing industries. Leading companies of these industries are more likely to meet the standards of the package because their resistance is better than the rest while facing the pandemic. — VNS

Source: VNS
vietnamnews.vn

Related News

Transparency evates the standing of listed companies

Transparency evates the standing of listed companies

VCN - According to the Hanoi Stock Exchange (HNX), the number of companies placed under warning, control, or restricted trading on the listed and registered markets has increased over the past two years compared to 2022.
Diversify and innovate securities products to attract foreign investors

Diversify and innovate securities products to attract foreign investors

VCN - Mr. Kojima Kazunobu, Chief Advisor of the Japan International Cooperation Agency (JICA), said that Vietnam needs to make more efforts in developing the stock market in both quality and quantity to become a potential market, attractive to foreign investors.
The biggest challenges businesses are facing

The biggest challenges businesses are facing

VCN - Orders, cash flow, market information, loan approach... are still the difficulties when the Private Sector Development Research Board (abbreviated as IV Board) surveyed the business situation.
Important step to soon upgrade stock market

Important step to soon upgrade stock market

VCN - According to experts, the Ministry of Finance's issuance of Circular No. 68/2024/TT-BTC dated September 18, 2024 is an important step in the process towards the goal of improving the quality of the Vietnam’s stock market.

Latest News

Launching virtual assistants to support taxpayers

Launching virtual assistants to support taxpayers

VCN – After completing the research and development of the artificial intelligence product “Virtual assistants to support taxpayers”, on November 21, Hanoi Tax Department was selected by the General Department of Taxation as the pilot unit to support taxpayers.
Banks increase non-interest revenue

Banks increase non-interest revenue

VCN - Slow credit demand and fierce competition have forced banks to seek ways to increase non-interest revenue, especially when there is a lot of support from the digital transformation of the entire banking system.
Monetary policy forecast unlikely to loosen further

Monetary policy forecast unlikely to loosen further

It will be difficult for the State Bank of Vietnam (SBV) to further loosen monetary policy due to a rising USD/VNĐ exchange rate pressure, experts said.
World Bank outlines path for Vietnam to reach high income status

World Bank outlines path for Vietnam to reach high income status

The World Bank (WB) has released a report which explores how Vietnam can upgrade its participation in global value chains to become a high-income country by 2045.

More News

Strictly control public debt and ensure national financial security  2025

Strictly control public debt and ensure national financial security 2025

VCN – In order to achieve goal of strictly managing public debt and maintaining security and safety of the national financial system in 2025, it is necessary to ensure the borrowings and repayments of public debts is within the approved estimate; closely monitor public debt indicators to ensure that they are within the ceiling and warning thresholds approved by the National Assembly.
Revising the title of a draft of 1 Law amending seven finance-related laws

Revising the title of a draft of 1 Law amending seven finance-related laws

VCN - On November 19, 2024, the Standing Committee of the National Assembly (SCNA) discussed amendments and refinements to the draft of a law revising seven existing finance-related laws. Concluding the session, Vice Chairman of the National Assembly Nguyen Duc Hai emphasized the need for the Government to direct the drafting body and relevant agencies to collaborate closely to finalize a persuasive and widely supported report, ensuring the quality of the draft law for the National Assembly's consideration and decision.
State-owned securities company trails competitors

State-owned securities company trails competitors

Contrary to the outstanding performances in the banking sector, the securities subsidiaries of major banks have yet to fully leverage their potential, despite numerous inherent advantages.
Strengthening the financial “health” of state-owned enterprises

Strengthening the financial “health” of state-owned enterprises

VCN - The state economy plays a key role in the socio-economic development process, but it is necessary to strengthen the financial health and competitiveness of state-owned enterprises (SOEs).
U.S. Treasury continues to affirm Vietnam does not manipulate currency

U.S. Treasury continues to affirm Vietnam does not manipulate currency

VCN - In its latest report, the U.S. Department of the Treasury has positively assessed Vietnam's monetary policy, reaffirming that Vietnam does not engage in currency manipulation.
Exchange rate fluctuations bring huge profits to many banks

Exchange rate fluctuations bring huge profits to many banks

Net profits from the foreign exchange trading segment of many banks have gained positive results thanks to a strong USD/VNĐ exchange rate fluctuations this year.
A “picture” of bank profits in the first nine months of 2024

A “picture” of bank profits in the first nine months of 2024

VCN - Pre-tax profits for banks during the first nine months of 2024 remained positive, exceeding 200 trillion VND, solidifying the sector's position as a market leader.
Many challenges in restructuring public finance

Many challenges in restructuring public finance

VCN - Restructuring public finance is an important step to improve state financial management, ensure resources are allocated reasonably and effectively, contributing to the country's sustainable development. In addition to the achieved results, the process of accelerating public finance restructuring also faces many pressures.
Tax declaration and payment by e-commerce platforms reduces declaration points and compliance costs

Tax declaration and payment by e-commerce platforms reduces declaration points and compliance costs

VCN - E-commerce platforms that declare and pay taxes on behalf of traders not only help to reduce the number of tax declaration points but also reduce the cost of compliance with administrative procedures for the whole society because only one point as the e-commerce trading platform implements tax deduction, payment and declaration on behalf of tens, hundreds of thousands of individuals and business households on the platform.
Read More

Your care

Latest Most read
Launching virtual assistants to support taxpayers

Launching virtual assistants to support taxpayers

VCN - According to the Hanoi Tax Department, the department manages 236,000 enterprises and 235,000 business households and over 10 million personal tax codes.
Banks increase non-interest revenue

Banks increase non-interest revenue

VCN - In the first 9 months of 2024, the group of banks leading in profit has focused on increasing the ratio of non-term deposits (CASA) to help reduce operating costs, resulting in positive credit growth.
Monetary policy forecast unlikely to loosen further

Monetary policy forecast unlikely to loosen further

It will be difficult for the State Bank of Vietnam (SBV) to further loosen monetary policy due to a rising USD/VNĐ exchange rate pressure, experts said.
World Bank outlines path for Vietnam to reach high income status

World Bank outlines path for Vietnam to reach high income status

The World Bank (WB) has released a report which explores how Vietnam can upgrade its participation in global value chains to become a high-income country by 2045.
Strictly control public debt and ensure national financial security  2025

Strictly control public debt and ensure national financial security 2025

VCN - According to the plan for borrowing and repaying public debt and foreign debt of the country in 2025, the total borrowing demand of the Government in the year is expected to be at VND 815,238 billion, an increase of 20.6% compared to the Government'
Mobile Version