Stock market reacts to the rise of interest rate

VCN - The State Bank's adjustment of interest rates in the market has affected the stock market. Along with some developments in the world financial market, the stock market has continuously dropped since State Bank announced the rise of interest rates. Therefore, according to experts, investors need to be calm and select the correct information to invest in the current context.
The stock market fell after adjustments in the interest rate market. Photo: Nguyễn Hiền
The stock market fell after adjustments in the interest rate market. Photo: Nguyễn Hiền

Negative volatility

After the Federal Reserve System (FED) decided to raise the introductory interest rate by 0.75 percentage points on September 21, the central banks of many countries moved to raise interest rates to control inflation and protect the local currency. Under tremendous pressure from the world macro context, in Vietnam, from September 23, the State Bank of Vietnam also decided to raise points for a series of critical operating interest rates. Rising interest rates caused the world stock market to decline. Moreover, after the interest rates rose by FED, major global stock markets simultaneously dropped points.

Vietnam's stock market is no exception. In that situation, cash flow is more difficult to access, and investors' psychology is affected. The VN-Index has decreased continuously; even the support zone of 1,100 points has been penetrated. The market had many dropping sessions in the last week of September. Entering October, the stock market witnessed struggling sessions, but the market's movements were still in a negative trend. Ending the first week of October, in the trading session on October 7, the market witnessed the plummet of VN-Index with a decrease of 39 points, stopping at approximately 1,036 points. The HNX-Index fell 8.04 points (3.84%) to 226.09 points, and the UPCoM-Index dropped 2.43 points (2.95%) to 79.98 points.

Talking about concerns in the market, Mrs Ho Nguyen Thuy Tien, Director of the Individual Clients Division at Rong Viet Securities, noted interest rate hikes. According to Mrs Ho Nguyen Thuy Tien, policy operators are facing the need to stabilize the exchange rate and control inflation in Vietnam. Therefore, the State Bank has decided to increase the operating interest rate by 1% with the supplying capital interest rate from 4% to 5% and the rediscount interest rate from 2.5% to 3.5%. However, raising interest rates conflicts with Vietnam's policy of promoting economic growth, which was set out at the beginning and is still emphasized today. Along with that, the world economy is coping with the European food and gas crisis, high inflation in the US, problems in China, political tensions, and the Fed raising interest rates.

"I think those are worrying issues in the market right now when cheap money is no longer available, interest rates rise, politics escalate... making the stock market's sentiment quite strong," Mrs Tien said.

Regarding the impact of raising the interest rate on the profits of listed companies, Mr Quan Trong Thanh, Director of Maybank Investment Bank's Analysis Division, said that the average total profit forecast of enterprises in 2022 was about 25 % which was still achievable. Therefore, the impact of the increase in the interest rate on businesses was not too significant. However, it would reduce the profit of the whole market by 3-5%. The industries that maintain high growth rates were, firstly, the retail and banking industries. It is forecasted that the banking industry will maintain a good growth rate of about 25%-30% because the bank could still ensure the credit growth rate if comparing this period with the previous period, in addition to the fact that they can regulate profits through the reserve fund.

Carefully monitor market movements

The stock market is always sensitive and moving forward, so entering the period of rising interest rates, according to experts, in the short term from the next three to six months when the market faces big stories such as exchange rate pressure, interest rate increase, the market will be pending, not participating drastically right away, while those holding stocks are also very impatient.

Mr Quan Trong Thanh, Director of the Analysis Division of Maybank Investment Bank, said that the most favourable scenario was that after this interest rate adjustment, the market price or VN-Index would go sideways, not creating a solid trend yet. However, according to experts of Maybank Investment Bank, business activities would have EPS growth, which means that earnings per share would continue to increase, and at some point, the valuation would drop to a superficial level. If, looking at the long-term perspective and Vietnam's economy was still in a recovery trend, Vietnamese businesses still had enough strength to go through this period within the next 12 months, then this was a good time to invest.

Meanwhile, Mr Tran Thang Long, Director of Analysis, BIDV Securities Joint Stock Company (BSC), said that, up to now, the global stock market's movements were quite bad and going down. However, the market was still weak. On the other hand, Vietnam's stock market was luckier because during the Covid-19 pandemic, we did not have to cut interest rates drastically or implement an easy monetary policy, so there was still room for growth. Therefore, with the efforts of the Government, the National Assembly of Vietnam, and our "room" policies, were still there, Vietnam would still be an essential and attractive destination for domestic and international investors.

After interest rates are adjusted to rising, investment opportunities may be quite bright in the long term, but many people think it will be difficult in terms of short-term investment opportunities. Accordingly, experts said that investors should pay attention and carefully monitor market movements. Let us seize the opportunity if there are adjustments to reasonable valuation and profitability levels. As for the investment prospects of industry groups, it is challenging to choose in the short term because market sentiment changes rapidly. However, in the long term, from the next six months to one year, stocks related to public investment that have dropped recently are an opportunity for investors to accumulate. Besides that, the industry group related to industrial parks is also quite promising when the occupancy rate of Vietnam's industrial parks has reached extremely high levels, and rents price has increased by more than 15%.

Experts also noted that the stock market was a susceptible market to information. As long as some disturbing information appears, it could greatly affect the market and cause strong fluctuations. Therefore, to be able to determine a good stock price, investors need to have a stable, calm mentality and select the correct information to be able to make optimal and more accurate investment decisions.

By Hoài Anh/Thanh Thuy

Related News

Ensuring national public debt safety in 2024

Ensuring national public debt safety in 2024

VCN - Since the beginning of the year, public debt management has been conducted proactively and effectively, meeting the need of raising capital for development investment. At the same time, debt indicators by the end of 2024 are guaranteed within the ceiling and safety threshold approved by the National Assembly, ensuring national financial security, increasing proactive response to risks arising from external and internal causes of the economy.
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.
Vietnam

Vietnam's economy remains growth momentum

VCN- According to Mr. Nguyen Ba Hung, Chief Economist of the Asian Development Bank (ADB), public investment will play a key role in economic recovery and growth in 2024. Fiscal measures to support growth and public investment are key policy solutions to stimulate growth year- end months.
FED cuts interest rates: A good opportunity for Vietnam’s exports and investments

FED cuts interest rates: A good opportunity for Vietnam’s exports and investments

VCN - The U.S. Federal Reserve (FED) has decided to cut interest rates and announced plans for further reductions until 2026. According to Dr. Can Van Luc, Chief Economist at BIDV and a member of the National Financial and Monetary Policy Advisory Council, the FED's shift in monetary policy has presented a great opportunity for Vietnam's exports and investments.

Latest News

M&A activities show signs of recovery

M&A activities show signs of recovery

Mergers and acquisitions (M&A) activities in Vietnam have been showing signs of recovery in recent months as several large companies announced finished deals, which may create a ripple effect in the M&A market.
Fiscal policy needs to return to normal state in new period

Fiscal policy needs to return to normal state in new period

VCN - To recover the economy during and after the Covid-19 pandemic, fiscal policy has been flexibly and promptly managed, becoming a solid foundation to help businesses and the economy gradually overcome difficulties. After nearly 5 years, although there are still difficulties, the economy is gradually returning to a high growth trajectory. In that context, it is necessary to let fiscal policy return to normal state.
Removing many bottlenecks in regular spending to purchase assets and equipment

Removing many bottlenecks in regular spending to purchase assets and equipment

VCN - Decree No. 138/2024/ND-CP, which has just been issued, is expected to contribute to resolving bottlenecks in allocating funds for purchasing assets and equipment; renovating, upgrading, expanding, and constructing new construction items in projects that have been invested in and constructed in the past.
Continue to handle cross-ownership in banks

Continue to handle cross-ownership in banks

VCN - The situation of excess share ownership, cross-ownership between credit institutions (CIs), CIs and enterprises, although has decreased significantly compared to previous periods, is still complicated and requires continued inspection and control.

More News

Striving for average CPI not to exceed 4%

Striving for average CPI not to exceed 4%

VCN - According to the report of the Ministry of Finance, there are still some factors that put pressure on price levels in the remaining months of 2024, so the Ministry has updated 2 scenarios of average inflation in 2024 increasing in the range of 3.7-3.92%.
Delegating the power to the government to waive, lower, or manage late tax penalties is suitable

Delegating the power to the government to waive, lower, or manage late tax penalties is suitable

VCN - Discussing in groups about the project "1 law amending 7 laws" in the financial sector according to the program of the 8th Session on October 29, 2024, National Assembly delegates proposed that the Government should be assigned to make specific regulations on decentralization, granting the right to exempt and reduce taxes, and handling penalties for late payment of taxes...
Removing difficulties in public investment disbursement

Removing difficulties in public investment disbursement

VCN - According to the report of the Investment Department (Ministry of Finance), the estimated disbursement from the beginning of the year to October 31, 2024 is VND 355,616.1 billion, reaching 47.43% of the 2024 plan, reaching 52.29% of the plan assigned by the Prime Minister.
State-owned commercial banking sector performs optimistic growth, but more capital in need

State-owned commercial banking sector performs optimistic growth, but more capital in need

VCN - According to the report sent to the National Assembly before the 8th Session of the Government on investment, management and use of state capital in enterprises nationwide in 2023, the business performance of the state-owned commercial banking sector achieved positive growth.
Stipulate implementation of centralized bilateral payments of the State Treasury at banks

Stipulate implementation of centralized bilateral payments of the State Treasury at banks

VCN - The Ministry of Finance (MOF) gathers feedback on the draft Circular regulating the management and use of accounts of the State Treasury opened at the State Bank of Vietnam (SBV) and commercial banks.
Rush to finalize draft decree on public asset restructuring

Rush to finalize draft decree on public asset restructuring

VCN - According to the Ministry of Finance, the draft Decree regulating the rearrangement and handling of public assets is being urgently completed by the Ministry of Finance to submit to the Government for promulgation.
Inspection report on gold trading activities being complied: SBV

Inspection report on gold trading activities being complied: SBV

The State Bank of Vietnam (SBV) has announced that inspections on compliance with legal policies in gold trading activities of credit institutions and gold trading businesses have been completed and an inspection report is being compiled.
Budget revenue in 2024 is estimated to exceed the estimate by 10.1%

Budget revenue in 2024 is estimated to exceed the estimate by 10.1%

VCN -The Government estimates that state budget revenue in 2024 will exceed VND 172.3 trillion, up 10.1% over the estimate, of which tax and fee revenue will reach 13.1% of GDP.
Ensure timely and effective management and use of public asset

Ensure timely and effective management and use of public asset

VCN – In order to promptly and effectively implement public asset management and use, ensuring compliance with legal regulations, the Ministry of Finance has just issued an official dispatch requesting ministries, branches and localities to comply with regulations in the Government’s Decree No. 114/2024/ND-CP dated September 15, 2024.
Read More

Your care

Latest Most read
M&A activities show signs of recovery

M&A activities show signs of recovery

Mergers and acquisitions (M&A) activities in Vietnam have been showing signs of recovery in recent months as several large companies announced finished deals, which may create a ripple effect in the M&A market.
Fiscal policy needs to return to normal state in new period

Fiscal policy needs to return to normal state in new period

VCN - To recover the economy during and after the Covid-19 pandemic, fiscal policy has been flexibly and promptly managed, becoming a solid foundation to help businesses and the economy gradually overcome difficulties. After nearly 5 years, although there
Ensuring national public debt safety in 2024

Ensuring national public debt safety in 2024

VCN - Since the beginning of the year, public debt management has been conducted proactively and effectively, meeting the need of raising capital for development investment. At the same time, debt indicators by the end of 2024 are guaranteed within the ce
Removing many bottlenecks in regular spending to purchase assets and equipment

Removing many bottlenecks in regular spending to purchase assets and equipment

Decree No. 138/2024/ND-CP, which has just been issued, is expected to contribute to resolving bottlenecks in allocating funds for purchasing assets and equipment
Continue to handle cross-ownership in banks

Continue to handle cross-ownership in banks

VCN - The situation of excess share ownership, cross-ownership between credit institutions (CIs), CIs and enterprises, although has decreased significantly compared to previous periods, is still complicated and requires continued inspection and control.
Mobile Version