Investors cautious about disbursing investments amid higher rates: experts

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VIETNAM, September 26 – HÀ NỘI — While many major central banks have tightened their monetary policies to contain the surge in inflation, the State Bank of Vietnam (SBV) also decided on September 22 to raise its key rate by 100 basis points, starting September 23.

This is the first rate hike by the SBV since 2020, following the outbreak of the COVID-19 pandemic.

According to experts, this decision is in line with current developments in the money market in order to avoid creating a significant management gap between Việt Nam and other economies.

Last week, the US Federal Reserve announced an increase in central bank overnight interest rates by 0.75 percentage points to 3-3.25% per annum, its fifth rate hike in 2022. The Fed also said it would continue to raise rates and hold above 4% per year after 2023 to curb inflation.

This caused the US dollar to continue to appreciate strongly and break the 20-year high in the international market, which put pressure on the USD/VND exchange rate and the management of monetary policy.

Nguyễn Đức Lệnh, Deputy Manager of SBV Branch of HCM City, said SBV’s pricing decision followed the general global trend. Many countries had raised and were continuing to raise interest rates to combat high inflation. Therefore, as an integrated economy with a relatively high degree of openness, the decision to raise interest rates was objective and appropriate, he added.

However, rising interest rates will weigh on the cost of raising capital for commercial banks.

After the SBV’s monetary policy decision, many commercial banks also announced increases in deposit interest rates.

According to forecasts by VNDirect Securities Corporation, the interest rate on deposits may increase by 30 to 50 basis points from the current level in the last months of 2022. Thus, the interest rate on deposits at 12 commercial banks will grow on average at 6.1-6.3% per year by the end of 2022, but still below the pre-pandemic level of 7% per year.

In a new report, Petrovietnam Securities Incorporated (PSI) said: “SBV’s decision indicates that the era of cheap money is over and interest rate levels in the future will certainly be higher. .”

The cost of capital for commercial banks has risen sharply since the beginning of the year, especially in the group of small banks.

In addition, SBV reopened the Treasury bill channel after freezing it for two years, withdrawing a large amount of money from the banking system to curb inflation.

The lack of liquidity in the system caused the interbank interest rate to sometimes exceed 6% per annum in the overnight market, higher than the rate for 12-month personal deposits in public banks.

Economist Nguyễn Hữu Huân said that while the government and SBV have requirements to ensure stability of interest rates on loans, commercial banks will find ways to cushion losses such as levying additional fees or the obligation for companies to use other financial services of banks to obtain loans.

In fact, since the start of the year, lending rates have also shown signs of increasing at some commercial banks.

However, as there is often a lag between increases in interest rates on deposits and lending rates, in the short term the net profit margin of commercial banks is considered to be narrower compared to the previous money period. cheap.

While the line of credit in 2022 has been widely used, PSI believes the outlook for the banking sector in the final months of the year will not be as bright as in the first half.

With the central bank’s cautious approach to extending credit, it is likely that 2023 will also continue to be a less favorable year for the banking sector.

Amid continued rate hikes by central banks, uncertain stock market developments and declining liquidity trends, PSI advised investors to prioritize risk management, limit use of margins and to reduce the proportions of equities in the portfolios during technical recovery sessions.

For companies with large investment plans in the future, PSI also suggested that investors cautiously re-evaluate the potential of projects, as interest charges will rise sharply from initial estimates and extend the payback period. projects. VNS

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