Deposits in banks fall to a record as money flows in other investment channels

23-Jul-2021 Intellasia | Infonet | 5:02 AM Print This Post

Since the savings interest rates dropped to record low levels, people have chosen other investment channels with higher yields such as securities, gold, real estate, etc. According to the State Bank of Vietnam (SBV), as of April 2021, the amount of customer deposits in the system of CIs was above 5,260 trillion dong, only up by 2.34 percent compared to the end of 2020. This is the lowest growth rate over the same period of many previous years.

Previously, in the same period of 2013 and 2014, when the savings interest rates were fairly high from seven to nine percent per annum, the growth of people’s deposits in CIs once reached 13.55 percent and 9.83%, respectively. However, in the last two years, residential deposits only increased by 3.37 percent as of April 2020 and 2.34 percent as of April 2021.

Depositing money in banks has always been considered a safe investment channel, especially during the epidemic. However, the current low savings interest rates have caused people’s accumulated capital to shift to other investment channels.

Statistics showed that the interest rate level has fallen by 1.5 percent to 2.5 percent per annum. The one-month savings interest rate in some banks is now only 3.3 percent per annum, the lowest in the past 10 years.

Data from the Vietnam Securities Depository (VSD) pointed out that in June 2021, domestic investors newly opened 140,193 securities accounts, an increase of 26,519 accounts compared to May. In particular, the number of domestic individual investors accounted for 140,054 accounts, and institutional investors only opened 139 accounts.

In the first six months of 2021, domestic investors opened 620,683 new securities accounts, up by 58 percent compared to 2020. This number is even higher than 2020 and 2019 combined, can be considered a record number ever of the Vietnam’s stock market.

According to experts, there are many reasons for the rush of domestic investors to open securities accounts in the recent time, such as the low savings interest rates, the tightening of corporate bond channel according to Decree 81, the gold channel in the domestic which is considered being “frozen”, and the attractiveness of securities channel in the recent time.

Many securities investors said that despite investing in securities is not very much profitable, it is a quick-money making, and a legal and relatively safe investment channel. In addition, it is also easier to borrow money for leverage than other investment channels.

The General Department of Taxation said that, recently, the tax revenue in securities sector has increased significantly. According to the Tax Department of HCM city, in the first four months of 2021, the tax revenue from securities sector soared by 221.3%. Compared to other amounts, the rate of tax collection from securities sector is many times higher.

Statistics from the State Securities Commission showed that from the end of the first quarter of 2020 until now, the outstanding balance of margin loans has risen by nearly threefold to nearly 110 trillion dong. the capitalisation of the three exchanges HCM city Stock Exchange (HoSE), Hanoi Stock Exchange (HNX) and Unlisted Public Company Market (UPCoM) is nearly equal to the Gross Domestic Product (GDP) in 2020.

Not only securities sector, the data published by the General Department of Taxation showed that in the first half of 2021, the revenue from corporate income tax on real estate transfers increased by 61.7 percent over the same period of last year, equivalent to about 8.6 trillion dong. the personal income tax from real estate transfers also went up by about 4.5 trillion dong, and real estate registration fee rose by about 1.1 trillion dong.

Regarding Foreign Direct Investment (FDI), the Ministry of Planning and Investment said that in the first two quarters of 2021, although the total FDI declined, the FDI in real estate still increased and reached 1.15 billion US dollars (up by over 35 percent compared to the same period of 2020). This is one of the 18 industries and sectors in Vietnam that received the largest capital registered by foreign investors in the first six months of the year.

These numbers show that despite facing many obstacles from the Covid-19 epidemic, the real estate market is still very attractive to foreign investors.

For domestic investors, the reduction of banks’ interest rates is also one of the factor for the shift of people’s capital to house and land buying instead of depositing in banks.

According to experts, although the epidemic makes it difficult for the real estate in general, experienced investors in real estate field would surely find opportunities in difficulties.

Current reality shows that many investors are still finding real estate in the areas that have large traffic infrastructure projects, low density or projects with clear legality.

The high demand for buying gold of Vietnamese

Recently, the World Gold Council (WGC) conducted a survey on gold investment of individuals in Vietnam in March 2020, which was announced at the Executive Committee meeting of the Vietnam Gold Traders Association in April 2021. The survey showed that investors’ interest in gold is huge as Vietnamese believe that gold helps fight inflation and currency fluctuations, giving investors peace of mind in the long term.

Specifically, among 2,000 investors participating in the survey, 68 percent of investors thought that gold is their priority product; 72 percent of investors invested in gold in the previous year, which shows the strong demand for gold in Vietnam; and particularly 81 percent of investors who bought gold in the past considered buying more gold.

In Vietnam, compared to other investment channels such as securities, savings, real estate, bonds, etc. according to experts, the gold market in the domestic is not as profitable as other investment channels because the domestic gold price is currently very high at about 57.5 million dong per tael, requiring a large source of capital for investment. It is worth mentioning that after buying gold, investors cannot sell immediately and must wait for many months or even years, while the profitability is low at only a few percent.

Moreover, the price in the domestic gold market is not compatible with the world gold price. This poses great disadvantage and risks to investors. Therefore, experts recommend investors to pour only a part of their capital in gold and should not put all eggs in one basket.

 

Category: Finance, Vietnam

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