SSI Research: savings interest rates unlikely to further decline

28-Jul-2021 Intellasia | NDH | 5:02 AM Print This Post

The analysis team of Saigon Securities Incorporation (SSI Research) has released the capital market report for the week of July 19th 23rd, stating that the Open Market Operation (OMO) did not record any new transaction, and foreign currency forward contracts continued to be executed, helping improve the supply of dong.

The social distancing requirements are applied more thoroughly, including the implementation of Directive 16 in many localities nationwide which caused people’s needs for cash to go up. This partly made the interbank interest rate level to gradually increase towards the end of the week, closing the week at one percent per annum on overnight term (up by seven basis points) and 1.2 percent per annum on one-week term (up by 13 basis points).

Following the call of the State Bank of Vietnam (SBV), more than 10 banks have announced preferential loan packages with a reduction of 0.5 two percent per annum in interest rates from July 15th to customers heavily affected by the epidemic. Meanwhile, the savings interest rates increased slightly by 10 40 percentage points in some banks on most terms. Some banks did not change the listed interest rate tables but raised the maximum negotiable rates with customers. SSI Research maintained the view that savings interest rates are unlikely to fall further and in contrast, may increase by an average of about 50 basis points in the second half of 2021.

The risk of one more epidemic outbreak on a global scale due to the Delta variant cast a shadow over financial markets earlier last week. However, the market sentiment was supported by the decision to maintain easy policy by major central banks (European Central Bank, People’s Bank of China) at recent meetings, the prospect of raising interest rates by the US Federal Reserve (Fed) at the December meeting has also become lower.

The risky assets tended to see more positive developments towards the end of the week but the moves were still cautious to wait for important information this week, including the results of the FOMC meeting in July and important economic data from the US.

The US government bond yields continued to sharply declined, ranging around 1.25 percent while the gold price also dropped by 0.56%. The US dollar index remained strong at around 92.9. the key currencies continued to depreciate against the US dollar, such as euro (-0.30%), British pound (-0.14%), Japanese yen (-0.44%).

In Vietnam, the news that the SBV and the US Department of Finance reached a joint statement to address US concerns about Vietnam’s monetary policy made the US dollar/dong exchange rate on both markets to go down. The exchange rate listed by commercial joint stock banks dropped by 30 dong on buying rate, closing the week at 22,890/23,110 dong per USS dollar. The free exchange rate decreased by five dong on each sides, closing the rate at 23,200/23,250 dong per US dollar. The domestic gold price slightly declined to around 56.85/57.50 million dong per tael.

In general, the US dollar/dong exchange rate from early July until now has kept a sideways trend because foreign currency supply and demand is still fairly balanced thanks to the positive remittances and FDI flows, which are enough to offset the trade deficit in the recent time. SSI Research believed that the US dollar/dong exchange rate will level off in the short term and may fall slightly due to the improvement in the balance of payments.

 

Category: Finance, Vietnam

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