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Stock market positively responds to interest rate cuts

The stock market has reportedly shown positive response to recent interest rate cuts.
Stock market positively responds to interest rate cuts ảnh 1Illustrative image (Photo: baodautu.vn)
Hanoi (VNA) – The stockmarket has reportedly shown positive response to recent interest rate cuts.

The State Bank of Vietnam (SBV)continued reducing regulatory interest rates onJune 19, the fourth cut in a row since mid-March.

Last week,the benchmark VN-Index rose 2.1%, equivalent to 24 points to 1,129.38 points. Themoney flows tended to be channeled into bank stocks while some steel andchemical ones also went up thanks to high hopes for the pressure from lendinginterest rates to be eased, the Lao dong (Labour) daily reported.

Since the beginning of 2023,the SBV has slashed the key interest rates for four times, by 0.5 - 2% per year intotal.

The downward trend of the interest ratesis expected to continue encouraging the money flows to be shifted from bank depositsto other investment channels with higher profitability like securities.

As a result, the VN-Index has jumped 105points in total, or over 10%, for the last nearly four months since the firstregulatory interest rate cut in mid-March.

Stock market positively responds to interest rate cuts ảnh 2The VN-Index has jumped 105 points in total, or over 10%, for the last nearly four months. (Illustrative photo: congthuong.vn)
According to VietinBank Securities,the reduction of the regulatory interest rates should be maintained for a long timewith stronger cuts so that it can have observable effects on the stock market,especially when many factors other than the monetary policy are negativelyaffecting the market.

The company predicted the stockmarket will become more positive in the latter half of 2023.

Meanwhile, experts held that thereremains room for further cuts.

StandardChartered forecast the SBV will lower the refunding interest rate by 50 basispoints in the third quarter to equal the rate during the pandemic-hit years,and maintain the level until the end of 2025.

Likewise, HSBC experts also projectedanother interest cut, by 50 basis points, for Q3 which will decrease the regulatoryinterest rates to 4% and reverse tightening efforts in 2022. The move will alsobe equivalent to the reduction during the COVID-19 pandemic.

Analysts from the Maybank InvestmentBank also said Vietnam still has room to lower the rates between now and theyear’s end./.
VNA

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