With savings interest rates at record lows, household money is turning to other higher-yielding investment channels such as stocks, gold and real estate… Household deposits at credit institutions stand at over VND 5.26 quadrillion
Record-low deposit rates drive sharp drop in bank deposits
According to the State Bank of Vietnam, as of April 2021, customer deposits at credit institutions stood at over VND 5.26 quadrillion, up just 2.34% from the end of 2020. This is the lowest growth for the period in many years of published statistics.
Previously, in the same periods of 2013 and 2014, when deposit rates were still relatively high at 7-9% per year, household deposit growth at credit institutions reached as high as 13.55% and 9.83%. However, over the past two years, household deposit growth slowed to just 3.37% in April 2020 and hit a low of 2.34% in April 2021.
Bank savings have always been considered a safe investment channel, especially during the pandemic, but today's low deposit rates have driven household savings toward other investment channels.
According to statistics, interest rates have fallen by 1.5% to 2.5%. Currently, one-month deposit rates at some banks are just 3.3% per year, the lowest in the past 10 years.
According to experts, with savings rates at record lows, household money is flowing into other higher-yielding investment channels such as stocks, gold and real estate…
Money pours into the stock market
According to data from the Vietnam Securities Depository (VSD), domestic investors opened 140,193 new securities accounts in June 2021, 26,519 more than in May. Of these, domestic individual investors accounted for 140,054 accounts, while institutions opened just 139.
In the first six months of the year, domestic investors opened 620,683 new securities accounts, 58% more than in 2020; this figure even exceeds the combined totals for 2020 and 2019.
It can be said that this is an all-time record for the Vietnamese stock market.
According to experts, the recent rush by domestic investors to open securities accounts stems from many factors, such as low bank savings interest rates, the tightening of the corporate bond channel after Decree 81, and a seemingly ‘frozen’ domestic gold investment channel… making stocks an attractive investment channel recently.
Many stock investors say that although stock investments do not yield large profits, they offer a quick way to make money and are a legal and fairly safe investment channel. In addition, it is easier to obtain leveraged loans for stocks than for other investment channels.
The General Department of Taxation said that tax revenue from the securities sector has increased significantly in recent times.
For example, the Ho Chi Minh City Tax Department reported that in the first four months of 2021, tax revenue from securities surged by 221.3%, growing many times faster than other revenue items.
Further data from the State Securities Commission shows that since the end of Q1 2020, margin lending has nearly tripled to almost VND 110,000 billion. The combined market capitalization of the HOSE, HNX and UPCOM exchanges is now nearly equal to Vietnam's 2020 GDP.
Withdrawing savings to buy homes and land?
Beyond the securities sector, data released by the General Department of Taxation (Ministry of Finance) shows that in the first six months of 2021, corporate income tax revenue from real estate transfers rose 61.7% year on year, equivalent to about VND 8,600 billion.
Personal income tax from real estate transfers also rose by about VND 4,500 billion, while land and housing registration fees increased by about VND 1,100 billion.
In the field of foreign direct investment (FDI), the Ministry of Planning and Investment said that in the first six months of 2021, although total FDI declined, FDI into real estate increased, reaching USD 1.15 billion, up more than 35% year on year. Real estate is one of the 18 sectors in Vietnam that attracted the largest registered capital from foreign investors in the first six months of the year.
These figures show that despite many obstacles from the Covid-19 pandemic, the real estate market remains highly attractive to foreign investors.
For domestic investors, falling bank interest rates are also one of the factors driving household money into homes and land rather than bank deposits.
According to experts, although the pandemic has created difficulties for the real estate market in general, experienced real estate investors will certainly find opportunities amid the challenges.
The current reality shows that many investors are still quietly seeking real estate in low-density areas that benefit from major transport infrastructure projects, as well as projects with clear legal status…
Vietnamese demand for gold is very high
Recently, a survey on individual gold investment in Vietnam conducted by the World Gold Council (WGC) in March 2020, announced at the Executive Committee meeting of the Vietnam Gold Business Association at the end of April, showed that investor interest in gold is very high, as Vietnamese people believe gold helps hedge against inflation and currency fluctuations, giving investors long-term peace of mind.
Specifically, of the 2,000 investors surveyed, 68% said gold was their top-priority product; 72% had invested in gold over the past year, showing that demand for gold in Vietnam remains very strong; notably, 81% of those who had bought gold in the past are considering buying more.
In Vietnam, compared with investment channels such as stocks, savings deposits, real estate and bonds…, experts believe the domestic gold market is still not as profitable as other channels, because domestic gold prices are currently very high, at around VND 57.5 million per tael, requiring substantial capital to invest. Notably, once you buy gold you cannot sell it right away; you have to wait many months, even a whole year, and the returns are low, just a few percent.
Moreover, the domestic gold market is currently a law unto itself, with prices out of step with world prices. This creates disadvantages and significant risks for investors.
Therefore, experts advise that investors who choose gold should commit only part of their capital to it as a safe-haven asset, rather than putting all their eggs in one basket.
Source: Cafebiz.vn