A residential area in Hanoi. Real estate becomes more attractive under the low interest rate context. Photo by VNA.
When interest rates are low, savers will reconsider their asset allocation, says Mirae Asset Securities & Investments Company Investment Director Huynh Minh Tuan. Cash flow is always “smart money” and seeks higher-yielding investments.
The savings channel can transfer money to real estate and equity markets, but it takes time. Tuan said the stock channel may get it next month, while the real estate channel may wait a few months.
Transferring savings books has also grown. Last weekend, a corporation promised to acquire 1,500 billion bonds but only bought 600.
While deposit interest rates plummet, investors prefer high-yielding securities. This bond pays 10.5%, 30% more than savings rates. Tuan believes interest rate reductions will benefit some industries. When interest rates dropped, equities rose. Tuan said capital-intensive industries including real estate, securities, banking, and construction materials will profit.
Tuan says the stock market reflects the economy’s future expectations, not the present. Real estate, equities, building materials, and consumer products should benefit from lower interest rates, but it takes time. When interest rates drop, bad debts stabilize, thus the banking industry needs to look further.
The stock market is sideways or moving in a narrow range despite foreign investors net selling 10 trillion VND, experts stated. That shows domestic investors are buying stocks, mostly individual customers, or cash flow is returning to the market. In the present sideways market, investors seeking stocks with inexpensive valuations and low prices must analyze each industry and asset, according to Tuan.
Selecting equities is easier when the stock market is narrow. Nguyen Nhat Khanh, head of Mirae Asset Securities & Investments Company’s Investment Advisory Division, advised investors to pick small- and medium-cap stocks with their own stories in the current narrow sideways market because cash flow won’t have to work as hard to boost their prices. At the same time, it is not always possible to choose the top stocks in the business, but if you choose stocks with less attention, the profitable bet will be larger.
