Experts from DNSE Securities Joint Stock Company said that the Fed continued to hike the US dollar interest rate sharply by 75 basis points, leading to a high VND/USD exchange rate. The VND has depreciated against the US dollar by 3.5-4% in 2022, negatively affecting businesses that import goods or have loans in US dollars.
The State Bank of Vietnam (SBV) recently raised the operational interest rate by 1 percentage point due to pressure from the Fed’s interest rate hike, showing that the SBV is prioritizing the objective of controlling inflation and stabilizing the macroeconomy, while keeping lending rates low to support businesses. DNSE experts believe that this is a negative factor for the banking sector.
Amid rising interest rates to calm inflation, global equity markets, as well as in Viet Nam, did not react positively as cash flows sought safer havens such as the US dollar or government bonds.
Inflation is under control and the devaluation of the national currency is not as severe as in other countries, which shows the good management and direction of the government and the SBV in controlling inflation and appreciating exchange rate, and stabilizes the country’s economy.
“The negative fluctuations in interest rates, together with the high VND/USD exchange rate, will increase costs for companies with a high USD debt structure. Interest charges have increased due to the persistence of high anchor interest rates combined with foreign exchange losses. The power and infrastructure group; the real estate sectors will be negatively affected by the current environment,” said Nguyen Ngoc Linh, Director and Owner of DNSE.
“Especially for real estate businesses that have loans in USD when carrying out large projects, these businesses will have to bear higher interest costs and greater foreign exchange losses due to the appreciation of the USD, affecting business results.
“The increase in the operational interest rate by the State Bank to reduce the devaluation of the Vietnamese dong will help real estate companies to restructure their debts, reduce interest rate and exchange rate risks. time for the policy to materialize, so in the current period, companies will have to make efforts to prove their internal health and have many measures to combat external risks,” she said.
Oil and gas, transportation, insurance have opportunities
The crisis between Russia and Ukraine has reshaped the global flow of crude oil and altered shipping routes, lengthening journeys as the EU turns to imports from the Middle East and Russia turns to Asian countries such as China and India. This is expected to increase the price of tankers. DNSE experts believe that the oil and gas transport group will benefit.
Insurance is an industry group that may benefit in the short term from the SBV’s decision to raise operating interest rates, due to the specific nature of the industry, which is to trade silver and raising money through insurance and bond products. It is therefore, at present, the industry which presents the least risk and which benefits the most from the rise in interest rates.
The retail industry is a notable industry group at the end of this year when consumer demand for products increases after the COVID-19 pandemic, and at the same time there are many public holidays at the end of the year and gasoline prices in Viet Nam are falling, causing inflation pressure to cool.
The increase in electricity consumption thanks to the recovery of demand from the manufacturing sector after the pandemic is also creating a push for the electricity sector, including hydroelectricity. VNS