Where does the money "flow" to?

SBV warned that credit for the real estate sector still accounts for a large proportion.

Cash flow diverted

Regarding the cash flow since mid-2020, an economic expert was concerned that the Covid-19 pandemic is still causing issues around the world. In Vietnam, this 4th wave has not shown any signs of ending, making it difficult for enterprises to do business.

However, while enterprises unable to do business is an issue, enterprises "surfing" securities is a completely different story and very new. This person also said this year's stock has increased strongly, making many F0 investors big profits, so businesses that take money to "play" the market also win and "have enough to spend" even if they do not do anything.

In Vietnam, there are five main investment channels recognized and protected by the State that people often allocate capital into: real estate, securities, savings, bonds and gold. Data the Vietnam Securities Depository (VSD) showed that in May, domestic investors opened more than 113,600 new securities accounts.

Compared to the previous month, the number of newly opened domestic accounts increased by about 3,000 and this is a record number.

Of this May issue, more than 113,500 were accounts individual investors and 131 accounts institutions. In the first five months of the year, domestic investors opened 480,490 new securities accounts, exceeding 20% of the number of new accounts opened in the whole of 2020. Meanwhile, the number of new accounts opened in 2020 is an all-time record, nearly double the previous year. As a result, by the end of May, the number of securities accounts on the Vietnamese market stood at more than 3.25 million, equivalent to 3.2% of the total population.

In the real estate market, since the beginning of 2021, there will be a few "virtual fevers" of land in some localities. By April and May, although the land "fever" has cooled down, there are still signs waiting to flare up again.

According to some experts, real estate prices are increasing rapidly and are 25-30 times higher than the average income of people. Real estate prices are much higher than their real value, which is the result of a series of problems related to the policy mechanism, planning and investment psychology of society.

In the bond market, a report by the Vietnam Bond Market Association shows that in April 2021 alone, there were a total of 36 domestic corporate bond issuances with a total value of over VND29,500 billion. In May, corporate bond issuance continued to be active with a series of deals. According to Fiin Group, the medium and long-term capital needs of Vietnamese enterprises are currently very large, so the mobilization channel through corporate bonds will still thrive in 2021 and coming years.

Directing cash flow to areas with high spread

With the money market, the domestic gold price is currently at a high level, up to over VND57 million/tael, but there have been few sharp increases and decreases since the beginning of 2021.

Market observation also shows that the number of transactions is not sudden, the number of buyers is higher than sellers customers, but the trend is not too strong, mainly serving the needs of hoarding and making gifts.

Meanwhile, at commercial banks, the savings channel – which is considered the safest investment channel – has a relatively low level of profitability, on average about 3-5%/year for short terms under 12 months, and the highest is only over 7%/year for long terms over 12 months.

In fact, the flow of capital into risky channels has been noticed and warned by state agencies. Recently, the State Bank of Vietnam (SBV) pointed out 10 potential signs of credit risk, in which the State Bank said that credit to the real estate sector still accounts for a large proportion, the growth rate of real estate credit is high; credit institutions also provided credit for securities investment and trading, which increased significantly compared to the previous year.

As the expert said above, difficult business and low interest rates will cause speculative "idle" cash flows during the pandemic. With F0 investors, many people pour into real estate speculation while lacking knowledge in finance, asset management, so risks can occur. In particular, the financial market still has a number of unlicensed forms of investment such as cryptocurrencies and foreign exchange (forex) exchanges. The amount of money flowing here cannot have accurate data, so the more difficult it is to manage, the greater the risk for investors.

However, interest rates in Vietnam are also showing signs of increasing. According to a market analysis report by VnDirect Securities, deposit interest rates will increase slightly by 25-30 points in the second half of 2021 due to increased credit demand in the context of economic recovery and higher inflation pressure. In addition, commercial banks need to maintain attractive deposit interest rates to mobilize capital in the context of higher competition other investment channels such as real estate and securities.

However, the liquidity of the system is still very abundant, the supply in the interbank market is still very large, so the increase of interest rate will not be high.

Banking and finance expert Dr. Can Van Luc, a member of the National Financial and Monetary Policy Advisory Council, said that Vietnam's inflation this year will still be under control, and interest rates will also be kept at a stable level. This expert also explained that interest rates inched up at some banks were only partial, however, it is necessary to direct cash flow to areas with high spillover effects, to coordinate fiscal and monetary policies.

Therefore, Dr. Can Van Luc recommends that investors focus on promoting financial knowledge, improving professionalism, especially personal investment.

SBV leaders also said that they have used tools to control risks such as gradually reducing the proportion of short-term capital used for medium and long-term loans (currently 40%), applying a high-risk adjustment coefficient and ing outstanding loans for securities investment and business compared to charter capital.