Which stocks will benefit from interest rate cuts?

Investors must thoroughly evaluate stocks to prevent riks.

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However, not all equities will benefit from SBV policy rate reduction. As a result, in order to prevent risks, investors must thoroughly evaluate stocks.

Activation of cash flow

As soon as the Fed agreed to stop raising interest rates, the SBV continued to lower policy rates to aid economic recovery. Thus, interest rates, including interbank rates, deposit rates, and lending rates, will fall shortly.

Despite the SBV cutting policy rates for the fourth time, credit growth remains modest. As of June 15, the Vietnamese economy's outstanding loans increased by 3.36% compared to the end of 2022 and 8.94% compared to the same period previous year. This fact demonstrates that both output and consumption in Vietnam are in sharp decline, leaving people with no need to borrow, and enterprises with little desire to expand production size.

However, the SBV's ongoing decrease of policy rates will assist banks in further lowering lending rates, therefore increasing production and consumption and supporting credit development.

The fast declining adjusted interest rate is predicted to cause capital flow from the deposit channel to higher risk channels, particularly securities, in the financial market.

However, several securities firms stated that the interest rate drop has had little influence on the stock market since the decline is small, the time period is short, loan rates remain high, and the stock market is still in its early phases. Many variables outside of monetary policy are putting pressure on this time, including: real estate difficulties, consumer loans, and political threats.

"The policy rate reduction must be sustained for an extended period of time; with a stronger reduction, the impact on the stock market will be clearer, especially given that many factors other than monetary policy have a very negative impact on the stock market," said Vietinbank Securities Joint Stock Company.

Who will benefit?

According to Mr. Nguyen Anh Minh, Head of F319, interest rate decreases would actively support specific groupings of companies, allowing investors to evaluate investing possibilities.

The first is a group of securities stocks. This is a sector that benefits from both input (lower capital costs) and output (better market liquidity and increasing demand for margins when financing rates are reduced). Some equities to keep an eye on are VND, SSI, HCM, and BSI. Investors may purchase SSI for 23,000 - 25,000 VND per share, VND for 18,000 -19,000 VND per share, VCI for 35,000 - 37,000 VND per share, and HCM for 26,000 - 28,000 VND per share.

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The second group is real estate stocks. Lower interest rates will assist real estate enterprises in lowering capital expenses, particularly those with significant net debt. Stocks to examine are VHM, PDR, and DIG. They are advised to purchase VHM at 54,000 - 55,000 VND/share, PDR at 16,000 - 17,000 VND/share, and DIG at 22,000 - 23,000 VND/share.

The third group is infrastructure construction and construction material stockpiles. Because the building material supply shortfall and excessive construction material prices have been overcome, public investment in infrastructure development is expected to increase significantly in 2023 compared to 2022. Based on the Prime Minister's capital plan, the Ministry of Transport (MOT) has allocated the first phase of traffic projects with a total capital of 94,135 billion VND since the beginning of this year. As a result, the North-South highway project phase 2 is allotted 45,266 billion VND in 2023, accounting for 48% of the Ministry of Transport's overall capital plan.

Until present, all 25 bidding packages for the 12 North-South expressway component projects in the 2021-2025 timeframe have been completed. A number of additional major transportation infrastructure projects, including Long Thanh Airport, the Bien Hoa-Vung Tau Expressway, the Khanh Hoa-Buon Ma Thuot Expressway, Ring Road 3 (HCMC), and Ring 4 (Hanoi), will begin in the first half of 2023.

With a holding period of 6 months, investors might consider purchasing CII at 16,000 - 18,000 VND/share and HHV at 14,000 - 15,000 VND/share.

With regard to the steel sector, investors could consider purchasing HPG at 24,000 - 25,000 VND/share and NKG at 17,000 - 18,000 VND/share, with a holding term from now until the end of this year.

In terms of cement stocks, investors could consider purchasing HT1 at 15,000 - 16,000 VND/share and BCC at 13,000 - 14,000 VND/share for a 6-month holding period.