On September 19, 2024, the Federal Reserve announced a 50 basis point interest rate cut in response to declining inflation and clear signs of a slowing U.S. economy. This decision has sparked widespread discussion about global investment markets.

Optimistic Stock Market Outlook

Dr. Nguyễn Trí Hiếu, a finance and banking expert, predicts that following the Fed’s rate cut, the stock market will become an extremely attractive investment channel. He points out that numerous positive signals indicate the market will receive significant attention from investors, and expects the Fed’s decision to positively impact global stock markets, including Vietnam’s. Dr. Hiếu assesses that the stock market will show good growth this year.

Phan Dũng Khánh, Director of the Investment Analysis Department at Maybank Kim Eng Securities Company, shares this view. He states that the Fed’s rate cut will positively impact the stock market, as the banking system can promote credit growth, thereby improving overall economic liquidity, especially in the stock market. Khánh adds that lower U.S. dollar interest rates will help attract international investment capital to developing country markets, particularly those with significant differences between their domestic currency interest rates and U.S. dollar rates.

After a prolonged period of net selling, foreign investors have recently resumed net buying in the Vietnamese stock market. This trend further supports experts’ optimistic expectations for the Vietnamese stock market’s prospects.

Dual Impact on Vietnam’s Economy

VinaCapital, an investment management company, points out that the Fed’s significant rate cut is a double-edged sword for Vietnam. On one hand, the depreciation of the U.S. dollar eases pressure on the Vietnamese dong (VND). Earlier in 2024, the dong had depreciated by nearly 5% year-to-date, prompting the State Bank of Vietnam (SBV) to actively tighten monetary policy by withdrawing liquidity from the country’s currency market. However, since late June, when expectations of Fed rate cuts increased, the dong has appreciated by nearly 4%.

On the other hand, the slowdown in the U.S. economy could hamper Vietnam’s GDP growth. Overall exports, particularly to the U.S. (which grew by nearly 30% in the first eight months of 2024), have been the most important driver of Vietnam’s GDP growth this year. Consequently, a U.S. economic slowdown could reduce American consumers’ demand for “Made in Vietnam” products such as laptops, phones, and other goods.

VinaCapital predicts that by 2025, Vietnam’s GDP growth will need to be driven by internal factors to offset the impact of the U.S. economic slowdown. The company emphasizes that the government has various tools available to boost the economy, such as increasing infrastructure spending and promoting further thawing of the real estate sector. VinaCapital shares that real estate transaction volume in Vietnam for the first nine months of 2024 may increase by up to 35% compared to the same period last year.

Foreign Exchange Investment Outlook

Dr. Nguyễn Trí Hiếu notes that the value of the U.S. dollar is trending downward and may continue to fall as the Fed further reduces interest rates. The dollar’s value is expected to stabilize only by the end of the year. However, Hiếu emphasizes that investing in foreign currencies is not a popular choice for most investors as it requires extensive experience and knowledge.

Bank Deposits Remain Attractive

In contrast, bank deposits remain an attractive investment option, especially with rising interest rates. This is considered the safest and most reliable channel for investors looking to protect their cash flow.

Gold Investment Loses Luster

Hiếu believes that gold has lost its appeal to investors. The fact that state-owned commercial banks are allowed to sell gold but not buy it has exacerbated the sluggish state of the gold market. The gold rush in the domestic market was eliminated when the price of SJC gold plummeted from over 90 million VND per tael to about 80 million VND per tael currently. Gold trading supply is very limited. The current development trend of the Vietnamese gold market differs from the international market and has not been strongly influenced by the Fed’s moves.

Real Estate Investment Faces Challenges

Regarding real estate investment, Hiếu points out that although demand for real estate remains high, property prices are also very high, currently beyond the budget of most Vietnamese people. According to experts, houses in Hanoi are priced at around 5 billion VND, far exceeding most people’s ability to pay.

When laws such as the Land Law and the Real Estate Business Law are amended, property prices tend to rise. Recently, there have been instances of land fever driving up prices in some areas. Hiếu states that this year’s real estate market will not truly stabilize and develop sustainably, so investors need to be cautious about the risks in this investment channel.

Brief Summary:

• After the Fed’s rate cut, Vietnam’s stock market is seen as an attractive investment channel, expected to show good growth.
• The Fed’s rate cut has complex impacts on Vietnam’s economy, both easing pressure on the dong’s depreciation and potentially affecting Vietnam’s GDP growth due to the U.S. economic slowdown.
• Foreign exchange investment requires professional knowledge and is not seen as a primary choice for ordinary investors.
• Bank deposits remain attractive in the current interest rate environment.
• Gold investment has lost its appeal in Vietnam, with a sluggish market.
• Real estate investment faces challenges of high property prices and market instability, posing risks.
• The Vietnamese government may need to drive economic growth through internal factors such as increased infrastructure spending and promoting real estate sector recovery.

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