Topic: Liquidity

A report from the VNDirect Securities Company shows that tight liquidity has been a concern for the banking system in recent times, but the risk to system liquidity is not significant. The efforts of authorities to combat “dollarization” in the economy and increase cashless transactions have brought significant results, while the macroeconomic situation remains stable and the health of the banking system has improved.

The purchase of land plots and apartments in Ho Chi Minh City and surrounding areas fell by nearly 80 per cent in the third quarter of 2022. The DKRA Group has forecast that market demand and liquidity will continue to be affected over the closing months of the year by moves to increase interest rates and strengthen credit control.

Liquidity in the banking system has risen in recent times, helping to cool interbank interest rates. The overnight interbank interest rate has fallen from more than 8.35 per cent per annum to 7.72 per cent. According to the Vietnam Interbank Market Research Association (VIRA), liquidity is forecast to be less of an issue but still not abundant.

A negative deposit-credit gap and the State Bank of Vietnam’s withdrawal of money have tightened liquidity in the banking system. Interbank VND rates have skyrocketed. The overnight interest rate on October 4 was up to 7.74 per cent per annum, or 2.58 percentage points higher than in the middle of last week. Deposit interest rates are expected to continue to increase in the near future.

The average transaction value per session in the stock market reached nearly VND23 trillion ($963 million) in the first nine months of 2022, down 14.5 per cent compared to the average in 2021. In the derivatives market, the average trading volume of futures on the VN30-Index reached 210,910 contracts per session, up 12 per cent from the average last year.

Liquidity pressure is increasing in Vietnam’s banking system. The maturity of USD sales contracts caused a corresponding amount of VND to be withdrawn, pushing up the interbank interest rate. In September, savings interest rates were raised to a new high at many banks, the highest being 8.8 per cent per annum at ABBank. The bank said requirements include deposits being at least VND1.5 trillion ($63.23 million) on a 13-month term, with interest received at the end of the period.

Interbank interest rates have continued to increase despite the State Bank of Vietnam’s net injection of capital. This appears to put a strain on liquidity in the banking system. In early August, VND85 trillion ($3.64 billion) of bills will mature, which will help system liquidity regain some balance.

According to the Ho Chi Minh Stock Exchange (HoSE), market liquidity was down 32.4 per cent in value and 20.98 per cent in volume in May compared to April. Total trading value by foreigners in the month reached nearly VND53.8 trillion ($2.3 billion), or nearly 9 per cent of the total.