Macro Report

Interbank interest rate inched up. Last week, interbank interest rates increased by 3-9 bps, closing the week at 1.36% for the overnight term and 1.44% for the 1-week term, which were 35-53 bps higher compared to April 2021. The VND supply of large commercial banks was less abundant. However, the supply vs. demand balance in the interbank market is not strained, and the State Bank still has suspended transactions on the open market for over 3 months. Deposit interest rates were unchanged in most commercial banks, except for a 10-30 bps increase in SHB and a 30-70 bps decrease at VP Bank and HD Bank. Deposit rates were at 2.8-4%/ year at 1 to under 6 month terms, 3.5-5.4%/ year at 6 to under 12 month terms, and 4.6-6.5%/ year at 12-13 month terms. Currently, we have not yet seen rationale for pressure to raise interest rates in the short term. However, we still maintain our forecast that interest rates may increase from the beginning of Q3/2021, a time expectedly when the epidemic comes under control, and when credit continues to accelerate.

Interbank interest rate held new ground. The open market continued to remain dormant last week, with no new transactions. Interbank interest rates increased by 11-18 bps, closing the week at 1.27% for the overnight term and 1.41% for the 1-week term, which were 30-45 bps higher compared to April 2021. Meanwhile, deposit and lending interest rates were still stable. Strong credit growth in the first 4 months of this year made liquidity of commercial banks less redundant. However, deposit growth recently has shown positive signs. For instance, the YTD growth rate to April 22, 2021 was 2.32%, much higher than the 0.54% YTD observed as of March 19, 2021. VND supply on the interbank market is still stable, especially seeing that there will be a large amount of VND pumped out from forward foreign currency transactions that will be exercised in July and August. Therefore, we have not yet seen rationale for pressure to raise interest rates in the short term. However, we still maintain our forecast that interest rates may increase from the beginning of Q3/2021, a time expectedly when the epidemic comes under control, and when credit continues to accelerate.

Interbank interest rate increased. The open market remained dormant last week, with no new transactions. Interbank interest rates, however, continued to increase by 21-32 bps, and closed the week at 1.15% for the overnight term and 1.29% for the 1-week term. Meanwhile, deposit and lending interest rates were still stable. In the first 4 months of this year, deposit growth was lower than credit growth, causing the deposit - credit gap to narrow. The liquidity of commercial banks was also less in abundance than the previous period. In the current complicated epidemic situation domestically, credit demand may be affected. It is expected that the State Bank of Vietnam will also aim to firmly maintain low interest rates to support businesses and the overall economy.

Bond yields inched up. Last week, the STV offered VND 8.75 tn worth of 5Y, 10Y, 15Y and 30Y bonds. Winning yield were unchanged for the 30Y term and inched up by 1-2bps for 3 other terms. There were VND 7.14 tn of bonds issued, equivalent to a 82% winning ratio. Thus, total STV bond issuance in April 2021 was VND 26.3 tn, the highest monthly issuance volume since the beginning of the year. In April, the average term was 11.6 years, shorter than the 1Q21 average (13.2 years). Average winning yield was 2.3%/ year, higher than the 1Q21 average (2.22%/ year). In the first 4 months of this year, the STV issued VND 65.5 tn of bonds, an increase of 81% YoY and equivalent to 18.7% of the 2021 issuance plan. The average term and winning yield were 12.58 years and 2.25%/ year, respectively.

Long-term bond yields decreased on both primary and secondary market. Last week, the STV offered VND 9.5 tn worth of bonds, which resulted in the largest and most successful auction since Feb 2021. A total of VND 9.35 tn of 5Y, 10Y, 15Y and 20Y bonds were issued, equivalent to a winning ratio of 98%. Winning yields inched up by 2 bps for 5Y bonds, unchanged for 20Y bonds, and dropped by 2-4 bps for 10Y and 15Y bonds. The STV planned to issue VND 100 tn worth of bonds in 2Q 2021, but issuance pressure is quite low as the state budget had a surplus of VND 61.8 tn in 1Q 2021. We think bond yields will move sideways in the short term. Bond yields also inched down for long terms on the secondary market. The week closed as follows: 1Y (0.26%, unch); 3Y (0.67%; unch); 5Y (1.18%,+2 bps); 10Y (2.35%, -3 bps); 15Y (2.56%, -4 bps); 20Y (2.99%, -4 bps); 30Y (3.11%, -3 bps). Liquidity improved, with average daily trading value of VND 9.18 tn (+9% WoW).

Credit is expected to accelerate in 2Q21. The open market remained dormant last week, with no new transactions. Interbank interest rates inched up by 4-9 bps, closing the week at 0.44% for the overnight term, and 0.59% for the 1-week term. In 1Q 2021, credit growth was 2.93% YTD, higher than the 1.31% YTD growth of 1Q 2020. The SBV forecasts that credit growth can be strong from 2Q 2021, especially lending for the industrial manufacturing, export, and trade sectors, 2021 credit growth may exceed target of 12%. We expect 2021 credit growth to be around 13-14%. Currently, bank liquidity is still at a very good level, and deposit rates & lending rates are stable. However, in 2H 2021, the higher demand for credit and higher inflation will cause deposit rates to inch up by 30-50 bps.

Amidst a narrowed deposit-credit gap, bank liquidity still abundant. The open market remained dormant last week, with no new transactions. Interbank interest rates inched up by 4 bps, closing the week at 0.4% for the overnight term, and 0.5% for the 1-week term. Credit increased quite well in March, and expanded at a clip faster than deposit growth. Bank liquidity was less abundant compared to 4Q20 but still at a very good level, and interbank interest rates are set to remain near current lows. Average deposit rates and lending rates were unchanged last week. According to survey results on 2Q20 gauging business trends of credit institutions (conducted by the State Bank from February 25, 2021 to March 12, 2021), credit institutions believe that interest rates in 2021 will basically hover around level set at the end of 2020. Credit is expected to increase by 5.09% YTD in 2Q21 and 14.7% YoY in 2021, whereas deposits is forecasted to increase 4.6% YTD in 2Q21 and 12% YoY in 2021.

Stable interest rate. The open market remained dormant last week, with no new transactions. Interbank interest rates inched up by 4-7bps, closing the week at 0.35% for the overnight term, and 0.46% for the 1-week term. Excluding short seasonal volatility before and after the Lunar New Year, the interbank interest rate remained at a very low level during the past 9 months. In 1Q21, the SBV did not pump VND in both the open market, nor did it engage in foreign currency transactions. 1Q21 credit growth was 2.04% YTD, higher than the 1.31% YTD growth rate of 1Q20. In 1Q21, some commercial banks retooled their deposit rates both ways by a range of 10-40 bps, most banks kept stable deposit rates. VCB applied a reduction of its lending rates to all outstanding loans affected by Covid-19 for 3 months, whereas BIDV deployed a credit package to support SMEs until 30 Sep 2021. Other banks still maintained the same lending rate as of the end of 2020 to present.

Q1 2021 is the first quarter that the General Statistics Office calculated the newly-adjusted GDP, which in essence is adding back missing enterprises and other omitted information to the calculation. Nevertheless, we are quite surprised to see that the level of adjustment is much bigger than expected, i.e 60.49%-68.38% (for nominal and real GDP respectively), rather than 25-27% for the annual data during 2010-2020. Here is a detailed calculation and comparison: It might be a bit early to jump to conclusions with just data for one quarter, as at this nominal level, assuming Q1 GDP accounted for 20% of the full year level, it means Vietnam GDP could hit $421.8 bn in 2021 and comfortably surpass the Philippines to rank as the third largest economy in ASEAN (just below Indonesia and Thailand). Also, surely a number of sectors might gain more weighting in GDP calculation, such as telecom (or information & communication – thanks to Viettel), Transportation (thanks to Vietjet), manufacturing, etc.

Interbank interest rate decreased. The open market remained dormant last week, with no new transactions. Interbank interest rates inched down by 5-10 bps, closing the week at 0.3% for the overnight term, and 0.4% for the 1-week term. According to the State Bank of Vietnam, as of Mar 17th, 2021 credit growth was 1.2% YTD, and for Q1 2021 it will likely be around 2%, which is higher than the Q1 2020 level of 1.31% YTD. Last week, the SBV also informed 2021 credit growth for commercial banks, of which SOCBs were 6.5-7.5% (except for VCB which was 10.5%) and joint stock commercial banks, which were 8-12%. 

Stable interest rates. The open market remained dormant last week, with no new transactions. Interbank interest rates inched up by 2-3 bps, closing the week at 0.36% for the overnight term, and 0.5% for the 1-week term. Deposit rates were steady at 2.2-3.8%/ year for under 6-month terms, 3.3-4.9%/ year for 6 to under 12 month terms, and 4.2-5.8%/ year for 12 and 13 month terms. We think deposit and lending rates will remain at current low levels in 1Q and early 2Q 2021, and could inch up by the end of Q2 as Vietnam’s warming economy boosts credit demand.

Stable interest rates. The open market remained dormant last week, with no new transactions. Interbank interest rates were stable, at 0.33% for the overnight term, and 0.48% for the 1-week term. In the first 2 months of this year, the SBV bought nearly $7 bn USD worth of 6-month forwards at an exchange rate of 23,125 VND/USD. If commercial banks do not cancel these forward contracts, about VND 157 tn will be pumped out in July and August. Bank liquidity is forecasted to continue to be plentiful, and interbank rates remain low. Last week, TCB and VPB increased deposit interest rates by 20-30 bps for individual customers, but did not change rates for institutional customers. Last month, some commercial banks (VCB, ACB, SHB, etc.) adjusted their deposit rates downward by 10-40 bps. These moves largely represent decisions in the local market from individual banks, and has yet to form a definitive trend. However, we do think deposit and lending rates will remain at current low levels in 1Q and early 2Q 2021,a and could inch up from the end of Q2 as a warmer economy boosts credit demand.