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Risk or safe haven: pick your investments wisely

VIETNAM, February 11 - By Ly Ly Cao

As 2024 kicks off, investors are eagerly looking for new investment opportunities to make their fortunes.

Although the unpredictable global market will affect the Vietnamese economy, there are still several channels that are likely to generate returns.

Bank deposits remain popular

Among all the mainstream investment channels, including stocks, real estate, gold, bank deposit and foreign currencies, the deposit channel remains a focal point of attraction for everyone, drawing attention over time, economist Nguyễn Trí Hiếu told Việt Nam News.

“Despite the cuts, the real interest rate still remains positive. If we can control inflation at around 4 per cent this year, bank deposits will still a popular channel. Not to mention, it is a safe investment channel and a widely used means of payment for everyone,” Hiếu said.

Last year, after four adjustments of operating interest rates from the State Bank of Việt Nam (SBV), banks have stepped in a race to lower deposit interest rates.

The 12-month term interest rate, which was initially at a peak of 10-12.5 per cent at the beginning of the year, was adjusted down to only 5 per cent before the end of 2023.

Meanwhile, by the end of 2023, the idle funds deposited by individuals and businesses in banks reached a record high of over VNĐ13.5 quadrillion, a 14 per cent increase from 2022, according to SBV.

Gold to take the spotlight

Given the uncertainties of the geopolitical events, including the ongoing Russia-Ukraine war and the Israel–Hamas conflict, and the risk of global economic recession, capital can flow into safe haven assets, especially gold.

Global gold prices are expected to rise higher this year, leading to increases in domestic gold prices. And this will attract investor interest.

According to J.P Morgan, gold hit a record high of US$2,135.39/oz last December and is forecast to reach a new high at $2,175/oz in the second half of 2024, which is driven by the US Federal Reserve cutting cycle and falling US real yields.

“Gold will continue to attract attention this year as prices are set to inch higher,” Hiếu said.

Moreover, “all other channels are unlikely to witness a strong performance in the first half of the year. Therefore, the gold channel may still be an attractive investment option for many investors,” he added.

Similarly, Nguyễn Minh Hoàng, director of the Analysis Department at VietFirtst Securities, sees gold remaining a bright spot this year as the global economy is expected to experience numerous unpredictable risks and volatility in 2024.

Stocks draw cash flows

After witnessing record-breaking inflows into bank deposits in the banking industry in 2023, especially during the last two months amidst economic difficulties while other investment channels, such as real estate, have experienced a period of stagnation, investors will gradually shift to riskier channels this year, said Phan Dũng Khánh, head of Investment Advisory at Maybank Investment Bank.

“The reason is that recovery signals of the economy, the effects of stimulus policies and support measures, and gradual interest rate reductions begin to reflect more deeply into the economy,” the financial expert said.

However, he noted that the rate of improvement will increase gradually rather than experiencing an immediate surge, as the economy needs time to recover, and funds are still inclined to seek shelter in safe channels like deposits. The channels expected to witness a significant improvement in cash flow towards the end of the year are stocks, corporate bonds, and real estate.

Hoàng from VietFirst Securities said that securities were the channel attracting capital flow this year as interest rates were expected to stay low, public investment will be accelerated, new trading system start, and business results are forecast to have clearer recovery steps based on the low base level of 2023.

“In addition, the stock market has hit bottom and witnessed strong cash flows into the market since November 2023 until now,” Hoàng said.

Real estate to recover in H2

The real estate market is also an appealing investment channel for many investors.

It is expected to rebound this year on the back of the government policies, but starting in the second half, said Hiếu.

“In my opinion, the real estate market will get better this year, but it may still be relatively sluggish in the first half of 2024 and can only show significant improvement in the second half,” Hiếu added.

According to Hoàng, the industry is showing signs of bottoming out, supported by a low-interest rate environment, a significant increase in credit availability, amendments to the housing law, real estate business law, and particularly the land law.

New investment channels

Non-traditional alternative investment channels like digital currencies and investment apps have been growing popular in the last few years.

However, Hiếu warned that they are very unpredictable and risky, making it difficult to forecast their development.

“Investment channels through various apps, particularly in 2023, have provided a platform for scams, leading to significant financial losses for many individuals. This serves as a warning to everyone engaging with such apps and investing through unofficial channels,” Hiếu added.

Khánh from Maybank Investment Bank said that there are limited new investment channels in Việt Nam due to various restrictions or the lack of comprehensive legal frameworks.

“Emerging industries and new technological applications such as AI, chips, blockchain, fintech, and green energy are consistently encouraged. It should be noted that investing in these sectors is still in its early stages, and startups in particular carry higher risks compared to listed companies,” Khánh said.

However, the domestic stock market is currently lacking companies that operate in trending global sectors or traditional companies that integrate new technologies.

As a result, Khánh said that there was a need for further market development to offer more investment choices, ultimately contributing to the stimulation and support of economic growth. VNS