Research Center

A sustained low-rate environment in the fixed-income markets continued to a greater extent as interbank rates and G-bond yields plunging further. However, phenomenal lending growth recently, and likely continue in the near term, will put massive upward pressure on the interbank rates and short-term yields in January.

With 4Q20 strong growth, 2021 outlook for Vietnam’s economy becomes even brighter. Supporting the export and FDI inflows, the COVID-19 vaccine distribution help normalize the global economic recovery. Additionally, massive fiscal packages continued a priority for governments to boost economic growth. Vietnam's government is also utilizing this tool to help nurture businesses for the longer-term. Last but not least, massive FTAs, including EVFTA and RCEP, would be an important factor to lift up Vietnam’s economy in 2021. For all those reasons, we predict the economic growth to reach 6.36% YoY in 2021.

In overall, the corporate bond market was quiet in Oct 2020. Issuing value dropped by 25% compared to Sep 2020. Accumulated 10M20, about VND357tn worth of corporate bonds were issued, up 26% YoY as well as corporate bond rate has increased slightly in 2020.

Excess liquidity in the banking system, due to a slowdown in bank lending, has been driving interbank rates and G-bond yields to historic low levels, of which some rates have stayed near-zero level for a long time. However, a surge in credit growth in November may give an early signal that liquidity conditions in the banking system would not as easing as before, which could reverse a super low-rate environment in the fixed-income markets.

November data showed that a worsening COVID-19 situation in the U.S. and Europe has again put downward pressure on export activity. For the domestic market, demand has remained strong with retail sales and import accelerating. However, the recent community-infection concerns us about the economic outlook in the near term. Hence, we predict that the economy will deviate from the acceleration rail to the extent that reversely related to how effectively the government controls the new COVID wave.

In October, interbank rates and bond yields continue to stay at historic lows as the current liquidity condition remains abundant. Looking forward to November, in the scenario that lending activity accelerates under the favorable seasonal effect in the fourth quarter, we expect interbank rates and G-bond yields to pick up from the bottom.

The economy continued to gain upward momentum in October thanks to domestic-driven factors. Briefly, trade, IIP, and retail sales continued growing robustly in a stable inflation environment. Looking forward, the 2nd lockdown in large European economies, the 3rd largest trade partner, will once again put great uncertainty on the economic growth, but this time we believe the economy knows how to live with it. Besides, domestic consumption-driven sectors are and would be in good shape in 4Q20.