Bank Deposits Decline
Recent data released by the State Bank of Vietnam indicates a decline in bank deposits. In January, individuals withdrew 34,643 billion VND from the banking system, marking the second consecutive month of withdrawals.
In the preceding month, withdrawals amounted to 61,643 billion VND. This trend contrasts with the consistent growth in bank deposits observed in 2023 until a reversal in the final months of the year.
Bank deposits from individuals are declining.
Savings interest rates by the end of January have significantly decreased compared to the same period last year. Few banks offer 5% interest rates per year for 12-month deposits. The prolonged interest rate decline since April 2023 has pushed savings interest rates to record lows, even below the levels seen during the COVID-19 pandemic. Several banks have announced historically low interest rates.
As of the end of January, individual deposits in the banking system totaled nearly 6.5 trillion VND, a 0.53% decrease compared to the end of last year.
Deposits from economic organizations in the banking system currently amount to over 6.67 trillion VND, a 2.41% reduction compared to the end of last year. This represents a 165,189 billion VND decrease within a month, following a period of continuous growth.
In total, deposits from both individuals and organizations in the banking system reached close to 13.2 trillion VND by the end of November 2023.
Alternative Investment Channels Attract Funds
Gold, stocks, and real estate are typically considered attractive investment options for those seeking to preserve or grow their savings. Among these, gold has been the most profitable investment option since the beginning of the year.
Currently, the price of SJC gold bars in Vietnam is over 85 million VND per ounce, while the price of plain gold rings is around 76 million VND per ounce. Compared to the beginning of the year, each ounce of gold bars has increased by almost 15%, and rings have increased by over 20%.
The rise in domestic gold prices is attributed to limited domestic supply, increased demand amid declining savings interest rates, and a global increase in gold prices.
In an interview with Tiền Phon, Ms. Truong Hoang Diep Huong, an expert from the Institute for Banking Research, stated that during the first quarter, gold, stocks, and real estate all witnessed significant growth.
According to Ms. Huong, individuals are investing their excess funds in financial assets rather than bank deposits, driven by a comparison of interest rates with returns from investments.
At a recent discussion, Dr. Vu Dinh Anh, a financial expert, shared that in the past, real estate was often only used for personal residence, which did not generate cash flow. Currently, a popular investment strategy is to rent out real estate, particularly to foreigners at a higher price, and then rent a different property to live in.
For the concept of cash flow real estate, the owner must possess the property and not use it themselves but instead lease it out, creating a source of income.
“The current real estate market shows that many people are withdrawing their savings from banks to invest in property, waiting for the price to appreciate and then selling it. This is known as short-term speculation. Others hold it for a longer period as an investment. Regardless of whether it’s for investment or speculation, the most important factor to consider is liquidity,” said Mr. Anh.
The second type of property investment that should be developed is owning real estate and renting it out. This segment focuses less on liquidity but aims to generate a continuous and growing stream of rental income.
Stocks are another investment option that often gains attention when interest rates are low. Investing in stocks can yield higher returns than savings deposits.
The number of new account openings has steadily increased in the first three months of this year alongside active trading. This indicates the growing interest among investors in this investment channel. In March alone, over 160,000 new accounts were opened.
