Banks cautious on stocks and real estate

System liquidity has not improved notably. The results released by the Vietnam Interbank Market Research Association (VIRA) show that respondents' expectations for the interbank market outlook over the next three months continued to weaken compared with the previous month. The developments in the money market at the end of March and the beginning of April may help explain this trend. After a sharp rise to the 10-12% per year range in late March, the average interbank Vietnamese dong (VND) rate for maturities under one month cooled but remained high. In trading on 6 April, VND interest rates rose sharply again at short maturities, with the overnight rate up to 8.6% per year and the 1-week tenor to 8.5% per year. At the same time, the State Bank of Vietnam net drained 14.387 trillion dong via open market operations as maturities were high. This indicates short-term liquidity in the system remained tight. The survey results show that expectations for asset groups remained cautious. Specifically, the assessment of the stock market stood at 4.89 points, while real estate recorded 4.44 points. Both were below the equilibrium level, indicating market participants remained cautious about the near-term outlook for these investment channels. Nevertheless, market confidence did not deteriorate across the board. The subcomponent of expectations for the State Bank's policy actions continued to reach the highest level at 5.39 points, while the domestic growth outlook recorded 5.28 points. In addition, assessment of policy risk for production and business activities reached 5.06 points. These results show that market confidence in the capacity to manage monetary policy and the domestic growth foundation remains relatively positive, helping to limit the decline of the overall index in April. On the other hand, external factors continue to exert significant pressure on the overall sentiment. The assessment of the global economy outlook only reached 4.33 points, while global geopolitical risk was at 4.22 points. Notably, the overall price level was the lowest factor, at just 4 points, indicating survey respondents remain cautious about price movements over the next three months. Compared with previous months, the fact that MCI-VIRA remains below the equilibrium suggests that market sentiment remains cautious in the short term. Going forward, sentiment is likely to continue depending on system liquidity, interbank rate levels, the State Bank's regulatory actions, and the degree of improvement in domestic asset markets.