Investment opportunities in the stock market amid rising interest rates

Rising interest rates have led many investors to question whether capital will leave the stock market. However, market data and observations from industry participants suggest the impact is not uniformly negative, and stock returns can remain competitive relative to bank deposits even as rates increase.

Do interest rates rise, is capital leaving the market?

In theory, higher interest rates can slow economic growth and reduce growth opportunities for many industries. For the stock market, capital flows are also affected to some extent. Still, current data indicate that as the interest-rate level increases, stock-market returns remain reasonably attractive.

One indicator highlighted in the article is the spread between E/P (the inverse of P/E) of the VN-Index and the 12-month fixed deposit rate at Vietcombank. After the stock market corrected sharply, the spread has at times jumped to 2.7 percentage points, implying an investment yield higher than savings deposits. As of 04/03/2026, the spread stands at 2.1 percentage points.

Data as of 04/03/2026 (Source: VietstockFinance)

Money flows in practice: two-sided effects

According to Nguyen Huu Anh Khoa, Investment Advisory Director at Kafi Securities, the shift of money away from equities in a high-rate environment is real, but it works in two directions.

He said around 95% of the clients under his management are short-term investors. When they see rates rising, they tend to become more cautious—sometimes withdrawing money or reducing trading.

For the larger client group, the approach differs. When markets become volatile, they may move funds into fixed-income products to preserve purchasing power while waiting for deeper market discounts. When valuations fall to attractive levels, they view it as an opportunity to deploy capital.

Who is more affected: experienced investors vs. beginners

Truong Hien Phuong, Senior Broker at KIS Vietnam, notes that the impact also depends on investors’ familiarity with the market. A single trading day with a price limit up can exceed the prevailing bank deposit rate. For seasoned investors, opportunities during these phases may still be within reach.

However, for those considering entering the market or beginners, rising bank rates may encourage them to choose deposits rather than equities.

Phuong also argued that to retain clients, brokers need to help investors understand stock-market opportunities and potential profits. “When investors understand the opportunities and potential profits in the stock market, they will be motivated to deploy capital rather than just leave money in banks,” he said.

Sectors diverge in a high-rate environment

Sharp rate hikes often create a contrast between sectors that benefit and those that face pressure. SSI Securities notes that sectors with high capital intensity and heavy reliance on borrowing—such as real estate or construction—will face higher financing costs.

On the other hand, some groups of companies can benefit from a high-rate environment. The article cites insurance companies and firms with substantial cash holdings, where deposit income can account for a sizable portion of net profit. It also points to stocks with high net cash balances and high deposit income relative to profits, especially in oil & gas, nitrogen fertilizer, and consumer sectors, largely state-owned.

In an analysis report by FPT Securities (FPTS), the insurance sector is highlighted as a key investment focus benefiting directly from higher interest rates, with a preference for firms whose portfolios are primarily short-term financial investments and have low combined risk.

FPTS also suggests that the banking sector may remain viable despite competition and consolidation pressures. It recommends prioritizing banks that can attract deposits, have an advantage in lending rates, and maintain tight control of bad debt ratios and credit costs.

Performance during periods of rapid rate increases

According to VietstockFinance, during periods of sharp rate increases such as September 2022–March 2023, or most recently from October 2025 (excluding declines due to the Middle East conflict), the insurance group performed significantly better than the VN-Index, while banks also delivered solid results.

Meanwhile, real estate has been very weak. The article states that the sector’s results are unlikely to improve unless players such as VIC or VHM participate.

Chart image: VNIndex vs interest rates (Source: VietstockFinance)

Bottom line

The article concludes that some sectors remain unaffected or even thrive in a high-rate environment, and that even small opportunities can matter for investors who identify the right entry points and sector dynamics.