Higher interest rates reshape valuations across Vietnamese asset classes
Deposit rates remain elevated in Vietnam, while the outlook for lower lending rates remains uncertain. As bank deposits return yields of 6-8% a year, stocks, property, bonds, gold and foreign currencies are all facing a higher return benchmark in the competition for capital.
In the interbank market, short-term liquidity pressures have eased significantly after sharp fluctuations in September. On September 21, overnight lending rates briefly rose to 7% per year, about 2.5 percentage points higher than at the end of the previous week.
By September 24, the rate had fallen to 1% per year, while one-week rates stood at 5.1%, two-week rates at 5.2% and one-month rates at 6.15%. On September 28, the overnight rate declined further to 0.48%.
The easing of interbank rates indicates that immediate liquidity stress has subsided, but deposit rates at commercial banks have not fallen correspondingly.
By mid-September, the four largest state-owned banks maintained deposit rates of around 6.6% per year for six-month terms and about 6.8% for 12-month terms. At some joint-stock commercial banks, 12-month deposit rates were between 7% and 7.8%. Some special deposit products offered higher rates, but these do not represent the broader market level.
The gap between interbank rates and deposit rates reflects two different pressures. Short-term liquidity conditions can improve quickly after policy measures, while banks' funding costs depend on credit demand, competition for deposits and the need to secure capital for the final months of the year.
KB Securities Vietnam (KBSV) said deposit rates had reached their peak and could remain elevated in the third quarter before easing slightly from early in the fourth quarter. Vietcombank Securities (VCBS), however, continued to highlight funding pressure as credit growth is expected to remain high.
Deposit growth reached 8.77% in August from the end of 2025, higher than credit growth of 8.38%. The gap has helped ease some pressure on the banking system's funding sources, but it is not enough to confirm that deposit rates will decline soon.
The final months of the year are typically a period when credit demand rises rapidly. If demand for capital continues to expand, banks may need to maintain sufficiently attractive deposit rates to retain funds.
Exchange rates are another constraint on the ability to cut rates. In September, the U.S. Federal Reserve raised interest rates by 25 basis points, bringing its target range to 3.75-4%. New projections from Federal Open Market Committee members showed that room for further monetary tightening remained.
Banking expert Nguyen Tri Hieu said U.S. interest-rate developments continued to affect exchange rates and Vietnam's monetary policy room.
When U.S. bond yields rise and the dollar remains strong, rapid domestic rate cuts become more difficult. If interest-rate differentials narrow too much, pressure on the exchange rate could increase, potentially feeding back into inflation.
The current environment therefore appears more consistent with a scenario of less volatile but still elevated interest rates, rather than a broad-based rapid rate-cut cycle.
Vietnam's credit-to-GDP ratio is currently around 150%. The large scale of credit means monetary management cannot rely mainly on further credit expansion, but must also focus on controlling the quality of capital allocation.
In this environment, high interest rates are beginning to have a clearer impact on how investors value different asset classes.
Property market faces pressure from funding costs
Property is among the markets most sensitive to interest rates. When deposit rates rise, banks' funding costs increase, limiting their ability to reduce lending rates.
For highly leveraged property companies, higher financial costs continue to weigh on cash flows, profitability and project development progress.
In a property sector report released in July, brokerage MBS said the residential property market in 2026 was being affected by high interest rates, causing liquidity and absorption rates to slow. The northern and southern markets were also showing different trends.
Greater pressure was falling on projects that had yet to generate cash flows, as developers may need to extend restructuring efforts, sell assets or seek financially stronger partners.
Segments serving genuine housing demand or generating clearer cash flows are proving more resilient. Industrial property has its own growth drivers thanks to foreign direct investment inflows and land rental demand, but each company's performance still depends heavily on legal progress, land handover schedules and revenue recognition timing.
For individual investors, the current interest-rate environment is changing investment calculations.
When 12-month deposits can generate returns of 6-8% per year, a low-liquidity property asset with high transaction costs and no cash flow must deliver sufficient price appreciation to compensate for the foregone yield.
Assets driven mainly by expectations of future price increases therefore face greater pressure than those with real demand or stable income generation.
Stocks face selective rather than broad-based gains
For equities, interest rates affect both capital flows and valuations. Higher deposit rates increase the opportunity cost of holding stocks. When safer assets offer higher returns, investors also demand higher returns from riskier assets. This puts pressure on the valuation multiples investors are willing to pay.
However, high interest rates do not necessarily mean money will leave equities if corporate earnings continue to grow.
SSI Securities's research unit said interest rates had not fallen significantly, while earnings prospects in the second half of the year could be less impressive than in the first half. Investment focus was therefore shifting towards sector and company selection rather than expectations of a broad market rally.
Banks are directly affected by funding costs. Banks with high CASA ratios, strong deposit mobilization and stable asset quality have an advantage in maintaining net interest margins, while those that need to raise deposit rates aggressively face greater pressure on funding costs and profits.
For listed property companies, pressure comes from both higher financial costs and weaker demand as buyers using leverage face higher borrowing costs.
Companies in manufacturing, exports, infrastructure, power and logistics with relatively stable operating cash flows may be less affected by the property credit cycle. However, this advantage still depends on each company's capital structure, industry outlook and ability to sustain earnings.
High interest rates are therefore making the market more differentiated rather than moving all asset classes in the same direction.
Bonds, gold and foreign currencies
The corporate bond market is also facing direct pressure as bank deposits become more attractive.
To compete for capital, bonds need to offer yields high enough to compensate for credit risks, particularly for property companies with weak cash flows or large refinancing needs.
HNX data showed that in September, some five- to six-year bank bond issuances carried interest rates of around 8.2-9% per year.
MBS also announced that the interest rate applicable to the fifth and sixth interest periods of its MBS12501 bond was 8.1% per year.
These levels show that funding costs in the bond market remain significant, creating an advantage for companies with strong cash flows, sound financial foundations and high transparency. For weaker companies, issuing new bonds to refinance existing debt will become increasingly difficult.
Gold and foreign currencies are also facing stronger competition from deposits.
When VND interest rates remain high, the opportunity cost of holding non-income-generating assets rises.
For gold, support continues to come from geopolitical uncertainty, global monetary policy and demand for hedging. However, to attract domestic capital, gold prices need to rise enough to compete with the returns available from bank deposits.
On September 29, domestic gold prices continued to fluctuate sharply, while global gold prices faced pressure from expectations that U.S. interest rates would remain elevated.
The domestic exchange rate has shown signs of easing. On September 29, the State Bank of Vietnam set the central exchange rate at VND25,630 per U.S. dollar, down VND2 from the previous session. However, the dollar remains heavily influenced by U.S. bond yields and expectations for Fed policy.
When bank deposits offer returns of 6-8% a year, investment channels with higher volatility must generate sufficiently large returns to compensate for risk, liquidity constraints and funding costs.
Capital is therefore unlikely to flow broadly into a single market. The ability to generate cash flow, leverage levels and asset quality will determine the attractiveness of each investment option while interest rates remain elevated.
Source: Dinh Vu, Thai Ha
Photo: Illustration courtesy of Robinson Appraisal Group LLC
