US stock momentum bodes well for others

After the Fed’s 0.5 percentage point interest rate cut in September, it is expected that the agency will seek another cut in November and December. The next adjustment meeting is expected to take place on November 6-7.

The US Fed is set to act again in early November, after a long-awaited interest rate cut last month, Photo Le Toan

“The future decision will depend on economic data, especially inflation, and unemployment. Although the Fed plans to cut rates, it is not following a set schedule, and its actions will be influenced by how the economy evolves, providing a sense of reassurance about the Fed’s cautious approach,” said Fed chairman Jerome Powell.

Currently, inflation has not cooled down, and the economic recovery is still slow, so the Fed is likely to reduce interest rates by 0.25 percentage point this November.

A report released on October 10 by the US Department of Commerce showed that inflation in September was still higher than expected. Specifically, the consumer price index increased by 2.4 per cent compared to the same period last year, higher than the 2.3 per cent increase predicted by economists.

“Monetary policy changes in major financial markets such as the US will impact on emerging and frontier financial markets, which are highly sensitive markets. Notably, the story of benefiting from attracting investment capital back when the interest rate gap between the USD and VND narrowed,” said Nguyen The Minh, director of Analysis at Yuanta Vietnam Securities.

According to the current trend, the USD/VND exchange rate is falling, which is a good signal for companies with outstanding foreign currency loans. “The exchange rate is more stable, foreign companies investing in Vietnam also avoid the psychology of worrying about the Vietnamese currency depreciating. A stable exchange rate helps investors feel more secure, especially indirect investors investing in the stock market, reducing pressure,” Minh said.

In addition, Vietnam’s manufacturing sector will also benefit when the US economy is more stable, and consumer demand increases. The US is a major export market for Vietnam, with the seafood, textile, and wood industries have positive growth momentum from the increased demand of this market.

According to a financial market analyst from Exness Investment Bank, American consumption continues to be strong, and the market is no longer worried about the US economy falling into recession but landing safely and continuing to grow steadily, as the US stock market maintains good growth momentum. This factor also has a positive impact on the stock markets of other countries, including Vietnam.

Yuanta Vietnam Securities noted historical data shows that the stock market is volatile when the Fed cuts interest rates. In the 3-6 months after the rate cut, whether there is a recession or not, the stock market slips down before moving up.

Dr. Can Van Luc, chief economist of BIDV Training School, said that the Fed’s interest rate cut will have a positive impact on the global economy. For Vietnam in particular, the positive impacts can be listed as promoting increased exports, attracting foreign investment flows, reducing pressure on exchange rates, stabilising interest rates, and benefiting the stock market.

“When the US Federal Reserve and central banks of developed countries begin to lower interest rates, the interest rate gap will decrease, and the trend of capital withdrawal from emerging markets to invest in the US market and some other developed markets to shelter risks and enjoy interest rate differences will gradually decrease,” Luc said.

“Moreover, the current price of Vietnamese stocks is relatively attractive, and it is expected that the Vietnamese stock market could be upgraded from emerging to frontier by FTSE Russell in 2025,” he added.

Fed goes big with long-awaited cut The US Federal Reserve’s latest interest rate cut is expected to ease pressure on Vietnam’s exchange rates, support domestic monetary policy, and potentially reverse foreign capital outflows, benefiting the country’s stock market and general economy.

Fed rate cut expands Vietnamese monetary policy flexibility The decision to cut interest rates by 50 basis-point in last week's Fed meeting is expected to have several positive impacts on the Vietnamese economy, specifically by alleviating exchange rate pressures and allowing the State Bank of Vietnam to implement a more accommodative monetary policy.