As we enter 2023, the outlook for investment channels appears to be generally unfavorable. However, there is hope for improvement in 2024. Despite this, investors are advised against concentrating all their investments in one area. It's crucial to recognize that 2024 is not a time for speculation and risky ventures. Instead, a prudent approach involves gaining a comprehensive understanding of the market dynamics.
The Investment Landscape in 2023: A Profit Analysis
Based on data released by the State Bank (SBV) in January 2024, deposits within the banking system experienced a significant increase of 14% in 2023 compared to the end of 2022, marking the highest level in the past four years. This surge in savings deposits can be attributed to the prevailing economic challenges, leading businesses and individuals to opt for this secure investment avenue while awaiting more favorable conditions.
In contrast, various alternative investment channels such as the stock market, corporate bonds, and real estate remained relatively subdued throughout 2023, reflecting an overall risk-averse sentiment among investors. The cautious approach suggests a preference for safer options amidst the uncertain economic climate.
However, it's noteworthy that deposit interest rates began to witness a notable decline from the mid to late stages of 2023, signaling a reduction in profitability for the savings channel. This downturn in interest rates can be linked to the decrease in operational interest rates, the imposition of lowered deposit interest rate ceilings, and the sustained low credit demand observed in the initial 11 months of 2023. As a result, deposit interest rates continued their downward trajectory, impacting the overall profitability of this investment avenue.
On the other hand, the real estate investment sector continues to experience a subdued environment in 2023, primarily due to a persistent imbalance between supply and demand, coupled with a lack of significant decreases in real estate prices. The mainstream real estate segment has witnessed a slight decline in prices, resulting in a generally low profitability from the real estate market. Although the second half of 2023 shows some positive signs, with a slight increase in apartment prices due to limited supply, the transaction volume remains low, contributing to the overall diminished profitability of the real estate market.
The stock market, too, is subject to fluctuations throughout 2023. The VN-Index recorded a commendable 12.2% increase, while the HNX Index saw a 12.5% rise compared to the previous year's end – a relatively favorable performance compared to other countries and regions. As for the gold market, 2023 witnessed significant price swings towards the end of the year. While the price of gold experienced a sharp 15% increase compared to the beginning of the year at one point, it ultimately only rose by 5% in comparison to the year's outset.
Choosing Investment Channels in 2024
As we look ahead to 2024, considerations for the savings deposit channel suggest that savings interest rates may have reached their lowest point. Forecasts indicate that with the anticipated high increase in credit activities in 2024, approximately 15% as directed by the State Bank, the basic deposit interest rate is expected to either remain stable or experience a slight uptick of around 0.1 - 0.5% throughout the year. Consequently, the savings interest rate is projected to persist at a low level, comparable to the rates observed at the end of 2023.
Given these projections, investors with substantial deposit amounts may contemplate diversifying their investments towards channels that offer higher yields while maintaining acceptable risk levels. The shift towards alternative investment avenues becomes a strategic consideration in light of the persistently low savings interest rates.
Regarding the real estate investment sector, there is an anticipation of potential local recovery in the real estate market from the second half of 2024. However, numerous challenges persist, including constraints on rapid supply increases, ongoing weak demand, a rise in bad debts, and sluggish legal resolutions. Additionally, the prevailing sentiment of waiting for real estate prices to decrease continues to exert pressure on the market.
Despite these hurdles, industrial park real estate is expected to stand out as a bright spot. Conversely, recovery in resort, retail, and office real estate is likely to be slower, contingent upon the robust resurgence of international tourism and shifts in sales methods, such as a preference for e-commerce over traditional direct transactions.
A noteworthy factor contributing to the market dynamics is the impact of new regulations introduced in the Land Law 2024, Housing Law 2023, and Real Estate Business Law 2023. These regulations aim to bring land prices closer to market values, and combined with a limited increase in supply, they act as a catalyst hindering a significant decline in real estate prices.
The stock market in 2024 is poised to be influenced by a combination of positive and negative factors. According to Bloomberg's forecast in January 2024, the VN-Index is projected to range from 822.2 points (P/E 11 times, representing a decrease of about 25%) to 1,318 points (P/E 17.5 times, indicating an increase of about 19%). In my perspective, there is a higher and more achievable likelihood of a 15-20% growth.
Turning to the gold investment channel, the State Bank's intervention through the amendment of Decree 24 in January 2024 is expected to contribute to a reduction in the gap between domestic and international gold prices. This regulatory adjustment is likely to enhance market stability for gold. Coupled with diminished economic risks, gold is anticipated to gradually lose its status as a safe-haven asset. Consequently, profits from gold investment activities are expected to plateau, remaining at levels akin to those seen in 2023, around 5-7%.
The aforementioned context implies several key considerations for investors. Firstly, understanding one's identity and assessing their "risk appetite" is crucial. Investors fall into categories of being risk-averse, neutral, or risk-loving. Identifying one's risk profile is essential for adopting appropriate investment strategies and choosing suitable investment channels.
Secondly, a fundamental investment strategy involves diversifying investment channels or portfolios. This strategy entails allocating funds across various asset types to mitigate risk. By spreading investments across different assets, investors can potentially earn returns from multiple sources, and the risks associated with each asset class can be offset by the others, contributing to a more balanced and resilient portfolio.
Thirdly, it is advisable to employ financial leverage cautiously. While "leverage" can enhance profits and profitability, it also carries high risks if not managed prudently. This is especially pertinent in environments characterized by elevated interest rates and limited liquidity. Striking a balance and using financial leverage judiciously can be instrumental in navigating the complex landscape of investment opportunities.
