Commentary about Resolution No.33 & Decision 313 & 314 – Supportive measures have come

• The Government released Resolution No.33 on 11 Mar 2023 to reduce liquidity shortages for the property sector in the near term.
• Following up, the SBV issued two Decisions No. 313 and 314 adjusting down key policy rates.
• We believe the Government needs to take more aggressive support policies to reopen capital market, tackle legal bottleneck to resolve the root of the problem.

Resolution No.33 could be a legal backbone for more supportive policies
Key points of Resolution No.33 include:

• Assign the State Bank of Vietnam (SBV) to guide credit institutions to review and apply appropriate measures for debts of property area (rescheduling principal/interest payments or maintaining debt group)
• Encourage commercials banks to lend to high-quality developers through a credit stimulation package of VND120tr.
• Assign the SBV to consider adjusting risk factor of risk-weighted assets which could reduce restrictions to property sector exposures, in our view.
• Encourage commercial banks to lower lending rates for property market and extend short-term bank loans for developers with liquidity issues.

We assess that Resolution No.33 together with Decree 08 which allows developers to reschedule bond payment obligations, will likely ease developers’ near-term liquidity pressure markedly and give them more time to manage their debt.

SBV follows up with key policy rates cut, backing the economic recovery

In response to Government’s guidance, the SBV immediately issued two Decisions on 14 Mar 2023, reducing key policy rates from 0.5% – 1%. Accordingly,

• Decision No. 313 kept the refinancing rate intact at 6.0%, but lowered the rediscount rate by 1% pts to 3.5% p.a.; the overnight lending rate by the SBV to credit institutions was also lowered to 6% p.a. from 7%.
• Decision No. 314 regulated the maximum short-term lending rate in VND of credit institutions for certain economic activities such as: agriculture, exports, high-tech application business, SMEs to reduce by 0.5% pts to 5.0% p.a.

This was the first time the SBV reduced policy rates in two recent years, marking the Government’s efforts to stabilize interest rates. Given the uncertainties of the global macro environment, we believe the SBV would closely watch the Fed’s next move and domestic business environment to offer suitable monetary policies. In terms of effects on commercial banks’ deposit rates, we reckon this is still heavily depend on the upcoming policy rate adjustment from Fed as there is still high pressure on VND exchange rate (After the crash of Silicon Valley Bank, the DXY has only brought the US$/VND down 0.2% ytd to 23,590). However, we expect the lower policy rates would support credit growth in the upcoming quarters given stagnant growth of 0.77% in the first two months 2023.

The Resolution also promotes social housing to rebalance supply and demand

The current market witnesses a mismatch of supply and demand with mid-end condo shrinking of only c.2% portion in HCMC and Hanoi new supply as of end-4Q22. We see the Resolution No.33 making efforts to rebalance supply and demand by 1) expecting to issue “The National Assembly’s Resolution piloted a number of policies to promote the development of social housing” while waiting for the amended Law on Housing; 2) proposing to spend a credit package of VND120tr for social and worker housing; 3) committing to build at least one million of social-housing units by 2030.

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