Vietnamese firms are keeping more cash on hand because of ‘challenging business conditions and high deposit interest rates earlier this year’, Vietnam News is reporting. Interest rates are, however, have been pushing all-time lows–This article is confusing.
That said, the data collected, at a glance, seems to confirm that a number of firms do have more cash on hand. There are a range of reasons why this might be, but a study published in 2020 in the Dalat University Journal of Science, found that Vietnamese businesses increase their cash holdings:
- when they have low growth opportunities; or
- when business risks increase.
Conversely they found that firms tended to reduce their cash holdings when:
- Other internal sources of cash are abundant; or
- when external fund accessibility improves.
With this in mind, this extra cash in the bank for these firms could suggest that they may be preparing for a prolonged economic downturn and that a lack of demand for credit from business is likely to persist.