Developing market: The National Assembly Building in Hanoi, Vietnam. The government’s efforts to improve the economy are creating a new class of domestic investors. — Bloomberg
HANOI: Foreign investors have net sold Vietnamese stocks on the Ho Chi Minh Stock Exchange with a value of 58 trillion dong since the beginning of 2023, indicating a prevailing trend of net selling in the Vietnamese stock market.
Over the past two years, apart from a brief period at the end of 2022 when the market experienced a decline and foreign investors seized the opportunity to buy at low prices, the trend of net selling has remained dominant in the Vietnamese stock market.
In recent months, the intensity of net selling has become particularly high, comparable to the record net selling in 2021, which exceeded 58 trillion dong. It is possible that new records will soon be set, as foreign investors show no signs of halting their selling activity, consistently offloading trillions of dong worth of stocks in each session.
Some observers argue that foreign capital flows only represent partial net sales resulting from portfolio restructuring, and therefore have a limited impact on the overall market.
However, it should be noted that even though foreign investors account for just over 10% of total transactions, their buying and selling still influences the psychology and decisions of domestic investors to some extent.
The disparity in interest rates, monetary policies, volatile exchange rates and political fluctuations has significantly influenced the actions of foreign investors.
This has led to global capital-flow realignments, with markets experiencing slower growth, currency devaluations or being classified as frontier markets witnessing substantial capital withdrawals in favour of more efficient market destinations.
Vietnam and neighbouring markets such as Thailand and China are also clearly affected by these factors.
Furthermore, the selling pressure partly stems from capital withdrawals occurring in several large exchange-traded funds (ETF). For instance, Dragon Capital’s DCVFM VNDiamond ETF has seen net outflows of over 6.3 trillion dong since the beginning of 2024, showing no signs of abating.
Similarly, Fubon ETF, the largest in the market, has been actively selling hundreds of billions of Vietnamese stocks in recent sessions. Net withdrawals from the ETF since the beginning of 2024 have amounted to nearly 800 billion dong.
Certain individual factors within the Vietnamese market can also have negative impacts on foreign investors, such as the delayed implementation of new trading infrastructure or imbalances in the proportion of industry groups on the trading floor, leading to a lack of attractive investment opportunities in sectors like manufacturing, technology and healthcare.
Despite the strong net selling pressure from foreign investors, Vietnam’s stock market has shown a robust recovery in the early months of the year. As of the May 29 trading session, the VN-Index reached 1,273.64 points, representing an increase of over 140 points or 12.6% compared with the start of the year.
A significant contributor to market growth has been domestic investors. Data from the Vietnam Securities Depository (VSD) reveals that the number of domestic securities accounts increased by over half a million in the first four months of the year.
As of April 2024, Vietnam had more than 7.7 million individual securities accounts, equivalent to approximately 7.7% of the population.
According to Bui Van Huy, director of the Ho Chi Minh City branch of DSC Securities Joint Stock Co, foreign investors have been net sellers for a considerable period of time. However, the more crucial factor at present is the domestic sector. Huy believes that with the market momentum rising, domestic investors will gain more confidence.
Moreover, Vietnam’s economy has received positive assessments, creating promising prospects for the Vietnamese stock market, especially as the process of upgrading the market is being actively pursued, he said. — Viet Nam News/ANN
