The Vietnamese stock market

Foreign net selling continues

06:00 | 23/07/2021 Economy

(VEN) - According to the SSI Securities Corporation, local investors remain the driving force of Vietnam’s stock market as net selling continues by foreign investors.

foreign net selling continues
Foreign investors still see the Vietnamese stock market as an attractive option

Foreign investors’ net selling reached VND11.5 trillion in May and VND25.8 trillion in the first five months of the year on Vietnam’s three stock exchanges. In the first week of June, foreign investors net sold a value of VND6.071 trillion on the Ho Chi Minh Stock Exchange (HoSE).

Meanwhile, plunging interest rates prompted Vietnamese to open nearly 400,000 new trading accounts in 2020, a record high. In the first three months of this year alone, they opened almost 258,000 more, helping send daily turnover on HoSE to an all-time high.

The foreign selling is attributed to the restructuring of portfolios by foreign investors, with capital shifting from emerging markets, including Vietnam, Thailand and Malaysia, to the US market that continuously hits new records.

Dr. Doan Bao Huy from the RMIT University Vietnam said world food prices surged by 40 percent in May compared to a year ago, and inflation in the second quarter of the year reached an estimated 4-5 percent due to sharp increase in oil prices. Inflation in Vietnam was inevitable with the average money supply increasing by 13-14 percent and economic growth reaching less than three percent, creating negative impacts on the development prospects of the stock market.

Tran Truong Manh Hieu, strategy analyst at the Korea Investment & Securities (KIS Vietnam), said it is hard to predict when foreign investors will be net buyers again on the Vietnamese stock market.

Nonetheless, the Vietnamese stock market remains attractive in the eyes of foreign investors thanks to the country’s political and economic stability, fast growth of listed companies, and upgrading prospects. Foreign investors will continue to pour capital into Vietnam to look for profits.

With efforts of the State Securities Commission of Vietnam in improving the legal corridor and with the revised version of the Law on Securities in effect since January, Vietnam is expected to be upgraded to the status of a secondary emerging market by FTSE in its 2022 upgrade assessment.

Once officially upgraded to a secondary emerging market, Vietnam’s stock market is expected to attract up to US$1.4 billion from funds tracking or benchmarking indices like the FTSE Global All-Cap, FTSE All-World and FTSE Emerging Markets. Based on historical data of actual movements of global markets, before a stock market is officially upgraded to emerging market status by FTSE, it usually receives strong cash flows from foreign investors and embarks on an upward trend.

Thanh Thanh