Stock market thrives on net foreign buying

16:09 | 05/09/2017 Finance - Banking

(VEN) - Foreign indirect investments (FII) involve corporations, financial institutions and private investors buying stakes or positions in foreign companies that trade on a foreign stock exchange.

stock market thrives on net foreign buying

Supporting stock market

Data compiled by the Ministry of Planning and Investment’s Foreign Investment Agency indicates that in the first seven months of the year, 2,501 foreign investors contributed capital through the purchase of shares, leading to total capital contribution of about US$2.25 billion.

Given unpredictable global economic changes, FII inflows to Vietnam are good news for the national economy in general, and the stock market in particular.

While foreign direct investment (FDI) is the main driving force to keep exchange rates stable, FII inflows to Vietnam help the VN-Index continuously conquer higher levels.

The total net buying value of foreign investors in the first half of 2017 on both the Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX) reached VND9.2 trillion.

Of note among the list of foreign net buyers was the E1VFVN30 investment fund with net buying volume of over 8.4 million units of fund certificates, equivalent to a net value of about VND104 billion.

Expectations

Analysts believe the total net buying value of foreign investors will continue to increase in the remaining months of the year, reflecting confidence in the Vietnamese business environment, especially after the government’s commitment to maintain macroeconomic stability.

In the most recent review, Fitch Ratings revised its outlook for Vietnam’s long-term foreign and local currency issuer default ratings (IDR) to positive from stable. The credit default swap (CDS), which measures the level of risk of government bond holdings, is on track to fall close to its lowest rate since 2007, indicating that the level of risk is declining.

The government has issued Instruction 24/CT-TTg, which requires relevant ministries and agencies to work out measures in order to boost the sector’s performance, to help Vietnam achieve GDP growth of 6.7 percent this year. In addition, credit growth this year is expected to rise above 18 percent to support GDP growth. With the high level of political risk in the region, investors from Japan, the Republic of Korea and Chinese Taipei tend to seek investment in such countries as Vietnam.

However, in order to attract more FII into the stock market, new mechanisms and policies are needed, according to analysts.

Ngoc Thao