Bourse status upgrade prospect to draw back foreign investors: expert

While there are still many favorable factors for Vietnam's stock market, the potential for a market status upgrade is expected to help attract foreign capital back in the near future, said Ho Thuy Ai, deputy CEO of Phu Hung Fund Management JSC.

At the talkshow “The Financial Street” aired on Vietnam Television on Monday, Ai said that after six sessions of actively buying Vietnamese stocks, foreign investors returned to net selling on Monday and Tuesday to the tune of more than VND300 billion ($11.82 million) and VND226 billion respectively on the Ho Chi Minh Stock Exchange (HoSE).

So far this year, they net sold nearly VND87.8 trillion ($3.46 billion) in total on the major bourse, including a sell-off of VND5.2 trillion ($204.68 million) on October 29 and high outflows on several days in mid-November.

Ai pointed out several factors behind the sustained foreign withdrawal from Vietnam’s stock market.

Firstly, Vietnam’s stock market has struggled to offer returns that are competitive compared to international investment opportunities. “Despite Vietnam's impressive economic growth in recent years, the stock market has not generated the high returns that foreign investors seek,” she said.

Another significant factor is the lack of new investment opportunities as Vietnam has seen a relatively slow pace in terms of initial public offerings (IPOs) in recent years.

It means that foreign investors have fewer options when it comes to diversifying their portfolios. The absence of fresh stock offerings has made the market less attractive, further contributing to the outflows.

Furthermore, the Vietnamese stock market remains heavily weighted toward just a few sectors. Finance, real estate, and consumer goods make up around 75% of the total number of stocks, while technology tickers represent less than 4%.

This imbalance has left foreign investors with fewer compelling options in sectors they typically favor such as technology sectors and high-growth industries, she added.

Despite the outflows, Ai remained optimistic about the market's potential. Vietnam's stock market has been able to maintain positive growth even without significant foreign capital inflows, as evidenced by the solid performance in the past two years.

The market has demonstrated positive signs in 2024, with optimistic reactions to the growing prospect of having its status upgraded from “frontier” to “emerging” in 2025.

This is seen as a major opportunity to attract foreign capital back into the market. However, to fully capitalize on this opportunity, Ai stressed that Vietnam needs to continue improving its investment climate. Fund managers and securities firms must improve transparency and protect investor interests through regulatory compliance.

“It is necessary to strengthen the country’s market infrastructure. Upgrading technology platforms, trading systems, and exchanges will help facilitate smoother transactions and better market monitoring,” she noted.

Ai also emphasized the importance of reducing restrictions on foreign ownership and creating more opportunities for foreign investors to participate in IPOs. By attracting more companies to list on the stock exchanges, particularly in the technology and innovation sectors, Vietnam can diversify its market, making it more appealing to international investors.

Improving corporate governance standards is vital for enhancing investor confidence. This includes ensuring greater transparency, adopting international financial reporting standards (IFRS), and making financial disclosures available in English, she added.

"However, in the long run, the most important factor remains the evaluation of foreign investors. All we are working on are aimed at meeting the criteria set by international organizations to enter the FTSE Russel emerging market list," said Ai.

In the current market context, the expert recommended that investors adopt more cautious investment strategies to mitigate risks and optimize investment performance. They should stay focused on stocks with high liquidity and good quality, and avoid those influenced by rumors or unsubstantiated stories.

Investors should also diversify their portfolios to minimize risks. A diversified investment portfolio will be a better choice, she notes.

Finally, Ai advised investors to pursue long-term investment as it tends to yield better results. If individual investors are busy, non-professional, or semi-professional, they may consider investing in open-end funds managed by experts and professional organizations to both achieve investment performance goals and reduce risks.