Foreign capital flow key indicator for Vietnam stock market: expert

Foreign net buying/selling in the coming period will be a crucial indicator for Vietnam’s benchmark VN-Index, as foreign investors play a significant role in shaping market sentiment, according to Yuanta Vietnam Securities JSC's chief analyst.

At the close of the trading week from December 2-6, the Vietnamese stock market maintained its upward momentum, with the VN-Index reaching 1,270 points by Friday's close. Market liquidity was a highlight, as trading volumes surpassed VND20 trillion (approximately $788 million) on multiple sessions.

The market’s recovery was bolstered by positive domestic developments. Optimistic assessments from global index provider FTSE Russell during their recent visit to Vietnam have raised expectations for the country's stock market to be upgraded to secondary emerging market status by FTSE next year.

This news has sparked speculative capital inflows, driving up the prices of stocks poised to benefit from the upgrade, such as those in the securities sector and large-cap stocks.

Additionally, the General Statistics Office released positive macroeconomic data for November, signaling a broad-based recovery in Vietnam's economy following super typhoon Yagi. The recovery spans industrial production, services, and public investment, while inflation concerns have eased, with the November consumer price index (CPI) rising by just 0.13% month-on-month and 2.77% year-on-year.

Foreign investors have also returned to net buying, with nearly VND950 billion ($37.4 million) flowing into the market over two consecutive sessions (December 5 and 6), creating a positive market impact. However, domestic retail investors were net sellers during the same period, with outflows totaling nearly VND2.5 trillion ($98.5 million).

Foreign investment as a pillar for market stability

Nguyen The Minh, chief analyst at Yuanta Vietnam Securities, noted that the VN-Index's recent gains are an important support for the market in the coming week (December 9-13) and for the remainder of 2024.

"The good news is that foreign investors have returned to net buying. Alongside this, domestic organizations and proprietary trading units have made strong purchases, balancing the selling pressure from retail investors," Minh explained. "So far this year, foreign investors have already net sold nearly VND90 trillion ($3.55 billion). Therefore, there’s limited room for further net selling."

“With such factors as the limited room for further net selling, the U.S. Federal Reserve's (Fed) potential rate cuts, and Vietnam's economic recovery, I expect foreign investors will continue to be net buyers in the coming period," he said.

With signs of strong foreign capital flow, combined with low valuations and recovering financial conditions among listed companies, Minh forecast that the VN-Index could soon approach the 1,300-point mark. He highlighted securities and banking stocks as potential areas of interest for investors.

Meanwhile, Dinh Quang Hinh, head of macro and market strategy at VNDirect Securities, believed the market will likely see increased profit-taking once the VN-Index hits the resistance zone of 1,280-1,300 points.

"As the VN-Index approaches these levels, profit-taking is expected to intensify," Hinh noted. "Investors should be cautious about chasing stocks at high prices and should wait for market fluctuations before making any adjustments to their portfolios."

Hinh recommended that investors focus on stocks with positive growth prospects for the final quarter of the year, particularly in the banking and export sectors (especially seafood and textiles). He also advised investors to consider stocks that stand to benefit from the anticipated market upgrade.