Foreign capital ‘inches back’ to Vietnam stock market: analysts

Foreign capital is showing signs of returning to Vietnam’s stock market after net selling was a dominating trend last year and in the first months of this year, analysts said.

Foreign investors’ aggregate net selling in the year to date was VND8.8 trillion ($385 million), down 25% year-on-year, accordingo to Yuanta Securities Vietnam.

“The net selling tends to decline. Foreign investors’ activities are returning in the first months, with rising interest in Vietnamese companies,” Nguyen The Minh, the Ho Chi Minh City-based firm’s chief analyst told a forum on stock market prospects, hosted by The Investor, on Tuesday.

But Minh noted that investment funds will still exercise caution due to geopolitical tensions following the Russia-Ukraine conflict and uncertainties over the Fed’s rate hike plans.

“Given the strong volatility and unpredictable risks, they might not buy in immediately. But we are hopeful and optimistic given the new signs, especially as our economy is reopening.”

Billions from net selling ‘are here to stay’

Le Xuan Nghia, Vietnam’s top banking expert, said his biggest hope when it comes to Vietnam’s stock market this year is the return of foreign investors.

“Their net selling was over $3 billion, but our research on the foreign exchange market shows that the money remains here, on their accounts,” Nghia, head of the Business Development and Research Institute, told the forum.

He stressed that if the country’s macro fundamentals are strong, like an inflation rate of less than 4% (while many countries might see 10%), an economic expansion of around 5.5%, good FDI growth, and especially a stable forex rate which has been so over the past three years, foreign investors will come back.

"Looking at Vietnam’s economic fundamentals and vaccination coverage, I believe foreign investors will prefer to stay here, rather than elsewhere. I expect they will return, contributing to the stability of the market this year and being a firm pillar for the market in 2022 and 2023.”

Nghia added that his research shows Fed is "pretty cautious" in raising interest rates and the hike level might be very low, just 0.25% at a time. “Only when a single hike is up to 0.5%, capital would possibly fly back to the U.S.”

“My expectation is the market this year is positive, though it could not rally like last year.”

Vu Bang, former chairman of State Securities Commission, said the net selling of foreign investor was $3 billion, but the actual outflight was less than $1 billion. “The remaining $2 billion remains on their accounts or has been invested in the primary market, in Vietnamese companies.”

Bang noted that capital outflight is a global trend in recent years, and the Ukraine-Russia conflict might fasten the shifting, which will negatively impact on countries. But that’s also an opportunity for Vietnam."

"Vietnam has a high vaccination coverage, and its economic stimulus is actively deployed, especially toward infrastructure and digital technology. Those elements will catch the eyes of foreign investors.”

Vietnamese investors have shrugged off concerns over foreign investors’ continual net selling since last year. Domestic retail investors opened 1.5 million trading accounts in 2021, up 50% against the total of the period 2017-2020. The tally keeps rising this year to 405,980 in the first two months.

Vietnam’s stock market is assessed as one of the 10 stock markets with the best resilience to the Covid-19 pandemic and best recovery in 2020. VN-Index set new peaks in 2021. At the end of 2021, the major index closed at 1,498.28 points, up 35.7% against the end of 2020 and is considered one of the world’s stock indexes with highest growth.

As of December 28, 2021, the market capitalization reached nearly VND7,729 trillion ($337.7 billion), up 46% against the end of 2020, equivalent to 122.8% of GDP in 2020 and 92% of GDP in 2021.

The market capitalization continued to rise slightly in the first two months of 2022, reaching nearly $340 billion as of February 28, 2022, up 0.2% compared to the end of 2021 and equivalent to 92.6% of GDP.