Foreign investors net buy Vietnamese stocks for two consecutive months

Foreign investors have been net buyers on the Vietnamese stock market since November 2022, with a total value of more than VND30 trillion ($1.34 billion).

In the first 13 days of 2023, foreign investors net purchased nearly VND119 billion ($5.07 million) on the Ho Chi Minh Stock Exchange (HoSE). Excluding the put-through sale of more than VND3.3 trillion of Eximbank’s EIB shares, their net-buying value hit over VND3.4 trillion ($145.05 million).

They mainly net bought HPG of steel maker Hoa Phat, with VND614.7 billion ($26.22 million); FUEVFVND of ETF DCVFMVN DIAMOND (VND321.6 billion or $13.72 million); VNM of Vinamilk (VND277 billion); VHM of Vinhomes (VND245 billion); and VRE of Vincom Retail (VND232 billion).

Meanwhile, they net sold EIB, with VND3,377 billion ($144 million); DPM of Petrovietnam Fertilizer and Chemicals Corp, VND147 billion; and DGC of Duc Giang Chemicals, VND120.6 billion.

Securities experts said that one of the reasons for foreign investors’ strong net buying was the cheap valuation of the domestic market after a deep fall.

Data from top broker VnDirect shows that the P/E (price to earning ratio) of the VN-Index, which represents the HoSE, is currently about 10.3, quite low compared to regional markets such as Thailand, China, Japan, and South Korea. In addition, the declining pressure on the USD/USD exchange rate is also making Vietnamese stocks attractive to foreign investors.

The strong net purchase of foreign investors was assessed to be the main support for the market and a silver liner in the gloomy stock transaction picture before the Lunar New Year (Tet) holiday. Despite accounting for only approximately 20% of the total trading value on the stock market, the consensus of foreign investors to net buy shares has helped push the VN-Index in terms of both scores and liquidity.

Foreign investors' transactions have captured even more attention when the global economy is forecast to face many difficulties in 2023, which will more or less negatively affect Vietnam.

Many experts argued that foreign capital inflows would continue to be the main support for the VN-Index this year.

VnDirect believed that the peak-forming signals of both global inflation and U.S. interest rates will stimulate the risk appetite of foreign investors looking for high profits from emerging markets.

In addition, the recent loss of technology stocks has led to an investment shift to traditional business activities. This is also the nature of Vietnam's stock market, where banks, real estate, electricity, and consumption goods stocks dominate in terms of capitalization, the broker added.

From a different perspective, Nguyen Trung Du, an investment consultant and asset management expert, said that the market would only start a new uptrend when foreign investors are net sellers and individual investors are net buyers. Cash flow in the market can only be active again with the comeback of individual investors, because foreign investors often net buy stocks and then put them in store, making the liquidity low.

“Such a new uptrend is unlikely to happen in the first half of this year, but after the second quarter, the situation may reverse," he said

According to Don Lam, co-founder and CEO of VinaCapital, market upgrading is an important factor for investment funds in particular and the Vietnamese stock market in general to attract foreign capital. He estimated Vietnam can lure at least $10 billion in new capital if the market is upgraded.

Don Lam pointed out that the first thing that needs to be improved is market liquidity. If the total trading value on the Vietnamese stock market hits $2-3 billion, it can completely activate the cash flows of large foreign investors. To improve the liquidity, there need more companies to be listed on the stock exchanges.

Besides, there should be a legal framework for independent pension funds, which is very important for long-term investment. Next, retail investors should be encouraged to invest in specialized funds to manage the market more stably and over the long term. More importantly, the capacity of governance and management, and information transparency must go hand in hand.

It is necessary to increase the ownership limit of foreign investors to make the stock market eligible for upgrading, he noted.

The ownership limit is holding back Vietnam's development, Don Lam noted, adding it has limited the number of shares that foreign investors can buy, causing them to pay expensive fees if they want to invest more. Such ownership limits make liquidity of securities assets lower and therefore the assets would be undervalued as compared to the potential and profitability of the Vietnamese stock market.