Foreign investors pin high hopes on Vietnamese stock market

Foreign investors have been expressing renewed interest in the Vietnamese stock market’s growth, reflected via a combined investment of VND9.3 trillion ($388.7 million) for five consecutive sessions last week.

On the Ho Chi Minh Stock Exchange (HoSE), foreign investors net purchased 314.08 million shares for over VND9,182 billion ($383.7 million), nearly five times higher in both volume and value compared to the previous week (from November 21-25).

Steel giant Hoa Phat (HPG) and Vinamilk (VHM) were the most popular purchases, with VND1,436 billion and VND1,308 billion, respectively.

On the Hanoi bourse HNX, foreign investors were also net buyers in all five trading sessions, with more than 5.92 million shares and VND245.27 billion ($10.25 million) changing hands, down 28.87% in volume and 10.3% in value compared to the previous week.

In November, foreign investors net bought more than VND19,000 billion ($774.2 million), slightly lower than the VND22.8 trillion ($953 million) recorded in May 2018.

In November alone, VNM ETF recorded $34 million in net purchasing value, while FTSE Vietnam ETF's figure was $16 million. These ETFs mainly focus on blue chips in the VNDiamond and VN30 baskets.

Of note, the Fubon FTSE Vietnam ETF bought shares worth $133 million in November. This figure is forecast to increase when its fourth additional mobilization of about VND4 trillion ($167.2 million) was approved by Vietnam’s National Financial Supervisory Commission, which should be an important source of foreign capital to support the market in early December.

Yang Yining, manager of Fubon FTSE, said that the decline of the Vietnamese stock market since the end of September was mainly due to the force-sell pressure on real estate stocks and the Central Bank of Vietnam’s two interest rate hikes within a month. After a deep fall, the market has showed a short-term recovery.

This is indeed a good time to invest in Vietnam's stock market, he emphasized.

The founder of the PYN Elite fund, Petri Deryng, also pointed out that recent market manipulation and corporate bond issuance violations had caused the stock market to plunge, affecting investor sentiment.

However, compared with other countries in the ASEAN region in terms of the financial market and macroeconomy, Vietnam is still considered more attractive by foreign investors, especially given the country’s economic outlook for the next five years.

Currently, many emerging market funds cannot access Vietnam as it is only a frontier market. The upgrade to an emerging market by the MSCI will be a big leap for Vietnam. It will make the country's stock market five or even 10 times larger than the current size. State-owned enterprises, at that time, will have very high IPO prices, Petri Deryng said at the "Secrets of Money" talkshow on Friday.

At a ceremony to honour the outstanding listed enterprises in 2022, Dominic Scriven, chairman of Dragon Capital Group, said that the market has started to reflect the cooling of many challenges, such as stabilizing the USD/VND exchange rate, easing panic in the corporate bond market, and improving liquidity in the stock market, with about $1 billion per session.

Citing legendary investor Warren Buffett’s long-term value-based investment method, he said after a sharp decline, the Vietnamese stock market’s capitalization is equal to only half of GDP, at about $200 billion. So people following Buffett’s viewpoint see this as an opportunity worth considering.

In addition, the regulators are working with the HoSE to transform Vietnam into an emerging market. At present, the total value of assets under management into emerging markets is $25 trillion. So if the Vietnamese market is upgraded to an emerging market, it will be able to access this capital.

Vietnam could access $100 billion if it attracts only 0.4-0.5% from this source, compared to its current foreign capital flow of about $40 billion, he added.

This will open opportunities for Vietnamese businesses to access foreign capital, he said, noting that foreign investors only choose strong businesses with good corporate governance.

Cash flow from foreign investors has helped improve domestic investor sentiment, making market liquidity increase sharply to $1 billion during some sessions.

The VN-Index, which tracks the performance of HoSE, has gained for three consecutive weeks. The benchmark closed at 1,080 points Friday, gaining 108.55 points compared to the previous Friday, marking the week with the strongest increase since June 5, 2009.

The trading volume and value on the major bourse improved markedly with over 1 billion shares and VND15 trillion ($627 million) per session, respectively.