Foreign investors’ stock purchasing power weakens
Foreign investors have turned net sellers in recent sessions from long streaks of net buying in previous months.
In 2022, the group net bought nearly VND28,650 billion ($1.2 billion), a strong reversal from the net selling value of VND58,000 billion in 2021.
The continuous disbursement of foreign investors came from the fact that most foreign exchange traded funds (ETFs) considered the Vietnamese stock market attractive in the medium and long terms thanks to sustained economic growth and inflation being under control. In addition, with a sharp decline in 2022, Vietnamese stocks were believed to be more attractive than those in other parts of the world.

Foreign investors were net sellers to the tune of nearly VND112.17 billion ($4.73 million) on the HoSE. Photo courtesy of Corporate Finance magazine.
Foreign investors’ net stock purchase was extended to January 2023, when they net bought more than VND4,200 billion ($176.5 million), and if the extraordinary put-through transaction of Eximbank’s EIB was excluded, this figure was over VND7,600 billion ($319.4 million).
Both domestic and foreign ETFs recorded positive cash flows, notably VanEck (VND2,005 billion), VNDiamond (VND680 billion), VFM VN30 (VND636 billion), FTSE Vietnam (VND594 billion), and VNFIN Lead (VND314 billion). SSIAM VNX50 was the only fund net sold with a value of VND10 billion ($420,256).
However, in February, when the VN-Index, which represents the Ho Chi Minh Stock Exchange (HoSE), fluctuated with shrinking liquidity, the buying power of foreign investors showed signs of weakening, with many strong selling sessions. In the first half of the month, they recorded four net selling sessions, with more than VND300 billion ($12.6 million) on February 15, and VND112.17 billion a day after.
Nguyen The Minh, head of research at Yuanta Securities Vietnam, told The Investor that there are four reasons for the weakening purchasing force of foreign investors in recent sessions. Firstly, ETFs continued to maintain positive cash flows in the first month of 2023, but their investors often relied on the VN-Index to make investment decisions.
Secondly, in 2022, many ETFs, notably Fubon, raised the scale of capital mobilization. After a period of strong net buying, there was not much room for disbursement, leading to a decrease in purchasing power.
Thirdly, for foreign investors, their net buying activity depends heavily on two factors: macro developments and valuation. This year macroeconomic growth is likely to decelerate, while the market valuation is no longer as cheap as in the period of October and November 2022. Currently, the VN-Index’s price to earning ratio (P/E) stands at 14x, so it needs to drop to 11x-12x to trigger a return of foreign cash flow.
"In addition, between Q2 and beginning of Q3, many businesses, especially real estate developers, will have to pay for a large amount of maturing bonds. However, with the current serious capital shortage, many investors are worried that defaults, if possible, will directly affect the stock market," Minh said.
This expert also noted that investors are waiting for information related to the latest draft of amended Decree 65 that the Ministry of Finance has just submitted to the government.
If this decree is passed, it will remove the liquidity-related bottlenecks for businesses. At that time, the pressure of bond defaults and long-term risks would relieve, thus stimulating foreign capital flow to return to the Vietnamese stock market.
In a recent report on foreign capital, SSI Research maintained a neutral view on this inflow after a period of continuous disbursement. It believes that there are still challenges from the domestic macro situation, plus a possibility of money flow moving to the Chinese market following its reopening.
Sharing the same view, Viet Dragon Securities also assessed that foreign capital inflow would continue to support the large-cap group and the VN-Index, as it did in the pre-Tet rally, but it will be difficult to form a new sustainable gaining drive when individual investors have continuously made net cash withdrawals for profit taking.
"The market needs a healthy correction to attract foreign cash flows back and create momentum for a new, more sustainable rally when macro developments are expected to be more positive in the second half of this year," it said.
Ending the Thursday session, foreign investors were net sellers to the tune of nearly VND112.17 billion ($4.73 million) on the HoSE. They mainly net sold STB of Sacombank, VIC, DXG of Dat Xanh Group, and DCM of Petrovietnam Ca Mau Fertilizer JSC; while net buying HDB, VNM of Vinamilk, HSG of steel maker Hoa Sen, and MSN of Masan Group.
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