Foreign investors turn net buyers after 5 months of net selling

Foreign investors have returned to net buying Vietnamese stocks after months of net selling since the end of February.

The VN-Index, which tracks the performance of the Ho Chi Minh Stock Exchange (HoSE), had a week of sharp falls with low liquidity from July 22-26.

Specifically, after the previous week of declines, the major index continued to plunge in the first two sessions of the week and retested the 1,220-point area before recovering.

Selling pressure gradually decreased in the following sessions with improved demand, helping the benchmark index gain at the end of the week. Across the whole week, the VN-Index lost 22.67 points, or 1.79%, to 1,242.11.

On the Hanoi Stock Exchange (HNX), the HNX-Index dropped 3.86 points, or 1.6%, to 236.66.

Trading volume fell by more than 18% week-on-week on the HoSE and nearly 21% on the HNX.

According to broker Saigon-Hanoi Securities (SHS), securities tickers experienced a sharp decline in the week, with SSI of Saigon Securities dropping 7.76%, VCI of Vietcap Securities (-5.16%), VIX of VIX Securities (-12.66%), BSI of BIDV Securities (-7.55%), CTS of VietinBank Securities (-11.9%), and MBS of MBBank Securities (-8.93%).

The banking group performed poorly, with LPB of LPBank down 8.7%, MBB of MBBank 4.33%, ACB of Asia Commercial Bank 3.98%, CTG of VietinBank 4.04%, and BID of BIDV 3.04%.

Most insurance stocks closed the week in the red, specifically BVH of Bao Viet Insurance (-5.57%), MIG of Military Insurance (-5.97%), and BMI of Bao Minh Insurance (-3.37%).

As a bright spot, foreign investors turned net buyers.

On the HoSE, they net sold stocks for two sessions and net bought for three sessions. In total, on this bourse, this group net bought 17.67 million units for VND420 billion ($16.6 million), while they net sold 9.19 million units to the tune of more than VND782 billion ($30.9 million) in the previous week.

They mainly net bought KDC of KIDO Group (VND470 billion or $18.57 million), SBT of Thanh Thanh Cong-Bien Hoa JSC (VND439 billion), VNM of Vinamilk (VND232 billion), and MSN of Masan Group (VND111.6 billion).

Nguyen The Minh, director of analysis at Yuanta Vietnam Securities JSC, said that in the first half of 2024, foreign investors net sold more than VND60 trillion ($2.37 billion), but net sales had eased in recent sessions and even turned to net buying.

"However, this is not necessarily a signal that this group will revert to net buying in the future. I think after a long period of continuous net selling in large quantities, foreign ownership is no longer significant, and mainly strategic foreign shareholders," Minh said.

According to this expert, a number of factors are prompting foreign investors to net buy stocks again, including the cooling exchange rate from possible interest rate cuts by the U.S. Federal Reserve.

In the past, foreign cash flowed into developed stock markets with a large proportion of technology stocks, such as Taiwan, South Korea, and the U.S. However, this trend has cooled recently as businesses announced their Q2/2024 financial statements.

Investors were disappointed in the results, and realized that AI has not helped businesses to grow as quickly as originally touted. According to the Q2 business results, the valuation of technology stocks was quite high compared to their real value.

"The VN-Index's price to earnings is forecast at approximately 12-13 times, with a profit of 8%, plus a fairly high cash dividend (2%), the gain of the VN-Index will be 10%. This is quite an attractive figure," said the expert.