Outflows from Vietnam-focused ETFs to slow down by year-end: brokerage

The cash outflows from exchange-traded funds (ETFs) investing in Vietnamese equities are not expected to end soon, but will be slower after June, stock analysts have said.

“Positive signals” may appear when the USD/VND exchange rates and interest rates become more stable, analysts with Saigon Securities Inc. (SSI) said in a note.

The Vietnamese dong has depreciated circa 5% against the greenback this year.

Since the start of this year, investors have net withdrawn a total of VND12.38 trillion ($486.64 million) from the ETFs active in Vietnam, or 16.3% of their net asset value (NAV) as of end-2023, data compiled by SSI showed.

The strongest selling was seen at DCVFM VN30 ETF (VND6.4 trillion or $251.6 million), SSIAM VNFIN Lead ETF (VND1.7 trillion), DCVFM VN30 ETF (VND1.5 trillion) and Fubon FTSE Vietnam (VND1.5 trillion).

Meanwhile, data by VNDirect Securities showed that outflows from Vietnam-focused ETFs totaled VND11.61 trillion ($456.4 million) in the first five months of this year, including VND2.8 trillion in May.

DCVFMVN Diamond ETF was the most sold in May, with VND1.32 trillion ($52 million). The next most affected ETFs were Fubon FTSE Vietnam, SSIAMVNFIN Lead ETF, and DCVFM VN30 ETF, with corresponding net outflows of VND772 billion, VND676 billion, and VND549 billion.

On the other side, investors net poured VND311 billion ($12.22 million) into KIM Growth VN30 ETF and VND183 billion into Xtrackers FTSE Vietnam ETF.

The outflows from ETFs have coincided with net sales by foreign players who net unloaded VND19 trillion ($747 million) worth of Vietnamese securities in May, mostly of banking and real estate stocks.

In the year to June 12, they have net sold VND40.58 trillion ($1.59 billion) worth of securities listed on the Ho Chi Minh Stock Exchange, the country’s main bourse, according to exchange data.

Nguyen The Minh, head of retail research at Yuanta Securities Vietnam, attributed foreign net selling to concerns that the U.S. Fed may keep high interest rates longer than expected, or even raise rates further.

In addition, stellar performances by developed stock markets have accelerated capital flight from emerging markets, helping investors gain better returns and fend off local currencies’ devaluation.

"Net sales by foreign investors only accounts for about 7-9% of the total market liquidity, thus they have an insignificant impact quantitatively. However, net selling has definitely impacted domestic investors’ sentiment,” said Minh.