Over the past two years, apart from a brief period at the end of 2022 when the market experienced a decline and foreign investors seized the opportunity to buy at low prices, the trend of net selling has remained dominant in the Vietnamese stock market.
In recent months, the intensity of net selling has become particularly high, comparable to the record net selling year of 2021, which exceeded 58 trillion VND. It is possible that new records will soon be set, as foreign investors show no signs of halting their selling activities, consistently offloading trillions of đồng worth of stocks in each session.
Some observers argue that foreign capital flows only represent partial net sales resulting from portfolio restructuring, and therefore have a limited impact on the overall market. However, it should be noted that even though foreign investors account for just over 10% of total transactions, their buying and selling actions still influence the psychology and decisions of domestic investors to some extent.
The disparity in interest rates, monetary policies, volatile exchange rates and political fluctuations has significantly influenced foreign investors' actions. This has led to global capital flow realignments, with markets experiencing slower growth, currency devaluations or being classified as frontier markets witnessing substantial capital withdrawals in favour of more efficient market destinations. Not only Vietnam, but neighbouring markets such as Thailand and China are also clearly affected by these factors.
Furthermore, the net selling pressure partly stems from capital withdrawals occurring in several large ETF funds. For instance, Dragon Capital's DCVFM VNDiamond ETF (FUEVFVND) has seen net outflows of over 6.3 trillion VND since the beginning of 2024, showing no signs of abating. Similarly, Fubon ETF, the largest ETF fund in the market, has been actively selling hundreds of billions of Vietnamese stocks in recent sessions. Net withdrawals from this ETF since the beginning of 2024 have amounted to nearly 800 billion VND.
Certain individual factors within the Vietnamese stock market can also have negative impacts on foreign investors, such as the delayed implementation of the new KRX system or imbalances in the proportion of industry groups on the trading floor, leading to a lack of attractive investment opportunities in sectors like manufacturing, technology and healthcare.
Despite the strong net selling pressure from foreign investors, Vietnam's stock market has shown a robust recovery in the early months of the year. As of the May 29 trading session, the VN-Index reached 1,273.64 points, representing an increase of over 140 points or 12.6% compared to the beginning of 2024.
A significant contributor to this market growth has been domestic investors. Data from the Vietnam Securities Depository (VSD) reveals that the number of domestic securities accounts increased by over half a million in the first four months of the year. As of April 2024, Vietnam had more than 7.7 million individual securities accounts, equivalent to approximately 7.7% of the population.
According to Bui Van Huy, director of DSC Securities Joint Stock Company, HCM City Branch, foreign investors have been net sellers for a considerable period of time. However, the more crucial factor at present is the domestic sector. Huy believes that with the market context gradually accumulating, domestic investors will gain more confidence.
Moreover, Vietnam's economy has received positive assessments, creating promising prospects for the Vietnamese stock market, especially as the process of upgrading the market is being actively pursued, he said.
If measures aimed at upgrading Vietnam's stock market are implemented more rigorously, it will attract foreign capital inflows to ride the wave.
Conversely, investments in the Vietnamese market can also benefit from capital shifting to developing markets if the US Federal Reserve begins reducing interest rates, Huy said./. VNA
- © Copyright of Vietnamnet Global.
- Tel: 024 3772 7988 Fax: (024) 37722734
- Email: [email protected]