Foreign capital returns to Vietnam’s stock market

Foreign investors net sold billions of US dollars on Vietnam’s stock market in 2021, but in the first month of 2022, the foreign capital flow has started to return.

Foreign capital
The stock market is still the channel to attract the cash flow of the majority of individual investors. (Photo: SGGP)

Selling more than VND62.3 trillion

Vietnam’s stock market grew 36 percent in 2021, but there was a low note as foreign investors net sold more than VND62.3 trillion on the whole market. However, it did not have a great impact on the general market because the cash flow of domestic investors increased sharply last year.

Experts said that foreign investors sold strongly on Vietnam’s stock market in the past year because they wanted to retrieve money due to fear of the Covid-19 pandemic. In addition, it is also because the proportion of industry groups on the Vietnamese stock market has not been diverse, and the percentage of foreign ownership is limit ed. Most of the companies listed on Vietnam’s stock market are in the fields of finance and real estate. Meanwhile, the number of enterprises in industries that attract strong cash flows in the world, such as technology, retail, healthcare, and education, is not high, so it is difficult for buyers. In addition, many foreign investors reflected that the process of opening a securities account was still complicated and not convenient for them.

According to a leader of Dragon Capital Fund, Vietnam’s stock market is a frontier market and has not yet been included in the list of emerging markets, thus limit ing the ability to attract capital of foreign investors. Currently, foreign investment flows into the frontier markets are decreasing globally. Besides, 2021 is a successful year for the global stock market in general, when most stock indices (except China and Hong Kong) recorded peak growth, causing Vietnam’s stock market to face more competition.

Forecasted to comeback strongly

James Estaugh, Head of Securities Services HSBC Vietnam, assessed that the prospect of Vietnam’s stock market in 2022 would continue to grow. The VN-Index is forecasted to increase to 1,850 points thanks to the improved market capacity, new technology system, and foreign capital. There are many reasons to believe that foreign capital inflows will return to Vietnam’s stock market strongly in 2022. Besides the fact that the State maintains macroeconomic stability as a solid fulcrum to support the stock market, the market also has many bright spots to convince foreign investors to pour capital into Vietnam. Particularly, Vietnam’s stock market has now grown spectacularly. Specifically, the average trading value of stocks on the Vietnam stock market in 2021 reached nearly VND26 trillion per trading session (about US$1.13 billion), an increase of 250 percent compared to 2020, equivalent to an increase of about $430 million per trading session. Meanwhile, the average trading value of Indonesia’s stock market was $800 million per day, Singapore’s was $500 million per day, and the Philippines was $100 million per day. In fact, foreign investors have returned to Vietnam’s stock market, net buying from the beginning of 2022 for up to a trillion Vietnamese dong.

Ms. Hoang Viet Phuong, Director of the SSI Center for Analysis and Investment Consulting, said that in 2022, many foreign investors assessed Vietnam’s stock market to have a positive outlook, and expected that capital flows from investment funds would return. In addition, domestic enterprises, which are required to complete IPOs and divestments in the next two years, include many names in the retail and consumer industries, which are expected to attract the attention of foreign investors.

Statistics from FiinGroup – a company specializing in providing financial services – show that, in January 2022, foreign investors net bought nearly VND500 billion on the whole market. It is not possible to confirm the net buying trend of foreign investors in the market. However, according to analysis, the domestic capital is somewhat weakened, the net buying of foreign investors will create many positive prospects for the stock market. Banking stocks had been continuously net bought by foreign investors in January and early February 2022. Statistics show that foreign investors net bought more than VND1.96 trillion of banking shares by order matching method in January 2022. This is also the group of stocks that foreign investors disbursed the most in the first month of the year. The strong buying demand of banking stocks in the market makes this group of stocks currently the most active in the market, helping to keep the rising momentum around 1,500 points after several real estate stocks plummeted.

Ms. Pham Thuy Duong, Deputy Director of the Analysis Department of Dragon Capital Fund, said that the fund was allocating investment to the banking stocks higher than the proportion of other stocks in the VN-Index basket. “The growth potential of the banking industry remains extremely attractive, thanks to high credit growth, especially in the retail customer segment. Along with that, credit risk is expected to decrease slightly in 2022 compared to 2021, so we expect banking stocks to record positive results in 2022,” she said.