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Where is foreign capital going?

Where is foreign capital going?

VietNamNet Bridge – Vietnam’s stock market is feeling pressure as foreign investors are selling more than buying.


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Foreign investors are selling more than buying



What happened?

According to Vietcombank Securities (VCBS), foreign investors had bought more than they sold by $1.5 billion by mid-June 2018. The General Statistics Office (GSO) reported that the foreign portfolio investment increased sharply in the first six months of 2018 by 82.4 percent to $4.1 billion.

VCBS noted that, if not counting special deals with big value such as Vincom Retail (VRE), Novaland (NVL) and Vinhomes (VHM), Vietnam would be just like other emerging markets, witnessing foreign capital net withdrawal.

Bloomberg reported that $19 billion worth of foreign capital had withdrawn from Asian emerging markets this year. The solace for Vietnam is that the net withdrawal from Vietnam was significantly smaller than other regional markets such as Indonesia, Malaysia and the Philippines. 

The solace for Vietnam is that the net withdrawal from Vietnam was significantly smaller than other regional markets such as Indonesia, Malaysia and the Philippines. 

Nguyen The Minh from Yuanta Securities noted that the investors withdrawing capital recently are ETF, some funds capitalized at $100-200 million, or funds pouring money into HSG and CTD shares which had to sell shares to restructure portfolios. 

Meanwhile, larger funds such as Dragon Capital and VinaCapital still operate normally.

What will happen?

As the China-US trade war kicked off on July 6 and the US FED raised the prime interest rate, emerging stock markets have become less attractive, according to Hoang Viet Phuong from SSI.

Phuong said though foreign investors only make up 15-18 percent of total transaction value of the market, their moves have psychological influences on investors.

The Vietnamese stock market also saw panic in several trading sessions. On July 3, the VN Index dropped by 41 points, erasing the hope of the market recovering.

After a series of corrections, the P/E index decreased to 16, equal to that in mid-2017.

According to Rong Viet Securities (VDSC), the market is getting more attractive compared with businesses’ post-tax profit (24 percent in the first quarter). It believes in the continued downward tendency of the VN Index in the next several months, promising better purchase opportunities for investors.

Analysts said in the new circumstances, no group of shares will be prominent enough to lead the market. Foreign investors will focus on IPOs, deals selling shares to strategic partners, and the state’s divestment.

Meanwhile, Hoang Cong Tuan from MB Securities thinks foreign capital will find a way to penetrate derivative stocks.

According to Dominic Scriven from Dragon Capital, Vietnam’s stock market capitalization value has soared from $70 billion to $200 billion.

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