Vietnamese Stock Market Remains Favored Destination for Foreign Capital Flows

4:21:15 PM | 19/2/2019

The Vietnamese stock market passed through 2018 in lingering doubts when VN-Index dropped dramatically. But, the overall picture of the local market, in relation to other markets in the region and the world, was still positive enough for experts to anticipate a brighter outlook for 2019. In particular, the most noticeable highlight is the direct and indirect foreign investment flows.

The Vietnamese stock market is considered an emerging market that strongly interests foreign investors. While other emerging stock markets witnessed foreign capital outflows in 2018, the Vietnam market still enjoyed net foreign inflows.

Rolling foreign fund inflows
In 2018, investor confidence was challenged when the VN-Index set all-time high of 1,204.33 points on April 9, 2018. But, the gauge quickly slid after that. The measure slumped 25.9% from the peak at the end of 2018.
Despite wide volatility, foreign investors still injected a record fund into Vietnamese equity. According to statistics, in 2018, foreign investors net bought about 421 million shares worth VND43,700 billion (nearly US$2 billion) on all three exchanges. They bought net on HOSE and UPCoM, while they sold net on HNX.

In 2019, U.S. - China trade tensions caused global investment outflows, but foreigners still bought net in the Vietnamese stock market.

Recently, they combed HPG, ASM, CEE, ABT, NVL and VCB. On January 21, the market liquidity soared on put-through deals of VRE and MSN traded by foreign investors. They negotiated to trade 19.76 million VRE shares for VND594.77 billion and 13.9 million MNS shares for over VND1,041 billion. The local market saw more than 171.45 billion shares and fund certificates valued nearly VND4,255.4 billion changed hands. Foreign investors bought a total of 41.89 million units for VND1,979.8 billion.

Increased foreign net buying on the Vietnamese equity market is also creating a more positive atmosphere for domestic investors. After the weeklong Lunar New Year holiday, investors have seemed to regain their excitement and confidence when key gauges gained 7 -13 points a day with an improved liquidity, averaging over VND4,000 billion a day.

Foreigners see many reasons to invest more in Vietnam’s equity
According to experts, after a period of weakening amid fears of macroeconomic stability, foreign investment flows have seemed to be returning to emerging markets, including Vietnam, to seek profit in 2019. This is an opportunity to further increase foreign fund inflows on the stock market.

The expected upgrading of the Vietnamese stock market in 2019 will leverage foreign funds into Vietnam. Earlier, in September 2018, FTSE Russell announced the annual market classification ranking, in which Vietnam was included in the list of secondary emerging markets. Many investors from South Korea, Japan, Thailand, China and Singapore seeking to channel their funds into the Vietnamese stock market by buying and selling listed shares, joined public share offerings launched by State-owned enterprises (SOEs) to raise their interests.

Nevertheless, Vietnam's stock market still faces challenges as the United States Federal Reserve (Fed) may raise prime rates two or three times in 2019 after four hikes in 2018. If this scenario happens, global stock markets, including Vietnam, will be affected, particularly cash flows, because this causes local currencies to lose their value against the greenback in emerging markets like Vietnam. Foreign outflows may happen to a certain extent. Secondly, the U.S. - China trade war, widely expected to continue in 2019, will also have negative impacts on the world stock market, as well as Vietnam.

Up to now, foreign investors have still increased their net buying on the Vietnamese stock market because they are still seeing opportunities in this emerging market. In addition, attractive support and preference policies for direct and indirect foreign investment are expected to exert a pull on foreign funds into the Vietnamese market in the coming time.

Luong Tuan