Foreign capital is rushing back to Vietnam's stock market

Investors monitor the electronic board at Rong Viet Securities Joint Stock Company (District 1, Ho Chi Minh City) in October 2024.

More than VND17,100 billion was disbursed by foreign investors on the Vietnamese stock market last week, while the selling volume was about VND14,100 billion. Foreign capital mainly sought banking stocks because of their low risk, high liquidity and large proportion in the market capitalization structure.

MBB and VPB led with net absorption values ​​of VND1,086 billion and VND416 billion, respectively. Meanwhile, MSB was the stock with the longest net buying streak from foreign investors with 14 consecutive sessions, helping the market price increase by 4% and at times surpass the VND12,000 barrier.

Leading stocks in the VN30 basket also saw foreign capital return. After being sold off fiercely since the beginning of the year, FPT absorbed a net of more than VND860 billion. PNJ was also bought by foreign investors for 6 consecutive sessions, including one session worth more than VND250 billion.

Although the net selling status since the beginning of the year has not changed, foreign investors' transactions last week were called by many analysis groups as a "reversal signal" after 2 years of tirelessly selling.

"Recent developments signal the return of long-term institutional capital flows and are consistent with the trend of interest in emerging markets in the region," said Tyler Nguyen Manh Dung, Senior Director of Market Strategy Research, HSC Securities Company.

Mr. Dung said that foreign investors, including offshore funds based in Europe, have been very active in disbursing recently. These are institutional investors participating in the Vietnamese stock market but have not yet set up a transaction office. They often apply a long-term investment strategy and gradually allocate over many sessions, instead of disbursing all in one session.

Speaking to VnExpress , Mr. Nguyen Hoang Linh - General Director of Vietnam Maritime Bank (MSB) - also said that among the investment funds that have been contacted recently, most are from Europe. The number of financial institutions and investment funds approaching the bank has increased sharply since the bank received additional long-term loans from OPEC Fund, Standard Chartered, Mizuho, ​​FMO...

In addition to the objective factor of global capital flows reversing as investors withdraw from the US to return to Europe and Asia, HSC experts believe that there are three internal factors that help the Vietnamese stock market attract foreign funds.

First, the overall market P/E (price-to-earnings ratio) valuation is below the five-year average and lower than some regional markets. This means the market valuation is relatively cheap.

Second, the launch of the KRX trading system is a major step forward, enhancing the market position in the eyes of rating agencies. The possibility of FTSE putting Vietnam on the list for consideration for upgrading in the September review still exists.

Finally, geopolitical stability and a clear economic policy direction are bolstering confidence in foreign capital flows, especially as the risks of tariffs and trade wars gradually subside. Institutional investors have begun to look back at the internal factors of the economy and individual businesses.

As a foreign investment fund participating in the Vietnamese market since 2013, a representative of AFC Vietnam Fund said that the Government's moves such as drastic tax negotiations, expanding diplomacy , boosting public investment and stimulating domestic economic growth make foreign investors like them "feel more secure".

"In recent sessions, we have bought stocks that benefit from the wave of public investment and continued to monitor the real estate group after a long period of price decline due to stagnant business," said Mr. Vicente Nguyen - Investment Director.

This fund previously focused on stocks in the garment, wood and seafood industries. They considered these to be domestic industries with real strengths and strong recovery after the Covid-19 pandemic. However, tariff risks forced them to restructure their portfolios to reduce the proportion of traditional industries to allocate to businesses with new growth stories.

Although foreign capital flows show positive signs, AFC Vietnam Fund representatives believe that it is necessary to observe developments over several quarters to conclude whether foreign investors have actually returned to the market. This caution stems from the fact that foreign investors net sold up to VND93,000 billion in 2024 - a record in the history of Vietnam's stock market. Over the past 2 years, foreign investors have only temporarily stopped selling in January 2024.

According to Mr. Tyler Nguyen Manh Dung, two important bottlenecks need to be resolved so that the reversal signal of foreign capital flows in the Vietnamese stock market becomes a stable and sustainable trend.

First, a favorable outcome in trade negotiations is key, especially since exports account for around 87% of GDP. Second, reforming regulations related to IPOs (initial public offerings), mechanisms to encourage equitization of state-owned enterprises and support for market upgrades this year.

"Foreign capital flows are less constrained by short-term technical resistance levels, so their return could create many breakthroughs for the VN-Index in the coming time. Not to mention, if this trend continues, capital may gradually shift to the mid- and small-cap segment, instead of focusing only on bluechips," said Mr. Dung.

PV (synthesis)

Source: https://baohaiduong.vn/dong-von-ngoai-ruc-rich-quay-lai-chung-khoan-viet-nam-411902.html