Stimulating liquidity for the stock market

Money in stocks "dripping"

Cash flow into the stock market is at a low level, with sessions of severe liquidity decline. In the trading session on 5/11, the liquidity of the HoSE floor dropped to 8.200 billion VND, the lowest since mid-month May 2023, foreign investors increased the scale of net withdrawal to 853 billion VND.

Even in the 6/11 session, the VN-Index increased by more than 15 points after the re-election effect of President Donald Trump, but the cash flow into the floor has not improved. The cash flow in the following 2 session did not have a breakthrough, liquidity continued to move sideways at a low level with the order matching value around the threshold of 11.000 - 12.000 billion VND.

The liquidity of the whole month of October 2024 only reached 17.764 billion VND, equivalent to the month of September 2024 and also the lowest level since the beginning of the year. In the past few months, VN-Index has been in a constant tug-of-war state, the index has not broken out; foreign investors have continuously sold net, while individual investors have reduced the number of new accounts.

Mr. Truong Hien Phuong, Senior Director of KIS Vietnam Securities Joint Stock Company, said that the geopolitical situation in the world, the US presidential election and geopolitical conflicts tend to spread, making investors more concerned and cautious in disbursing.

Meanwhile, the domestic situation has not had much positive information. The third quarter 2024 business results report is almost completed, the issue of upgrading the market has not been implemented. The increase in exchange rates, the increase in gold prices or the boom in land prices in some localities, although only local phenomena, also make stock investors consider other investment channels. The fact that foreign investors continue to sell net has significantly affected the psychology of domestic investors.

It takes time for non-prefunding to take effect.

At the beginning of November 2024 month, the new regulation to loosen Pre-funding officially took effect, foreign institutional investors can buy stocks without requiring sufficient funds when placing orders. This is one of the final bottlenecks to help the Vietnamese stock market be upgraded and is expected to help attract a large amount of foreign capital into the market. However, experts all agree that the positive effects of this regulation will take time to penetrate the market.

“Foreign funds investing in Vietnam have been investing for a long time and are familiar with previous regulations, so they are not too affected. Other foreign organizations also need time, need to consider, research and evaluate carefully before entering the market,” said Mr. Truong Hien Phuong.

Sharing the same view, Mr. Vicente Nguyen, Investment Director of AFC Vietnam Fund, said that the non-prefunding regulation has not had any significant direct impact. Thanks to this regulation, the market upgrade by FTSE Russell has a chance to materialize and if the Vietnamese stock market is upgraded, that can help attract foreign capital.

How to stimulate liquidity?

Discussing the prospects for market liquidity from now until the end of the year, experts still have many concerns as there is not much positive information. However, in the long term, the Investment Director of AFC Vietnam Fund believes that there are many options to improve the stock market and attract capital flows both domestically and internationally. In addition to the non-prefunding regulation, improving and innovating the transaction process, shortening the transaction process from T+2,5 to T0 are measures that can be considered.

Mr. Vicente Nguyen emphasized: “If we pay attention, we will see that in the past 3 years, there have been almost no IPO deals in the market to add new products. In the end, the market still only has those companies, without products, how can it attract more attention? Therefore, promoting IPOs, or equitizing state-owned enterprises, encouraging private enterprises to list is a way to promote the stock market to attract more cash flow from investors.”

The most basic thing is that businesses themselves must constantly grow to promote investor interest.

Giving additional suggestions on policy solutions, Mr. Truong Hien Phuong expressed his hope that management agencies will continue to step up the fight against and punish price-fixing entities in the stock market, review and have mechanisms for groups that spontaneously and baselessly call for stock advice, distort the market and affect investor sentiment.

In particular, Mr. Phuong hopes that the agencies will promote and further strengthen the procedures to meet the requirements of the appraisal organization, and upgrade the stock market as soon as possible.

One-sided efforts cannot promote the overall development of the entire market. Efforts from both state agencies and listed enterprises can stimulate positive investor sentiment and attract cash flow back into the market, both from domestic and foreign investors.