Foreign investors piling on Vietnamese stocks

Authorities check the result of equitisation of a State-owned company (Photo: www.qdnd.vn)

Experts have said that the escalating US-China trade tensions present the Vietnamese stock market with an encouraging atmosphere for growth in 2019 as foreign investors have a brighter outlook on emerging markets.

Recently, investors from the Republic of Korea, Japan and Thailand, among others have been pouring capital into Vietnamese stocks via various merger and acquisition (M&A) deals.

Dominic Scriven, Chairman of fund management firm Dragon Capital, said that despite a tough 2018 in terms of both economic and political issues in the world, the Vietnamese stock market remained stable and was in a somewhat better situation than its counterparts like Indonesia, Thailand and the Philippines thanks to the Government’s timely and flexible macro-financial policies.

In the past four years, the equitisation of State-owned companies has resulted in a strong national stock market, especially serving as a magnet for foreign investors, he added.

MB Securities JSC said that liquidity on the market hit its highest figure in four months, backed by foreign capital disbursement through domestic and foreign exchange-traded funds (ETFs) such as VanEck Vectors Vietnam ETF, db x-trackers Vietnam ETF, and VFMVN30 ETF.

According to Vice Chairman of the State Securities Commission (SSC) Pham Hong Son, Vietnam has become more attractive to foreign players after the UK-based financial and business information firm FTSE Russell (FTSE) announced on September 27 last year that Vietnam is currently classified as a frontier market and is being added to the watch list for possible reclassification as a secondary emerging market.

He evaluated 2018 as a successful year for the Vietnamese stock market as the stock market capitalization reached some 3,900 trillion VND (167.75 billion USD), up 12.7 percent year-on-year, and accounting for 71.6 percent of the annual gross domestic product (GDP).

In particular, after one year of operation, the derivatives market has proved its role as an effective investment channel and hedging against risk, helping to stabilise investors’ confidence when the base market was highly volatile. 

Vietnam aims to make the size of its stock market equal to 100 percent and 120 percent of the gross domestic product (GDP) in 2020 and 2025, respectively. The country also looks to develop its bond market to be equivalent to 47 percent and 55 percent of the GDP in those respective years.

Meanwhile, the number of listed companies next year needs to increase by at least 20 percent from 2017. The number of investors in the market should account for 3 percent of the population in 2020 and 5 percent in 2025, Deputy Prime Minister Vuong Dinh Hue said at a meeting of the SSC in Hanoi in February.

He noted that in 2019, relevant agencies must take stronger actions to develop a transparent, professional and modern market that matches international practices, thus enhancing investors’ trust so as to soon upgrade Vietnam’s stock market from a frontier to an emerging market.

Deputy PM Hue also requested that they ensure a reasonable structure between private and organisation investors, and between domestic and foreign ones, while facilitating the development of professional investors.

The Ministry of Finance and the SSC need to make the financial market healthier and improve the capacity of securities business organisations, he said, adding that all transaction and payment technologies on the stock market must be reformed by 2020.