Vietnam stock market turns bear, but foreign investors stay

Foreign investors have been net sellers over a couple of weeks, but this does not mean they are leaving Vietnam, experts say.

vietnam stock market turns bear, but foreign investors stay hinh 0

Vietnam was the best Asian market in 2017 and has had record high trading in the first months of 2018. However, foreign investors have been net sellers since April and through May which has sparked concern about the outflow of foreign capital.

However, Thoi Bao Kinh Te Viet Nam (Vietnam Economic Times) quoted a high ranking official as affirming that there is no sign of foreign capital reversal.

The official emphasized that it is necessary to see the difference between net sales and capital outflow.

“If foreign investors are withdrawing capital from Vietnam, this will be immediately reflected in the exchange rate, which is very ‘sensitive’ to any change in the market,” he explained.

Meanwhile, the dong/dollar exchange rate has been stable since the beginning of 2018. The exchange rate fluctuation is predicted to be around 0.5% this year compared with the end of 2017.

The State Bank of Vietnam has been buying foreign currencies in an effort to stabilize the exchange rate and the liquidity, and to control inflation.

 He said that the stable exchange rate, coupled with the continued increase in the forex reserves to US$63.5 billion, will help attract foreign investment. This was also an important factor for Fitch to upgrade Vietnam’s credit rating last May.

 The official said net sales by foreign investors are quite ‘normal’ in the market. 

 “Foreign investors also need to take profit and restructure their investment portfolios,” he added.

 Meanwhile, an analyst disagreed with the official, saying that incidents in the world market are encouraging capital to go out of frontier and emerging markets, including Vietnam. 

 It is highly possible that the FED would continue raising the prime interest rate and the US bond yield to increase, which would help attract investment capital to the US.

 In reply, the official said the interest rate hike is foreseeable. Meanwhile, Vietnam maintains attractive interest rate and has good conditions to stabilize the exchange rate.

 Nguyen Duy Hung, chair of the Saigon Securities Incorporated (SSI), said the upswing occurred because the stock supply was not too big and the amount of money not big enough.

 When the stock market reached its peak of 1,200 points two months ago, some finance institutions and Hung himself expressed concern about a downswing.

 "I think the amount of money withdrawn from Vietnam is not big. In my recent business trips, I noticed that foreign investors are still interested in Vietnam’s market,” he said.


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