Foreign capital flows into Vietnam’s stock market in takeover deals

Foreign investors make selective purchases

Though foreign investors were net sellers in recent months, they still bought more than they sold in the first six months of the year, according to the National Finance Supervision Council (NFSC), with net purchase value of US$1.6 billion, or VND36.3 trillion.

The figure shows that capital flow to Vietnam is stronger than other Asian emerging markets, which witnessed foreign investors’ net sale of US$0.9-8.9 billion in the first half of the year.

However, analysts noted that foreign capital flow only targets some newly listed shares, or shares of companies foreign investors want to take over.

HDB shares, for example, witnessed net purchase of VND1.4 trillion within five trading sessions, on January 5-11, after the bank officially began listing shares.

On June 27, one just one days after the listing, the net purchase of Yeah 1 shares (YEG) reached VND2.356 trillion.

To implement their takeover plans, on March 26, foreign investors rushed to buy VGT with net purchase of VND555.5 billion.

On April 20, they bought 52.5 million NVL of Novaland, worth VND3.391 trillion, through negotiations. On May 10, Kyoei Steel bought 33.22 million shares of the steel manufacturer VIS, worth VND1.158 trillion.

However, the deals are small compared with the huge deal in which foreign investors’ net purchase of Vinhomes shares (VHM) reached VND28.548 trillion.

The huge deal helped maintain the foreign investors’ influx in the first six months of the year, despite the massive withdrawals by foreign investment funds recently.

As such, foreign investors only purchased potential shares, while they sold a lot of blue chips, meaning that the market’s risk increased, but a few enterprises are still believed to have high potential.

Takeover deals

A report from the General Statistics Office (GSO) on the socio-economic situation in the first six months of the year showed that there were 2,749 deals of foreign investors buying into Vietnamese businesses, totaling US$4.1 billion, an increase of 82.4% compared with the same period last year.

The reports by the two agencies both showed optimism about foreign portfolio investment in Vietnam.

The GSO’s report showed that there were 390 capital contribution deals valued at US$1.4 billion which led to a charter capital increase, and 2,359 deals, worth US$2.7 billion, in which foreign capital contributed capital, but did not lead to the charter capital increase.

The figures, once again, prove the view that foreign capital flow aims to take over businesses, rather than cooperate for development.