Foreign investors net sell in Vietnamese market, banking sector attracts interest

Foreign investors sold a net total of VNĐ11.55 trillion across all three exchanges in the first three months of 2024, equivalent to 50.62 per cent of the total net selling value in 2023. VNA/VNS Photo

Foreign investors in the Vietnamese stock market continued net selling in the first quarter of 2024, with active funds and ETFs contributing to the selling pressure. However, specific sectors, such as insurance, chemicals, and banking, attracted foreign capital.

In the market outlook report for the week of April 15 to 19, 2024, BIDV Securities Company (BSC) provided an updated analysis of foreign capital flows and ETF funds in the first quarter of 2024 and a forecast for the second quarter.

According to BSC, foreign investors sold a net total of VNĐ11.55 trillion across all three exchanges in the first three months of 2024, equivalent to 50.62 per cent of the total net selling value in 2023. The most robust net selling occurred on March 23, with foreign investors selling over VNĐ6.5 trillion. The selling pressure came from active funds and ETFs, resulting in a continued net withdrawal state and exerting pressure on the market.

In March 2024, foreign ETFs experienced a significant increase in net withdrawals, surpassing a total of US$55 million. The ETF with the highest net withdrawal was Fubon ($33.9 million), FTSE with a net withdrawal of $20.2 million, and Premia with $1.16 million. Throughout the first quarter of 2024, foreign ETFs had a net withdrawal of $82.4 million, marking the fourth consecutive month of capital withdrawals.

Domestic ETFs also saw record net withdrawals in the first quarter, totalling $225.48 million, nearly equivalent to the net withdrawal scale for the entire year of 2023 ($267.72 million). The net selling trend persisted in the three main ETFs: Diamond ($173.51 million), E1 ($30.69 million), and Finlead ($20.88 million).

BSC stated that foreign investors have been consistently net selling for five consecutive quarters, although the trend varies among industries. Compared to the fourth quarter of 2021, when foreign investors net sold over VNĐ22 trillion, the chemical, retail and utility sectors experienced net buying.

Although the overall trend was net selling, foreign investors still invested heavily in certain sectors, such as insurance, chemicals, and banking, during the first quarter of 2024. The banking sector, in particular, attracted attention from foreign investors, ending the five-quarter net selling streak.

Đỗ Hồng Vân, Head of Analysis at FiinGroup, said that the majority of net selling by foreign investors occurred in the last two weeks of March, coinciding with the NAV closing of the first quarter's funds. Notably, the net selling was driven by active funds rather than ETF funds.

According to her, the net selling trend by foreign investors is a global phenomenon, with funds flowing into developed markets while weakening in Asian markets, including Thailand and Việt Nam. Additionally, factors such as exchange rate fluctuations and a limited range of stocks, primarily focused on real estate and banking rather than trending sectors like technology and green energy, contribute to the unattractiveness of the Vietnamese stock market for foreign investors.

However, there is a positive development as foreign investor demand has recently emerged, primarily driven by the Fubon Fund from Taiwan. To confirm this trend, foreign investors would need more net buying sessions. Stabilising the exchange rate and addressing market upgrade obstacles will be crucial for retaining foreign capital.

A significant milestone to watch for is the end of the second quarter, which plays a crucial role in upgrading Vietnam's stock market. During this period, more updated information and evaluations will be available regarding resolving bottlenecks, including the official approval of pre-funding matters and the implementation of the new trading system (KRX). If these solutions are effectively implemented, there is a reasonable chance that Việt Nam will receive approval for an upgrade from FTSE Russell by September 2024.

Offering a comprehensive market perspective, Nguyễn Tuấn Anh, Founder of Finpeace, forecasts a highly positive trend in the stock market. He advises investors to have confidence in holding stocks as fixed assets instead of engaging in panic selling.

Furthermore, to identify potential "super stocks," investors should focus on companies with medium to small market capitalisation that exhibit potential for price improvement, demonstrate improvements in fundamental analysis platforms, possess leadership committed to shareholders' interests, have majority ownership by prominent shareholders, organisations and leaders, and have appealing stock valuations.