What Does VinaCapital Have to Say About the Foreigners’ Net Sell-Off of Nearly VND 50,000 Billion?

The morning trading session on July 10th, 2024, saw the VN-Index temporarily halted at 1,294.66 points, a slight increase of 0.95 points from the previous session. Foreign investors continued to sell a net of more than 523 billion VND. This was the 10th consecutive session of net selling by foreign investors on the HoSE. While statistics up to the end of June showed that foreign investors had net sold more than 50 trillion VND on the three exchanges of HoSE, HNX, and UpCoM, which somewhat affected market volatility and investor psychology.

NLD had a conversation with Mr. Dinh Duc Minh, Investment Director of VinaCapital Fund, about the factors leading to the net selling of foreign investors.

– Reporter: In the first half of this year, foreign investors net sold about $2 billion (more than 50 trillion VND), the highest net selling value since 2011. What is the main factor that makes foreign investors continuously net sell despite the recovery data of the Vietnamese economy?

+ Mr. Dinh Duc Minh: The main reason for the continuous net selling of foreign investors in the Vietnamese stock market is that the US Federal Reserve (FED) maintains high-interest rates for an extended period. As a result, foreign capital tends to flow back to the US to enjoy higher and less risky interest rates.

At the same time, the rise of stocks in the fields of artificial intelligence (AI) and semiconductors in the US is also attracting foreign capital. Besides the US, capital is also flowing into the stock markets of Taiwan (China) and South Korea, which are markets with many investment opportunities in the semiconductor and AI technology industries.

Looking at a broader perspective, the net selling of foreign investors is not only happening in Vietnam but also in most other emerging markets for the same reasons.

– Despite the net selling of foreign investors, domestic investors still dominate the market, as evidenced by the VN-Index’s good increase over time. What are your thoughts on this?

+ From the beginning of the year to the first week of July 2024, the VN-Index increased by 13.6% in VND terms and 8.4% in USD terms. The Vietnamese stock market has outperformed other markets in the ASEAN region and the MSCI Emerging Markets and Frontier Markets indices. This positive performance is thanks to the buying power of domestic investors, who account for 85-90% of the market transactions. With the expectation that the economy will recover positively in 2024-2025 and the interest rate environment – although slightly increased compared to last year – is still relatively attractive for stock investment.

– So, in your opinion, when will foreign investors stop net selling?

+ Although it is difficult to accurately predict foreign capital flows, we see some factors that can make foreign investors more interested and see more investment opportunities in Vietnam.

First, the Vietnamese economy is recovering faster than expected. With GDP growth of 6.4% in the first half, the Ministry of Planning and Investment has come up with a scenario for the economy to grow by 6.5 – 7% for the whole of 2024, compared to the target of 6 – 6.5% at the beginning of the year.

Second, many forecasts show that the FED will start cutting interest rates in the coming time, and the reduction may not be significant, but investors will perceive it as a significant shift in US monetary policy.

Third, if the Vietnamese stock market is upgraded to an emerging market in 2025 as planned, it will attract capital inflows from emerging market investment funds.

What is the trend of the stock market in the second half of the year? Is it still attractive compared to other investment channels such as savings, gold, or real estate?

+ We expect the Vietnamese stock market to remain positive in the coming time as the economy is recovering faster than expected. Listed companies may achieve positive business results this year.

For the portfolio of stocks that VinaCapital is tracking, which accounts for about 90% of the market capitalization, the total profit growth of these businesses is expected to reach about 20% for the full year. Although the stock market may still be affected by exchange rate and interest rate pressures, this pressure will ease in the coming time.