Foreign capital expected to return to Vietnam’s stock market
If the stock market is upgraded to emerging status, the potential influx of foreign capital could range between $5 and $8 billion.
The imminent launch of a new stock trading system developed by the Korea Exchange (KRX), South Korea’s bourse operator, and the potential market status upgrade are expected to make the Vietnamese stock market attractive to foreign investors this year, according to a report by VinaCapital.
Foreign investors have recorded six consecutive net buying sessions from January 11-18, with a total value of nearly VND600 billion ($24.45 million) on the Ho Chi Minh Stock Exchange (HoSE). The banking and retail sectors are among the preferred stock groups, with notable choices including MWG, HPG, STB, VCB, and others.
Although no clear trend has been established, the inclination of foreign investors toward buying has driven stocks in these two sectors over the past week.
This move has generated positive expectations in the market, especially considering these investors were net sellers of over VND19.5 trillion ($795 million) last year.
During a recent press meeting, the CEO of the Public Securities and Bonds Investment Division at VinaCapital Fund Management Company Nguyen Hoai Thu mentioned that foreign investors withdrawing funds from Vietnam could be related to the success stories in other markets such as India and Japan. However, she noted that these investors have recently contacted VinaCapital, expressing interest in reinvesting.
"This year, Vietnam offers numerous opportunities in the stock market, private investment, and real estate," stated Thu.
An essential factor supporting this outlook is the prospect of an upgrade for the Vietnamese stock market. According to VinaCapital's forecast, the KRX system, which would allow same-day trading, is set to be operational in the first quarter, and the requirement for margin trading will be eliminated.
As a result, the possibility of being classified as a new emerging market by FTSE Russell could happen during the preliminary assessment in March and officially in September, she added.
As for MSCI, the expected upgrade is not until 2027. These are two of the world's three largest stock market rating organizations, often considered benchmarks for international investors.
If Vietnam is upgraded by FTSE, the market could attract 16 funds with a capital flow of $90 billion. And in case of being upgraded by MSCI, the number of funds could reach 844 with a total capital of $615 billion. According to VinaCapital's calculations, foreign capital inflow into the Vietnamese stock market could range from $5 to 8 billion.
Dragon Capital, another foreign fund, also has positive predictions about foreign capital inflow this year. The analysis group believes that foreign investor participation could improve with positive information, such as the easing of pre-financing or new steps in the process of upgrading to a new emerging market.
In its 2024 outlook report, BIDV Securities (BSC) presented two scenarios for foreign capital flows. In a positive scenario, foreign capital inflows could increase by $700 million, supported by factors such as the narrowing interest rate differential between USD and VND as the US Federal Reserve begins to cut interest rates. Additionally, this scenario could be caused by positive signals in the FTSE Russell's preliminary evaluation of the new emerging market and a gradual return of Thai investors following new tax regulations that took effect this year.
"Foreign capital will return to net buying, and the capital flow may target stocks with large market capitalization, room for foreign ownership, high liquidity, with an eye on the possibility of market upgrades," said BSC.
Stock market to reach new high
During the Ministry of Finance’s press briefing held last week, Deputy Minister of Finance Nguyen Duc Chi noted upgrading the stock market’s status and the effective operation of a new trading system remain the Government’s key tasks in the short term.
Regarding the market upgrade, Chi mentioned that the State Securities Commission of Vietnam is assigned to implement and reviewing of tasks to achieve the stock market upgrade.
“The goal of upgrading the stock market and the new trading system should align with implementing the Stock Market Development Strategy until 2030,” said Chi.
Regarding the new trading system, Chi said the ministry has been providing meticulous guidance over the past two years, encouraging investors and relevant units to collaborate with contractors in implementing tasks.
As of now, the fundamental technical aspects have been completed, and the testing phase is underway, with direct units and market members actively deploying these efforts, he noted.
"The requirements for the trading system are very high in terms of stability and security. The Ministry of Finance has instructed investors and contractors to ensure stability, security, and virtually no risks. At that point, the authorized agency will put the new system into operation," shared Chi.
He emphasized that this system is very comprehensive and tightly interlinked among entities such as the Ho Chi Minh Stock Exchange, the Hanoi Stock Exchange, and the Vietnam Securities Depository and Clearing Corporation.
The crucial aspect is to ensure the highest level of security and expedite the system's operation while meeting all the specified conditions, he said.
"Once the new system is completed, the stock market is expected to reach new heights soon," emphasized Deputy Minister Chi.
