Market sees strong impact of foreign capital

Foreign capital flow

Capital flow from foreign investors, including foreign ETF, began to make a strong impact on transactions from November 2022, when the Vietnamese stock market had hit bottom with the VN Index falling to the lowest level of 873.78 points on 16 November 2022. However, aggregate foreign capital flow, including from all foreign accounts, only started to return to net buying from November 2022, while in September and October before that, this capital flow still recorded as net sale.

In contrast, foreign ETF capital inflow showed signs of an explosion right from the beginning of October 2022. Specifically, according to FiinTrade data, in September 2020, foreign ETFs net poured only about VND 15.7 bln into the Vietnam stock market, but by October 2022, it skyrocketed to nearly VND 1,900 bln. In November 2022, foreign ETF capital reached more than VND 6,200 bln.

Since the beginning of October 2022 until 7 February 2023, the total amount of capital that foreign ETFs have poured into the Vietnam stock market is over VND 14,228 bln. The total net buying value of all foreign investors on HoSE from the beginning of November 2022 to 7 February 2023 is VND 34,464 bln. This is a very large amount of capital and according to FiinTrade, it was because of three consecutive months of net buying at a record scale.

A contrasting data is that transactions from domestic institution investors and domestic individual investors was very weak. In the last three months until the end of January 2023, domestic organizations only net bought about VND 4,385 bln. Domestic individual investors net sold a huge amount of VND 37,377 bln. Even if counting the order matching alone, domestic individual investors net sold VND 42,537 bln.

This contrast reflects something very clearly that any investor who has experienced the recent bottom phase can see the panic of individual investors during selloffs, short-terms, or stop-losses. In these huge net selling numbers of individual investors, there were also some accounts of business leaders that were disbursed, but overall, domestic investors were still selling, and foreign investors were buying.

Opportunity for investors

Turning back to the time when the Vietnam stock market had plunged and bottomed in November 2022, there is an interesting difference between the analytical view and the action of smart money. At the end of October 2022, there was a view posted on Thai newspaper hinting that Vietnam was likely to fall into a crisis like Thailand did in 1997. This view was, of course, later refuted by various domestic experts. However, foreign investment flow in the region, particularly in Taiwan and Thailand, poured into ETFs investing in the Vietnam stock market.

Two domestic ETFs in Vietnam that issued depository certificates on the Thai stock market, namely, VNDiamond and VFMVN30 in October 2022, have netted about VND 1,276 bln, and from the beginning of October 2022 to 7 February 2023, these two funds have net withdrawn VND 6,680 bln. Besides other foreign ETFs, it is clear that foreign investors see the sharp correction of the Vietnam stock market in the last three months of 2022 as an opportunity, and not as a risk.

With the above statistics, when domestic individual investors flee, it is undeniable that foreign investment inflow can salvage the situation. In fact, with huge resources and a long-term investment perspective, it is not difficult to see a positive view of foreign investors with opportunities. The two simplest base lines are that firstly the market declines due to factors from a group of businesses, mainly real estate and major shareholders, while many other businesses are doing normal unrelated business, and revenue and profit are still stable, but their value is reduced.

Secondly, the influence of a group of businesses will not be large enough to have a knockoff effect on the entire stock market, and the management agencies will not let that happen in the context that the macro-fulcrum of the economy is still positive. Up to now, many real estate stocks are still plunging, many real estate projects have changed hands, and many major shareholders have lost their positions, but the stock market is still operating normally, and many stocks have recovered to the early 2022 price range, some even back to their historic peak.

However, the recovery of the stock market still needs to stand strong in cash flow, by both foreign and domestic investors. Because foreign capital flow to a certain point will no longer be hot as in recent months, because when stock prices increase, the market valuation increases and opportunities will decrease.

Nguyên Hà