Banks having a lag due to being affected by COVID-19, or the tourism industry not being able to return to normal.
In addition, according to VinaCapital's recent market commentary, the list of reasons why Vietnam may be out of range of foreign securities investors in the coming months also includes domestic production being dependent on the global demands (as many countries and regions have yet to control the disease or open their borders), agriculture being affected by natural disasters, or foreign ownership limits in some banks such as VPBank being reduced from nearly 23.5% to 15%.
In addition, while public investment in infrastructure is being promoted by the government, the closed border will still prevent FDI inflows into Vietnam.
Meanwhile, domestic consumption accounts for 70% of GDP, but the weak consumer confidence after the period of social separation and the reduced employee income are also factors that need to be overcome.
At the same time, Vietnam's GDP growth forecast, according to VinaCapital's Chief Research Officer Ismael Pili, could be a bit optimistic.
All these factors have been influencing the decision of capital investment of foreign investors into the Vietnam stock market in the short term.
Although the VN Index increased by 28% as of May 20 from the bottom of March 24, thanks to the demand of domestic retail investors, foreign institutional investors mostly sold during this period.
Explaining this phenomenon, VinaCapital says that foreign investors are withdrawing money from Vietnam to compensate for losses because this is a sub-market they are betting on at a time when the global macro environment is always volatile.
According to global developments, this is the first stage of recovery when governments are pouring money to prevent economic collapse and systemic risk. The second important period will revolve around stimulating growth through cash and policies (reducing unnecessary costs or delaying taxes). Meanwhile, markets will remain vulnerable, and betting on the market may not be the choice of foreign investors at the moment.
"At the moment, we do not see any buying activity among foreign investors, and the main question is whether the indirect capital flows will return, and when," the report said.
However, according to VinaCapital, when investors return, they will have some quality blue-chip stocks to consider. These investors will select stocks based on the quality of management and the business situation.
VinaCapital has launched three investment recommendations for foreign investors on three topics.
The first is the stock group which can recover soon after a social distance period like banks’ stocks. These stocks often belong to banks with large and more profitable loans or real estate with prospects from newly launched projects. There is also the aviation industry when multiple flights are resumed to transport passengers and cargo.
The second is related to infrastructure. This is identified as a lever to help develop the Vietnamese economy and help the related fields gain benefits. This group includes industries such as construction materials production, real estate, and accompanying utilities. There are also several sectors that are directly or indirectly affected, such as industrial zones (related materials production) and state-owned banks (loans for related fields).
And finally, the 3rd group includes the leading franchise companies and businesses in the industry which are profitable and growing well that it can be difficult for competitors to replace.