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Foreign investors’ net selling and its impact on Vietnam’s stock market

Foreign investors’ net selling and its impact on Vietnam’s stock market

Friday 27, 08 2021
The stock market in Vietnam had downward correction sessions in the last week. Foreign investors continued to be net sellers, but this did not affect domestic investors’ psychology.

Waves of net selling by foreign investors

The continuous net selling trend of foreign investors in August 2021 caused the Vietnamese stock market to have downward sessions. However, Vietnam's stock market is forecasted to continue to attract strong investment capital.

In the session on HOSE on August 17, 2021, foreign investors net sold 21.57 million shares with a total net selling value of 1,383.41 billion VND, up 10.44% in volume and 44.41% in value from the previous session.

HOSE & HNX

On the HNX, foreign investors also net sold 1.74 million shares with a total net selling value of 56.3 billion VND, up 118.33% in volume and 42.28% in value compared to the previous session.

On UPCoM, 496,280 shares were bought with a total net buying value of 24.62 billion VND, up 5.24% in volume but down 26.42% in value compared to the previous session.

In the session on August 18, 2021, the VN-Index could not surpass the threshold of 1,380 points due to continuous pressure from foreign investors. Specifically, in the trading session on August 18, 2021, foreign investors net sold 1,886.1 billion VND on HOSE, sold 41.61 billion VND on HNX, and net bought UPCoM with 41.54 billion VND. In total, this group had a net selling session of 1,886 billion VND and exceeded the selling scale of the day before.

Facing the net selling trend of foreign investors, at the end of the session on August 18, 2021, the VN-Index decreased slightly by 2.15 points (-0.15%) to 1,360.94 points with 172 gainers and 197 losers.

The total trading volume reached 689.8 million units, worth 24,406.7 billion VND, down more than 10% in volume and 5.3% in value compared to the previous session.

In the morning session of August 19, 2021, the VN-Index decreased by 1.01 points (0.07%) to 1,359.62 points; UPCom-Index decreased by 0.28% to 94.22 points, and only HNX-Index increased slightly by 0.03% to 344.91 points. Market liquidity was at an average level with the trading value of 3 exchanges reaching 5,500 billion VND. Foreign investors are currently net selling 50 billion VND on HOSE, selling focus on Bluechips such as VNM, NVL, VHM, DPM, etc.

VN-Index

The continuous net selling of foreign investors did not affect the psychology of domestic investors since Vietnam's stock market excitement depends on low deposit interest rates, a sluggish real estate market, and an unattractive gold market.

The deposit interest rate decreased by about 1.5% for a 1-year term. Interest rates began to fall at the beginning of 2020 prompted many people to seek alternative investment channels as their deposits matured, corresponding with an increase in the number of new individual securities trading accounts opening each month. The real estate market has slowed down recently because of the delay in construction progress due to the impact of the pandemic. Gold is also losing its appeal when the difference in buying and selling prices has narrowed since last year, and because Vietnam's gold price was 17% higher than the world gold price (Vietnam imposes a tight gold import quota). In the absence of other more attractive investment solutions, more and more domestic savers are turning to the stock market, and the enthusiasm of new individual investors is pervading the entire stock market.

Potential for Vietnam’s stock market

Despite a strong increase in the last two years, the number of people with personal securities trading accounts in Vietnam only accounts for about 3% of the country's population. This figure is equivalent to the proportion of Taiwanese people that had personal securities trading account in 1986. Vietnam's stock market is in the early stages of a growth process that may span many decades.

The Vietnamese government also aims to increase the share of people participating in the country's stock market to 5% by 2025 and 10% by 2030, and these are feasible targets compared to the market entry progress of individual investors in Taiwan at a similar stage of economic development to Vietnam today. Vietnam's GDP per capita of 3,500 USD is equivalent to Taiwan's GDP per capita of 4,000 USD at a time when the country's individual stock exchange participation rate is still only 3%.

The Vietnamese government

In general, the current wave of individual investors investing in Vietnam's stock market, driven by falling interest rates and strong growth in corporate income, is a new step forward in the development of the stock market that Vinacapital said. predicted to take place over the coming decades. The increasing participation rate of domestic investors in the stock market is still modest compared to "Asian Tigers" like Taiwan when these economies are at a similar stage of development to Vietnam's. Currently, the service segments that make up a modern stock market are still being arranged to meet the expected growth rate.

However, for the stock market to be a medium and long-term capital channel, it is necessary to soon open the limit for foreign investors. Besides, Vietnam's stock market is now heavily dependent on individual investors (80-90%) while institutional investors are increasingly shrinking. Therefore, it is necessary to improve and raise the percentage of institutional investors to a higher level.

Source: The Ministry of Industry and Trade

Compile by VietnamCredit

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