Foreign funds likely to return to Vietnam in 2024

HANOI: Although the market benchmark VN-Index closed last year with a gain of 12.2%, foreign investors were less positive with strong net selling.

Viet Dragon Securities JSC said that the strong net-selling trend that happened in December 2023 will slow down with an improvement in the profit outlook scenario, resulting in a more balanced price-to-earnings ratios for international investors.

The scenario in which the US Federal Reserve (Fed) lowers interest rates will also stimulate cash flow from the currency market back into international capital markets.

Similarly, experts from Bao Viet Securities JSC expect that the Fed will likely stop rate hikes and could reduce interest rates in the second half of 2024.

The lower interest rates will lead to a depreciation in the US indices, helping investment capital move back to emerging markets.

Foreign-capital flows also show higher investor interest in the Vietnamese market amid a weakening US dollar.

Additionally, the opportunity for Vietnam’s stock market to rise in 2024 will be a factor in attracting foreign cash flow.

Nguyen The Minh, head of the individual customer analysis division at Yuanta Vietnam Securities Co, said that markets such as the United States and Europe experienced superior performance compared with Asian markets in 2023, attracting investors to these markets for investments.

After the recession, countries with sound economies, such as those in Europe and the United States, will recover very strongly. That is also the reason why investors withdraw capital from the Asian markets and move to other markets, Minh explained.

“Net selling is a portfolio restructuring activity by foreign investors, so it is expected that foreign investors will soon buy in early 2024,” Minh said.

Meanwhile, SSI Securities Joint Stock Corp (SSI) said that in 2023, stocks that received support from foreign funds all reported higher profits than the group that saw strong net selling activity.

Last month, foreign investors significantly increased their net selling to 10 trillion dong, making it the strongest monthly net withdrawal in 2023. Foreign investor influence reached its highest transaction proportion of 9.86% since April.

This reflected a consistent trend throughout 2023, with total net selling value reaching 22.8 trillion dong, according to SSI.

Foreign investors were widely engaged in selling in December, with the highest selling recorded in the banking and financial-services industries at 2.6 trillion dong.

Other key sectors, such as real estate and food and beverage, also faced a similar trend.

Notably, foreign investors decreased their allocation in the basic-resources sector, with a net selling of 991 billion dong, following consistent buying since the beginning of 2023.

The information technology sector was bought the most by foreign investors in December, amounting to 101 billion dong. It was followed by the retail sector with a net buying of 80 billion dong, snapping a continuous selling streak that lasted for five months.

SSI believes that in the medium term, investment inflows into the Vietnamese market could benefit from the shift of funds towards emerging markets. However, this is likely to occur only after the Fed begins rate cuts. — Viet Nam News/ANN