January 23, 2019 08:51

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Retaining foreign investors: information transparency is necessary

10:23 | 13/07/2018

VCN - Although recently on the stock market, the trend of net selling from foreign investors is occurring due to unpredictable movements of the market, however, Vietnam stock market still has many opportunities and potential to retain this foreign capital.

retaining foreign investors information transparency is necessary

Vietnam has many opportunities and potential to attract foreign capital

Investors are restructuring their portfolio

In the world, the story that has got special interest from investors is that the FED has continued to raise the USD interest rates. After the FED, many central banks, including the European Central Bank, will increase the interest rate, too. Thus, the rule of "rising interest rates, falling stocks" is unavoidable. This is because the money flow of funds tends to be withdrawn to reduce the cost of short-term investment.

At Vietnam’s stock market, when integration and openness are conducted deeply, the impact of the global economic and stock market is inevitable. In fact, the world stock markets from the US, Europe and Asia have all been down since January 2018. Many Asian countries have decreased by 7% to 10%. This adjustment was expected and originated from the information that FED had raised the interest rates.

Meanwhile, the stock market in Vietnam has increased strongly for a long time, so many investors have the psychology of taking profit. This psychology happened when the USD interest rate increased and the world stock market decreased, so the resonance effect was greater.

According to Vietcombank Securities Joint Stock Company (VCBS), the total investment value of foreign investors in the Vietnam stock market showed that the net selling pressure of foreign investors especially appeared in the first and second quarters. However, some regions still maintain a positive level of investment, especially for investors from Asia such as Japan and Korea.

VCBS said that the net selling pressure of foreign investors came from the unpredictable movements of the world market, while the domestic macro data has not played a positive role as in the first quarter. The net selling may continue especially in the fact that the supportive news with potential growth drivers has not been clear yet.

According to VCBS, it is too early to say that the cash flow is being withdrawn completely from the Vietnam market. Instead, this stock market is inclined to the scenario that it will take 3-6 months for foreign investors to restructure their portfolio before disbursement back to market.

In the long term, VCBS maintained a positive outlook for the whole market. From now to 2020, the cases of divesting and equitizing SOEs will continue with the participation of foreign investors. Along with that, the size of the market can be expanded continuously thanks to the new listed private firms on the stock market.

Many opportunities and potential are available

According to Mr. Tran Van Dung, Chairman of the State Security Commission of Vietnam, the impact of the rule of "rising interest rates, falling stocks" to the tendency of withdrawal of foreign capital flows around the world is unavoidable and Vietnam is not out of the general trend. However, in principle, cash flow will never stand still, if anything, this status is temporary or in the form of capital preservation to seek new effective investment.

Mr. Dung said that Vietnam has many opportunities and potential to attract foreign capital.

"For a country with high growth potential like Vietnam (GDP growth is projected to reach at least 6.5% in the period of 2018-2020, the Government’s commitments to remove investment barriers, to support private sector, to determine to implement state capital withdrawal, to IPO of state-owned enterprises and to list large and high-quality enterprises,...), we still have great expectations that Vietnam’s stock market will strongly attract the capital flows, especially foreign capital.

At the same time, the statistics showed that 86% of listed companies had profitable business results in Q1/2018, while the market valuation has become attractive (P/E is about 17 times, it is 16.1 times without VHM), this is an opportunity for value investing,” the representative of the State Security Commission of Vietnam stated.

Many securities experts also said that, objectively, Vietnam has a comparative advantage over many countries in the region and the world stock markets. Investment flows from Japan, Korea and other countries have been increasing, and most recently, Thais and Malaysians are also coming to Vietnam.

However, it must be affirmed that the "going or staying" of foreign cash flow completely depends on the decision of the investor; But whether to "retain" them or not depends on the stock market of Vietnam.

Therefore, in addition to the reasonable and stable policies of the Government, we need to provide accurate and complete information on the evolution of the macroeconomic market, current status of the business sector listed on the market. Therefore, investors can be assured of investment decisions in Vietnam

By Nhat Minh/ Ha Thanh