Securities experts have predicted that foreign capital will keep flowing into the local stock market after the Lunar New Year holiday as foreign investors have become very active since the end of last year.
Trinh Hoai Giang, deputy general director of HCMC Securities Corp. (HSC) that holds the biggest foreign brokerage market share in Vietnam, said foreign capital will flow strongly into the market in the coming time.
The foreign investors have net bought around VND4 trillion worth of shares over the past two months, implying that they have jumped into the market, instead of staying on the sidelines. As they have focused on large caps, the VN30 index has strongly outperformed the VN-Index.
Local shares currently have a P/E (Price/Earnings Ratio) of 11, much lower than in other countries in the region with ratios from 15 to 18. Not just shares, investors in the U.S. have strongly bought Vietnamese government bonds, a good sign after the investors withdrew from the local bond market in 2008.
“Many investors I met during business trips asked for information about the local stock market, saying the market has made positive improvements and offered many investment opportunities. I think foreign investors have come back,” Giang said.
The Government is trying to fix shortcomings of the economy through restructuring programs while inflation and foreign exchange rates have been put under control. In addition, the banking system has been more stable than last August and September. These factors will help drive up foreign investment into the domestic market.
Many new products have been applied on the market and the industry is no longer in the group that does not receive Government support. Notably, the State Securities Commission has submitted to the Ministry of Finance a proposal to increase the foreign ownership limit in listed enterprises.
The director of a big investment fund also said that foreigners are pouring a huge capital flow into the market via ETFs (exchange traded funds), closed-end funds and open ended funds established overseas, concentrating on large caps on the two bourses. The director said this is natural as these enterprises are leading brands with profitable business, transparent operations and high dividends.
Foreign capital will keep flowing into these stocks in the coming time, especially after foreign room in listed firms is increased. Foreigners seem to be interested in consumer goods and pharmaceutical sectors, the director said.
Giang of HSC said strong fluctuations of the stock market have attracted the attention of foreigners.
In the Year of the Dragon, the VN-Index jumped 121 points, equivalent to 32.4%, while the HNX-Index rose 7.77 points, or 13.4%.
The Saigon Times Daily