Foreign capital chooses a new way to flow

08-Jun-2018 Intellasia | Nguoi Quan Sat | 6:02 AM Print This Post

About 43 trillion dong is the total outstanding margin reported by securities companies to the State Securities Commission (SSC) by the end of May 2018. This figure is about 10 percent lower than the end of April 2018 but 12 percent higher than the end of 2017.

This margin amount did not involve foreign investors. According to current regulations (Circular 203/2015/TT-BTC), foreign investors are not allowed to conduct margin trading. In other words, foreign investors are not allowed to use loans (at Vietnamese securities companies) to invest in Vietnam’s stock market.

In May 2018, the stock market witnessed many strong net selling sessions of foreign investors, such as the session on May 21st (436 billion dong), May 22nd (596 billion dong), and May 25th (508 billion dong), etc. This net selling amount mainly focused on the VN30 of real estate and banking sectors those recorded strong gains in the end of 2017 and the first quarter (Q1) of 2018. However, the accumulated value of net foreign capital inflows in the first five months of the year reached about 2.35 billion USD (equivalent to 80 percent of the net foreign capital inflows in 2017), much higher than that in 2016 (1.28 billion USD). Many investors questioned why foreign capital net flew and which channels it flew into. In fact, unlike the way individual investors choose to buy shares, foreign organisations, when deciding to invest in the stock market, often conduct research and appraisal of opportunities. For big investment deals, the evaluation period may last several years, especially for the cautious investors from Japan and South Korea.

Foreign investors do not win in all deals but they have firm reasons to make investment, and the sale on the stock market is mainly to restructure the portfolio in a certain period. After periods of ups and downs in the market, foreign investment funds on the Vietnam stock market do not have the psychology of fleeing, cutting losses, and losing patience like what many individual investors experienced in the red sessions in May.

The “in” and “out” of foreign investors is a process of selection. After a period of scattered buying on the stock market, foreign capital in the recent time has tended to flow in some major deals, in line with the way of thinking and investment taste of professional investors which is buying to hold a firm position in the enterprise and develop production and business activities along with the enterprise. Vinhomes, Vietnamese-Italian Steel, FPT Digital Retail and Hochiminh Securities Company, etc. were the names foreign investors bought the most in May, when the general stock market was going down.

The new notable point is that foreign capital is eyeing derivatives stock market. In May, the number of derivatives trading accounts opened increased by 12.77 percent compared to the previous month, reaching 30.995 accounts. Foreign organisations have started to trade more on the derivatives stock market with 992 contracts implemented in May, five times higher than April 2018. As expected, in June, the covered warrant product will be launched on the Hochiminh city Stock Exchange (HoSE). Along with that the government bond futures are being urgently formed by the Hanoi Stock Exchange (HXN), promising to open more space for foreign capital flowing into Vietnam’s stock market.

The Securities Business Association once recommended the Ministry of Finance to allow foreign investors to carry out margin trading in order to create equality with domestic investors. However, foreign investors, without margin trading, has already reached a total portfolio of over 36 billion USD, by the beginning of June 2018. This is the highest ever capitalisation of foreign investors on the Vietnam’s stock market.

 


Category: Stocks, Vietnam

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