Foreign investment funds set aside capital for short-term strategies
Although transactions of foreign investors account for only 7 percent of total transactions in the market on average, their trading moves are always closely watched by domestic investors.
That is because transactions of foreign investors in Vietnam’s stock market are mainly of investment funds who are professional and experienced investors. Notably, recent transactions of investment funds include short-term investment in addition to long-term investment strategies, particularly for experienced funds.
In the early years of Vietnam’s stock market, the number of foreign invested funds was few. Such funds such as Vietnam Dragon Fund, VinaCapital, Mekong Capital and others were relatively familiar to investors. With the scope of dozens of listed share codes at that time, there was no need for trading statistics of investors displayed on the electronic trading board, domestic investors could also guess which shares foreign investors were trading and what the trading volume was. Many domestic investors followed foreign investors’ trading actions in a bid to seek short-term profits.
In 2007 when Vietnam’s stock market developed both intensively and extensively toward the point increase of indexes in the both two trading floors, the number of foreign investment funds participating into the stock market quickly grew, reaching more than 70 funds including Sumitomo Musui Vietnam, Fulleron Vietnam Fund, Tong Yan VGN, Maxford Growth – Vietnam Fcus, Vietnam Resource, Credit Agrcole Fund and so on, mainly came from Japan, Korea, Singapore, Malaysia.
When the world’s economy in general and Vietnam’s economy in particular entered the recovery period, Vietnam became an attractive destination for many foreign investment organisations. A series of investment funds snapped up opportunities of such recovery and the number of investment funds unexpectedly increased in both quantity and capital.
According to the finance ministry’s statistics, by November 2009, Vietnam’s market had 46 fund management companies and 382 foreign investment funds. The number of foreign investment funds was five times as many as the number of 2007. This also partly explained why the average money transactions rocketed in Vietnam’s stock market within over one recent year.
Currently, although investment strategies of newly-registered foreign investment funds have not yet been known, as for experienced investment funds in the country’s stock market, their long-term investment and value-based investment strategies present some changes.
A director of a prestigious foreign investment fund said that with such big gap between the peak and the bottom (VN Index reached over 1,000 points by the end of 2007 but fell to nearly 200 points by early 2009, and currently approximate 500 points), it is very hard for an investment organisation to use all their capital to conduct long-term investment strategies.
Khong Van Minh, investment manager of Jaccar Fund, said value-based investment and long-term investment remained the key strategy of funds. However, in order to adapt to Vietnam’s stock market, funds had to set aside certain amount of capital to make short-term investment.
Those investment funds had different investment strategies; hence, their trading movements were not the same. However, investment funds had long-term capital, so they could trade shares continuously. Such trading way failed to have much impact on indexes in the market but it did impact price changes of some shares.
Category: Finance
