VinaCapital expects foreign investors to return to Vietnam stock market

Foreign investors have net sold VND66 trillion (US$2.6 billion) so far this year, as the high U.S. interest rates meant foreigners took their money out of frontier markets to deposit in banks there for risk-free high interest rates, Nguyen Hoai Thu, director of stock investment at VinaCapital, said at a recent meeting.

They have also been investing more in tech stocks, but Vietnam has few major tech companies apart from FPT, while the American, Japanese, Taiwanese, and South Korean markets offer many options, she added.

But they are expected to return, with their selling declining in recent times, she said.

In September foreign investors' net selling declined for a third month in a row to $100 million, representing an 83% decline from this year’s peak in June, she said.

"We believe that foreign investors will soon return to Vietnamese markets to gain from a new growth wave."

The main reasons include the country’s high GDP growth.

In the first nine months the economy expanded by 6.82%, and the expected rate for the full year is 6.5%, driven by a recovery in manufacturing and public spending.

The recent decision by the U.S. to cut rates will allow the State Bank of Vietnam to relax its monetary policies, boosting property and stock investment.

Businesses are also recovering substantially, with listed companies’ profits projected to rise by 18.3% this year, higher than in many countries in the region such as China, India, Thailand, and the Philippines, VinaCapital said.

Another reason is the benchmark VN-Index’s attractive price-to-earnings ratio, which is expected to be 10.1 next year, lower than that of Indonesia, Malaysia, the Philippines, and Thailand.

But there are also risks, including the slowing U.S. economy and China’s expansion of international trade, which could affect Vietnam's exports, Thu said, adding that geopolitical tensions also pose challenges.

Domestically, consumer spending has not recovered as expected. Total retail sales of goods and services grew by 8.8% in the first nine months, 1.3 percentage points lower than in the same period last year, she said.