Foreign investors still bank on Vietnamese stocks despite overload

Thomas Hugger, CEO and founder of Asia Frontier Investments Ltd., said overload on the Ho Chi Minh Stock Exchange (HoSE) is a major concern.

HoSE is a service provider, responsible for ensuring all transactions go through even if demand surges unexpectedly. It however has failed to do so despite adequate time and budget for a system upgrade, he said.

Petri Deryng, founder and portfolio manager of Finland-based PYN Fund Management, said the inability to resolve these issues is a step back for the market.

He said this has occurred amid investor expectations for the T+0 settlement, meaning completion of a stock transfer of ownership in the same day it was made, compared to the current three-day policy (T+3).

However, Deryng said he understands Vietnam’s stock market remains new, and that the overload has not impacted his strategy.

Hugger said most foreign fund investors are long-term and are not affected by short-term issues. He said he would not withdraw his money and would buy more shares with low valuation.

Foreign companies should be hired to help reduce pressure on the system, Hugger suggested.

Deryng added that HoSE should partner with Vietnamese IT giant FPT to deal with the overload. "This partnership should have been formed three months ago."

HoSE’s trading system, which has remained mostly unchanged for the last 20 years, has been overwhelmed after a huge number of new investors began trading in recent months. Many complain about the trouble they have placing orders, especially in the afternoon when trading value rises to VND15 trillion ($652 million).

Representatives of several other foreign investment funds also confirmed they would not withdraw their investment.

However, data shows foreign investors have been net sellers for the last 16 sessions with strong selling pressures on VNM of dairy giant Vinamilk, POW of electricity distributor Petrovietnam Power Corporation and CTG of state-owned lender VietinBank.

The Finance Ministry recently commissioned IT giant FPT to provide solutions to deal with the overload. The process could take three or four months.

There were 2.88 million stock trading accounts at the end of February, 21 percent up from a year earlier and equivalent to 2.96 percent of the country’s population. Last year the ratio of HoSE’s total market cap to GDP was 67.59 percent.