Foreign hands continue to help prop up the market

Foreign investors remain net buyers of Vietnamese equities valuations.

Ho Chi Minh Stock Exchange (HoSE) statistics revealed that foreign investors have been net buyers of Vietnamese equities in the first week of October  with 18 million shares worth VND706 billion ($36.2 million), compared to net buying of 25 million shares and VND1.1 trillion ($56.4 million) in September.

Foreign investors bought 150 million Vietnamese shares worth  more than VND10 trillion ($513 million) during the year to date, according to HoSE statistics. 

The foreign investors’ heavy net buying contrasts with domestic investors staying on the sidelines for months, fearing that the numerous new share sales would cause an oversupply.

In the last few trading sessions,   the domestic market rebounded a little bit as foreigners continued to buy blue chips fairly aggressively. Blue-chips and strong fundamentals like HAG, HPG, FPT, DPM, VIC are most favoured by foreign investors.

“We think that foreigners’ buying came from new institutional investors which are heavily cash rich,” said an analyst with BIDV Securities, adding that when the overall demand is low, new foreign net buying would cause volatility.

Market analysts said foreign investors’ strong net buying was attributed to emerging markets with attractive large inflows thanks to the economic recovery and relatively more attractive valuations than developed markets.

The price to earnings (P/E) ratio of 600 listed firms is 9.83, while 134 others are below six, compared to around 8.5 during the crisis bottom in February 2009, according to Tri Viet Securities statistics.

Recent research by International Institute of Finance (IIF) estimated the flows to emerging market at $186 billion in 2010, three times higher than $62 billion during 2005-2009.

“In Vietnam, the market also guesses new flows of foreign investors are coming. If this is true, it is supportive market news,” Ban Viet Securities analysts said in a note to clients.

In a related development, the Vietnam Securities Depository has issued licences to 17 new foreign institutional investors in September to trade local stocks, raising the total to 1,377. During the month, 58 foreign individuals also received permission to trade, increasing the total number to 13,200.

Nguyen Son, head of State Securities Commission’s Market Development Department, said there were foreign inflows into Vietnam this year. Several institutional investors also visited the country to seek investment opportunities.

Pham Thanh Binh, PetroVietnam Securities Incorporated chief analyst, said the market development depended on foreign buying.

“If foreign investors continue net buying, the market would turn bullish. If not, the market is likely to test 430-440 point level,” said Binh.