Foreign portfolio investment surges

More hot money will flow Asia’s way this year, say market analysts

Vu Bang, chairman of the State Securities Commission, the country’s stock market watchdog, said that net foreign portfolio investment outflows amounted to $1.8 billion in 2008 and $320 million in 2009.

However, last year had seen a reverse in figures with net inflows of $900 million, he said.

“We expect stronger net inflows for this year,” Bang told reporters at a recent meeting with Securities Reporters Club of Vietnam in Hanoi.

Although Bang did not forecast an exact number, he said the foreign investment quality would be higher.

The watchdog is currently finalising regulations for better management of foreign portfolio investment capital with the aim of attracting more foreign investment.

“New trading mechanisms like margin trading, a shorter T+ rule and investors being able to open more trading accounts will be considered in 2011 to boost market liquidity and lure long-term foreign investors,” said Bang

Market analysts have predicted that hot money will continue to flow into emerging Asian markets in 2011 and Vietnam’s market will attract a share of this thanks to its attractive valuations.

“The source of new foreign indirect investment will be a surprise for the time being,” a Tri Viet Securities analyst said.

Tran Dac Sinh, Ho Chi Minh Stock Exchange (HoSE)’s general director said foreign portfolio investors were expected to find Vietnam in 2011 as the country’s market valuation was relatively cheap compared to regional peers.

“Foreign investors will be driving force for the time being,” said Sinh, adding that several securities firms from Korea, Singapore, Malaysia and Japan were eyeing off Vietnam, aiming to own 100 per cent of a local securities brokerage by 2012 following World Trade Organisation (WTO) commitments.

Sinh added that although the country’s market remained small with a few tradable listings, if Vietnam managed to control inflation foreign investors would continue to arrive. 

A National Committee for Financial Supervision (NCFS) source said around $1.3 billion net foreign portfolio investments (FIIs) had been made in Vietnam last year while State Bank statistics in late November put net inflow at $715 million by that time.