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Foreign investors purchase more than sell, why?
In the last 12 months, the purchase volumes of foreign investors have always been higher by 30-50% than the sale volumes, which has raised the question among domestic investors of why foreign investors have so much money to buy.
Buying with old, not new capital
According to the HCM City Stock Exchange, in the period from September 2007 to August 25, 2008, foreign investors purchased over $160mil a month, while sold $90mil a month. The purchases by foreign investors, especially in the months when electronic boards were all lit red, showing the price decreases of shares, proved to be the only thing that helped create liquidity for the market.
When domestic investors stopped making transactions as the purchases could not bring them profit when the market fell deeply, foreign investors kept purchasing steadily. This has sparked the question among domestic investors about the sums of money foreign investors have poured into the market.
According to Bui Cong Giang, General Director of Anpha Capital, the money for the transactions partially came from the $6.2bil worth of portfolio investment that flowed to Vietnam in 2007. Most of the investment funds did not have opportunities to disburse capital when the market was hot and share prices were high. However, when the market fell deeply later, the funds took full advantage of this to use that money. They restructured their investment portfolios, sold bad share items and bought good ones.
Statistics released by Mekong Capital investment fund showed that there are 58 investment funds operational in Vietnam, both domestic and foreign, including 20 foreign ones. In the first six months of the year, except several funds which mobilised more capital, Vietnam’s market did not see any new face.
According to Tran Quoc Toan, Deputy Chairman of the Government Office, the total indirect foreign investment in Vietnam in the first seven months of the year was $700mil.
About the new sum of money, the deputy general director of an investment fund said that the new capital proved to be modest, just equal to 2-3% of the scale of the market at the moment, when the market made up 30% of GDP ($20bil).
Will they continue purchasing?
Experts do not see the high possibility of high portfolio investment flying into Vietnam in the time to come. The research team of the Bank for Investment and Development of Vietnam (BIDV) said that the World Bank has predicted the sum of $2bil for this year.
According to the report about the operation of investment funds in emerging markets by LCG Rothschild, by August 4, the day when the VN Index gained 439.41 points and the VND/US$ exchange rate was VND16,740/US41, the yield to maturity (YTD) of the investment funds that joined Vietnam’s market was - 53.9%. Meanwhile, the net asset value (NAV) of Indochina Capital Vietnam Holdings was - 44%, while the figures were - 60% for PXP, - 21.5% for Vietnam Equity Holding, - 37.8% for Vietnam Opportunity Fund, and - 42% for Blackhorse Enhanced Vietnam.
This shows that, according to the deputy director, the lower NAV will prompt investment funds to focus on looking for good share items for their investment portfolios as the top priority. They will not think of raising more funds at this moment, when Vietnam’s national economy, though better off, still does not show clear signs of attractive opportunities.
“The trading activities by foreign investors will not see many changes in the time to come if compared to the first six months of the year,” said the Director of a French investment fund.
Bui Cong Giang also said that the investment fund he is managing now focuses on restructuring companies, while he still does not have any plans to raise new funds.
VNN
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