Foreigners Speed Up Sales of Vietnamese Shares Despite Prospect of Market Upgrade

The recent news regarding foreign investors accelerating the sale of Vietnamese shares, despite the potential upgrade of the market, raises significant questions about the future trajectory of the Vietnamese financial landscape. In this article, we will delve into the short-term and long-term impacts of this phenomenon on the financial markets, drawing parallels with historical events and estimating the potential effects on relevant indices, stocks, and futures.

Understanding the Context

Vietnam's stock market has been on the radar of international investors, primarily due to its rapid economic growth and the potential for market upgrades, which could enhance investor confidence. However, the current trend of accelerated sales by foreign investors signals an underlying concern that could lead to volatility in the market.

Short-Term Impacts

In the short term, the increased sales by foreign investors may lead to a decline in stock prices, particularly for Vietnamese indices such as:

• VN-Index (VNINDEX): The main stock index of the Ho Chi Minh Stock Exchange, which is likely to experience downward pressure as foreign capital exits the market.
• HNX-Index (HNX): The index for the Hanoi Stock Exchange may also feel the impact, though to a lesser extent.

The selling pressure could result in increased volatility and a potential dip in investor sentiment. This reaction can be attributed to the fear of further withdrawals by foreign investors, leading to a sell-off by domestic investors looking to mitigate losses.

Long-Term Impacts

In the long run, the impact of foreign sales on the Vietnamese market could vary based on several factors:

1. Market Resilience: If the Vietnamese market demonstrates resilience and attracts domestic investments, it may recover from the initial decline. Historical data has shown that markets can rebound after foreign sell-offs, particularly if local fundamentals remain strong.

2. Economic Indicators: The performance of Vietnam's economy, including GDP growth, inflation rates, and trade balances, will play a crucial role in determining the long-term outlook. Positive economic indicators could reassure both domestic and foreign investors.

3. Market Upgrade: If Vietnam successfully achieves the anticipated market upgrade, it may attract renewed interest from foreign investors, leading to a potential recovery in stock prices. However, the timing and sustainability of such upgrades will be vital.

Historical Context

To better understand the potential ramifications of this news, we can look back at similar events in the past:

• August 2015: Following China's stock market crash, foreign investors pulled out from emerging markets, including Vietnam. The VN-Index experienced a significant drop of approximately 20% over a few months but eventually recovered as local investors stepped in, and the economy showed resilience.
• February 2020: The onset of the COVID-19 pandemic led to a massive sell-off in global markets, including Vietnam. However, by the end of 2020, the VN-Index rebounded strongly, driven by domestic consumption and government stimulus measures.

Potentially Affected Stocks and Futures

Investors should keep an eye on the following stocks that may be impacted by the current trend:

• Vingroup (VIC): A major player in various sectors, VIC's stock price may react to foreign sales.
• FPT Corporation (FPT): As a leading IT and telecommunications company, FPT could see fluctuations in its stock value.

In terms of futures, the VN30 Futures (VN30F) could experience increased activity as traders react to the current market dynamics.

Conclusion

The accelerated sale of Vietnamese shares by foreign investors, despite the prospect of a market upgrade, presents both challenges and opportunities for the financial markets. While short-term volatility is likely, the long-term outlook will depend on Vietnam's economic performance and the ability to attract and retain investor confidence. Historical trends suggest the market has the potential to recover, provided that underlying economic fundamentals remain strong and supportive of growth.

Investors should remain vigilant and consider these factors when making investment decisions in the Vietnamese stock market.