Despite reaching new highs, foreign investors have been selling Vietnam stocks all year. Part of the cause appears to be competition from popular retail equities like Tesla Inc. and cryptocurrencies.
According to data from the Korea Securities Depository, Korean retail investors, who accounted for 16 percent of net foreign inflows between 2017 and 2019, are among those selling out, dumping a net $166 million worth of shares so far this year. Their risk appetite has migrated from emerging countries to the United States, owing to excellent returns in speculative assets there, according to analysts.
“Bitcoin and U.S. stocks, especially tech growth stocks, showed big swings,” said Lee Soyeon, a market strategist at Korea Investment & Securities Co. “So investors were attracted to them, rather than Vietnam. Stock transactions are a little complicated and returns have lagged.”
Despite the benchmark VN Index’s 33 percent increase, which made it the best performer in Southeast Asia, outflows have occurred in all but one month this year. According to statistics provided by Bloomberg, they sold a total of $2.7 billion worth of stock in 2021.
“A lot of the foreign selling is simply profit taking,” said Stephen McKeever, head of the institutional client division at Ho Chi Minh City Securities Corp. “The market has performed strongly and some investors have cashed out,” with Korean retail investors switching their attention to U.S. tech stocks such as Tesla, he added.
Nonetheless, observers such as Jessica Tea of BNP Paribas Asset Management and Quynh Cao of SSI Securities Corp. see positive long-term fundamentals in the country’s stock market and believe international investors will return. According to them, demographics, Vietnam’s position in the Asian supply chain, and good values provide opportunities for equity investors.
“We think the net foreign selling we have seen over the last two years is not necessarily reflective of foreign investor sentiment toward Vietnam which remains very positive,” said Ho Chi Minh City Securities’ McKeever. “We call this the sentiment paradox.”
