Foreign investors’ cash flows outward, Vietnam’s stocks tumble
09-04-2015 14:26:16+07:00
Foreign investors’ cash flows outward, Vietnam’s stocks tumble
A number of foreign investors have withdrawn their cash from Vietnam because of the appreciation of the dollar and the recovery of the European stock markets.
Analysts attributed the fall to foreign investors’ selling off securities, and not current macroeconomic conditions as economic performance is better than predicted.
By April 1, the VN Index of the HCM City bourse had dropped by 12.22 points to 538.91 points, while the HNX Index of the Hanoi Stock Exchange fell to 80.47 points. As such, the VN Index lost 42.85 points, or 8 percent, over the last 10 trading sessions, and HNX Index 6 percent.
Analysts said that foreign investors sold more than they bought during this period, with a net sale of VND1 trillion.
However, market liquidity remained weak: VND2.465 trillion worth of stocks were traded on April 1, 10 percent lower than that of March 31. Investors remained outside the market.
Phan Dung Khanh, investment consultancy director of Maybank KimEng Securities, noted that foreign investment funds, especially ETFs, have been selling shares. Since foreign investors hold shares with big market capitalization value, their selling of stocks have caused the VN Index to fall.
The stock index fall has worried margin purchasing investors because they are under margin call pressure. This also affected the stock market.
Khanh noted that foreign investors, who are now attracted by the stronger US dollar, were converting their dong into US dollars. As for the euro, many of them hope the currency, which is depreciating, will regain its value by several percent in the time to come.
Meanwhile, the European stock markets, including German, Italian and French, have bounced back strongly over the last three months.
The world’s cash flow is being lured to the US, where the dollar is getting stronger, and to Europe, where the stock markets are recovering.
Le Dat Chi from the HCM City Economics University agrees that the stock market has been affected by the foreign investors’ actions.
“When they (foreign investors) continue buying for a long time, they push the market up. And when they sell many stocks at the same time, the stock index decreases,” he said.
Chi said the newly released Circular 36 on tightening lending to fund securities investment has also put pressure on the stock market because it weakens capital flow to the market.
