Brokerages hope for more capital in stock market

Brokerages hope for more capital in stock market

Foreign trading activities are forecast to increase this year thanks to many supporting factors, especially exchange-traded funds (ETFs), according to Viet Dragon Securities Company (VDSC).

In the past two years, the E1VFVN30 ETF and VNM US ETF were the two main capital-attracting ETFs of the Viet Nam stock market.

It is likely that E1VFVN30 will continue to attract cash flow from its two key investors, Thailand and South Korea, because the interest rates in these two countries are at low levels after the two local central banks made rate cuts last year, VDSC said.

Viet Nam’s benchmark VN-Index increased by 7.8 per cent in 2019, higher than South Korea's KOSPI, which only increased by 6.3 per cent, and Thailand’s SET which rose by only 0.6 per cent.

Foreign investors have been net buyers over the past two years, with most of the net buying activities taking place through put-through transactions.

The net selling of foreign investors has slowed down as the value dropped sharply from over VND16 trillion (US$692.5 million) in 2018 to more than VND1 trillion in 2019. Foreign investors had even net bought VND3 trillion in the first four months of 2019 but then they became net sellers due to the trade tensions between the US and China.

It is expected that Kuwait will be upgraded from frontier market status to emerging market by the Morgan Stanley Capital International (MSCI) in May 2020.

Accordingly, the occupancy of Vietnamese shares in the MSCI Frontier 100 Index would increase to 30 per cent, instead of only about 12.3 per cent as currently. If so, the passive fund Ishares MSCI Frontier 100 ETF could buy in $86.5 million worth of Vietnamese shares, VDSC said.

The Ho Chi Minh Stock Exchange (HOSE) introduce new indices that contain foreign-ownership-capped shares in November last year, including VNDiamond, VNFin Select and VNFin Lead. According to Saigon Securities Company, many large fund management organisations such as SSIAM, VFM and VinaCapital all plan to launch ETFs based on new indexes implemented by HOSE.

The stock market is forecast to boom in the near future as foreigners are now able to invest more in their preferred stocks, thus luring foreign capital inflows into the Vietnamese market.

SSI Fund Management Company (SSIAM) is completing procedures to launch SSIAM VNFin Lead ETF, simulating the movement of financial stocks.

VietFund Management (VFM) is also preparing for the launch of its two new ETFs based on the VNDiamond index.

Market experts also forecast that foreign capital inflows could improve in 2020 thanks to a number of external factors, such as the cooling of US-China trade tensions and the divestment and equitisation process of State-owned enterprises in 2020.

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