More domestic capital
At an online conference on 14 April, Mr. Nguyen Tuan Anh, Director of the Credit Department for Economic Sectors of the State Bank of Vietnam, said that the credit in the securities sector in the last two months of 2020 had increased rapidly, but then decreased by 10% in January 2021. However, from the beginning of March until now, credit in securities has suddenly increased again to VND 45,350 bn, same as it was at the end of 2020.
According to statistics from the Vietnam Securities Depository (VSD), domestic investors opened 113,340 new accounts in March. This is an unprecedented record, equivalent to 29% of total newly opened accounts in the whole of 2020. On an average, the number of new accounts opened by domestic investors were upto 4,928 accounts in March. By the end of the first quarter, the number of newly opened domestic investor accounts are 256,695, equivalent to 65% of the whole of 2020.
The above information partly explains the appearance of explosive sessions once congestion at HOSE was resolved. According to HOSE, the remedy to ease congestion continues to be deployed by related units and has seen initial results. Recently, HOSE has added a number of innovative technical solutions, helping in the trading process. Since the trading session on 12 April, the congestion has reduced, and is now supporting the market to increase liquidity.
The announcement of HOSE not only created confidence in investors but activated a massive cash flow into the market. In fact, market liquidity set new records after the 12 April session. For example, on 13 April, the total market trading value reached around VND 29,000 bn, in which the matched trading value reached VND 26,000 bn, with even foreign investors suddenly buying a net VND 183 bn.
Available foreign capital
The return of net buying by foreign investors, although not too large, is a sign that the cash flow from foreign investors has not yet been refunded after nearly twelve months of net selling. According to statistics, foreign investors net sold about USD 1.2 bn, of which only in the first quarter of 2021 the net selling value was upto USD 809 mn.
According to analysts, this trend is driven by profit taking and portfolio structure, which implies that cash flow could return in the medium term. Most of the net withdrawal happened in the leading stocks, instead of selling many stocks at the same time. Specifically, the top ten stocks accounted for USD 740 mn of foreign net selling value. According to an analysis by a securities expert, foreign investors still keep money in the Vietnamese market, accumulating USD 2.7 bn in cash by the end of December 2020, and waiting for an opportunity to buy.
Analysts describe the move of foreign investors at the present time as a wait and watch scenario. However, there are still many foreign funds that have officially started disbursing into the Vietnamese stock market, instead of waiting like most other foreign colleagues. For example, an ETF from Taiwan, Fubon FTSE Vietnam ETF, has just announced to raise TWD 5.28 bn, equivalent to VND 4,279 bn, during the IPO at the end of March. With the above information and the trend of net selling of foreign investors decreasing rapidly, even in net buying status, it is not excluded that this buying force comes from the Fubon FTSE Vietnam ETF. This possibility increases when the Fubon FTSE Vietnam ETF thinks that this is a very good time to invest.
Mr. Yang Yining, the Investment Director of Fubon Vietnam ETF, said that Vietnam is now like Taiwan in the 1980s. He explained that one could not invest in Taiwan 40 years ago, but through Vietnam’s economic reforms and investments one can make a profit now.
Although still on the watch list for upgrading by FTSE Russell in the last review period, in the recent analysis, Bao Viet Securities (BVSC) remains optimistic that Vietnam will be upgraded to a Tier 2 emerging market at the 2022 upgrade review, in context of new decrees and circulars accompanying the revised Securities Law which came into effect since early 2021. According to BVSC, by observing international markets in the past, it is usually at least 9 to 12 months before a country's stock market upgrades to an emerging market. That country's stock market will then often receive investment inflow from abroad quite strongly and have an impressive increase momentum.
With the expectation that Vietnam's stock market will be upgraded in two evaluation periods of 2022, there may appear foreign cash flow to catch this trend from the second half of 2021. Specifically, according to BVSC estimates, in case the FTSE is officially upgraded to a Tier 2 emerging market, Vietnam's stock market will attract cash flow of upto USD 1.4 bn from investment funds based on FTSE Global All-Cap, FTSE All-World and FTSE Emerging Markets. Based on the criteria set by FTSE Russell, it is likely that stocks that benefit the most from this trend will be the ones with large capitalization, satisfying the conditions of liquidity, foreign room and free-float stocks, which are proposed by FTSE Russell such as Vingroup (VIC), Vinamilk (VNM), Vinhomes (VHM), Hoa Phat (HPG), Vietcombank (VCB), Masan (MSN), and Vincom Retail (VRE).
VN Index target
Cash flow from domestic investors was the strong force that helped the VN Index to re-establish. Many large organizations even raised their forecast higher for the VN Index. For example, JP Morgan has just released an updated report on VN Index target from 1,200 points to 1,400 points, while MSCI Vietnam forecasts from 1,000 points to 1,100 points by the end of 2021. At this level, the VN Index will deliver at an estimated 17.5x P/E for 2021.
In a market assessment newsletter, most securities companies hold an optimistic viewpoint on the market prospects when forecasting that the VN Index will continue to go upto 1,300 points. According to MB Securities (MBS), the positive sign from trading has triggered a large cash flow into the market despite the influence from regional markets. The domestic market entered the uptrend, and investors were completely convinced by the uptrend of the market and drastically reduced money. Liquidity was at an explosive level when it reached nearly VND 20,000 bn, showing that the cash flow was activated and investors were waiting for the market to create a clear wave to buy strongly. According to BVSC, the domestic cash flow is still the main driver that is supporting market movement in this period. Large-cap stocks, especially leading stocks, will alternately increase to support the market.