Overseas players are heading to turn net sellers on the Vietnamese stock market this year after a decade of buying spree as the possibility of the U.S.’s Fed raising interest rates is increasing and the greenback is appreciating considerably in the international market.
They net sold a value of $309.8 million on the Ho Chi Minh Stock Exchange (HOSE
) in the year to December 1. In November alone, they unloaded $61.2 million worth of local shares, exchange data showed.
Net selling pressure was notable over the past two weeks, especially in large-cap stocks such as dairy producer Vinamilk (VNM), steel maker Hoa Phat Group (HPG), real estate developer Vingroup (VIC) and food processor Masan (MSN).
Foreign investors were also selling Vietnamese government bonds, with net sales amounting to $287.6 million in the three weeks through November 25 in the secondary market while they were net buyers in the first 10 months of this year.
This move caused their net buying value to dwindle to $463 million in the bond market in the year to end-November, according to Bao Viet Securities Company (BVSC
-based brokerage house named three reasons for foreign traders’ net sales.
First, capital outflow from frontier and emerging markets is increasing as the U.S. central bank is highly likely to raise interest rates in December for the second time since the 2008 financial crisis.
Due to this effect, as much as $113 million was withdrawn from two foreign-run Vietnam-focused exchange-traded funds (ETFs) in the year to November 23. Market Vectors Vietnam ETF, the largest ETF in Vietnam, saw a net outflow of $28.6 million between October 31 and November 25.
Second, a number of foreign might be locking in profits on some items in their portfolios to stand ready for shares of major state-owned companies such as Sabeco, Airports Corporation of Vietnam (ACV) and Petrolimex that are poised to list shares on local bourses soon.
Third, recent strong fluctuations of the USD/VND exchange rate have been considered a catalyst for foreign selling to protect their profits.
However, foreign selling is expected to be short-lived. “We believe that after the Fed officially raises rates or the volatility of the forex rate wanes, it is likely that foreign traders will scale down net sales,” BVSC commented.