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As the VN-Index tumbles again and reaches the new low at 906 points, market regulators have issued advisory messages for investors. According to Tran Van Dung, the Vietnamese market still has tremendous potential in the mid- and long-term, and investors should not overreact to global volatilities.
On July 3, the VN-Index lost 41 points to land at the 906 mark, continuing its losing streak. Can you explain the reasons for this ongoing fall?
|Mid- and long-term prospects are still good, says the State Securities Commission|
Since the end of last year, we have been worried about two risks that can have a double impact on the Vietnamese market: possible rate hikes by the US Federal Reserve and global trade tensions, especially between the US and China.
Both of these risks materialised in June: On the 13th, the Fed announced a rate hike and more increases are set to follow within the year. At the same time, trade tensions between the US and China and Europe also had a negative impact on investors around the world.
The effects of these two events have rattled the global financial market. The Dow Jones and Nasdaq plummeted. However, the effect is more remarkable in Asia: the Shanghai Composite Index fell by 6.4 per cent in June and the Chinese yuan has lost 5 per cent of its value in the past two weeks. Regional markets like South Korea and the ASEAN were also in the red.
I believe that this is the main reason for the capital outflow from some Asian markets. In the first half of 2018, foreign investors have withdrawn $22.8 billion from seven markets: Korea, India, Taiwan, Singapore, Thailand, Indonesia, and the Philippines.
With these volatilities all around, did the Vietnamese market suffer from the domino effect?
Of course, despite being a stable country, Vietnam also caught a cold when nearby markets sneezed. Some investors have sold part of their holdings in Vietnam and deposited their money back home.
This net selling has negatively affected the sentiments of local investors. I have a feeling that many local investors are overreacting to international news, the outflow of foreign investors, and some volatilities in the VND.
As foreign investors kept selling and local investors became hysteric, the market was thrown out of balance and the VN-Index tumbled.
What advice do you offer for investors in this rough time?
I truly hope that investors, both foreign and domestic, will have a balanced look at the market. Of course the world is going through some tough moments in politics, trade, and business, but we should have an objective evaluation of their effects on Vietnam—specifically the stock market. In the mid- and long-term, I believe that the Vietnamese stock market is poised for good growth with strong fundamentals.
Specifically, Vietnam has good macroeconomic data—in the first six months of 2018 GDP expanded by 7.08 per cent. Agriculture, industrials, and services all experienced strong growth. The target for the third quarter is 6.53 per cent of growth and in the last quarter of 2018 we hope to expand the economy by 6.36 per cent.
At the moment, the price of many stocks in the VN30 index has fallen compared to the start of 2018, some blue-chips even reached their one-year bottom price. Excluding the newcomer Vinhomes, the market’s P/E stands at 16.1—which is considerably lower than other countries and can be a good buying in opportunity for investors.
Business and manufacturing results have also been good. As of May 8, about 667 listed companies have released their first-quarter business results, and 86 per cent of them have made a profit.
Regarding foreign capital, it is true that there are some outflows in recent days. However, foreign investors are still buying Vietnamese stocks—in May, foreign indirect capital reached $700 million, and foreigners also net bought $34 million stocks last month, which was also a highly volatile period. Year to date, investors from overseas have net bought $2.28 billion—which is positive as the figure was $2.92 billion for the entire year of 2017.
This is why I strongly advise investors to stay calm amid news of net selling by foreign investors and not to exaggerate the impact of these sales on the Vietnamese market. I believe that foreign investors still see Vietnam as a highly potential market, so it is impossible that they are running away from Vietnam.
In the past two trading days, when the VN-Index fell, foreign investors made some contradictory actions. Can you elaborate on this?
On July 2, when the market dropped, foreign investors remained on the buying side at VND310 billion ($13.5 million). On July 3, the market fell even further and foreigners net sold VND365 billion ($15.8 million). However, excluding a specific sale-off for Vingroup JSC, the market only saw a modest outflow of VND142.3 billion ($6.1 million).
Once again, I want to stress that these transactions are only the daily ups-and-downs of the market. In the mid- and long-term, investment funds around the world still have a good opinion of Vietnam. They understand very well that Vietnam has strong fundamentals, the economy itself is doing well, and Vietnamese businesses have lots of room to grow.
I believe that after the hysteria dies down, local investors will also feel the same about the Vietnamese market and become calmer with their investment choices.
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