Domestic investors quit, foreign investors jump in

The high purchasing power of foreign securities investors in the so-called ‘hibernation’ period of the market shows that a huge sum of capital is waiting to be injected in Vietnam’s stocks.
When domestic investors got frightened by the warning that the VN Index would fall to the 900 point level by the end of 2007, foreign investors kept buying shares.

In May 2007, the trading volume of foreign investors reached 752,000 units for every trading session, worth VND105.51bil ($6.59mil). The trading volume slightly decreased in the next period, from June 1 to 25, to 378,000 units a session, worth VND55.31bil ($3.45mil). The purchasing volume rose again in the last 10 trading sessions to 790,000 units a session, worth VND119.06bil ($7.44mil). In many trading sessions, foreign investors’ trading volume accounted for 45% of the total transaction volume of the market.

Meanwhile, statistics showed the fear of domestic investors as their trading volume was just some 4mil units. The prices of many share items fell down to their deepest lows as investors did not make transactions in the last time.
The recently released report by HSBC, which provided a contradictory forecast about the VN Index of 900 points by the end of this year, also showed that the number of newly set up investment funds was increasing rapidly.

According to HSBC, since April 2007, 13 new investment funds have become operational, raising the total number of funds established in 2007 to 22, and total operational funds to 55, which have the total assets of $6bil.

However, with the maximum foreign ownership level in Vietnam’s listing companies at $4.8bil, most of the capital remains in cash.

A report from the State Bank of Vietnam also confirmed the news that capital in foreign currencies was now profuse. In the last six months of the year, commercial banks did not buy foreign currencies from the central bank as they could buy foreign currencies from enterprises and the public themselves. The amount of foreign currencies remitted into Vietnam in the first six months of the year increased by 12% compared to the same period last year.

As the supply was in excess, the central bank had to buy foreign currencies in large quantity. By the end of May 2007, the amount of purchased foreign currencies had reached $7bil.

Several domestic securities companies have estimated that the foreign currencies of foreign institutions ready for disbursement reach nearly $3bil.

Phuong Hoang Lan Huong, Director of the Securities Depository Centre, in June 2007 alone, the centre granted trading codes to 26 institutions and 789 foreign individuals. As such, by the end of June, there were 5,705 foreign investors on Vietnam’s stock market, 335 institutions and 5,370 individuals, granted trading codes.

According to HSBC, most of the newly set up big funds are now ‘sitting atop a pile of money’ which needs to be disbursed when a series of IPOs are made.

However, information that may affect the disbursement plans of the funds is that the IPO roadmap may be reconsidered after experts warned that a massive number of IPOs would cause ‘indigestion’ of commodities.

Source: VNE