Foreign investors aren’t leaving Vietnam

CEO and Co-founder of VinaCapital Don Lam, who is also the Chairman of the Vietnam Infrastructure Ltd, has denied the report that foreign investors are trying to withdraw from Vietnam.

Foreign investors have not sold shares in the last three months, they just have not bought them. This is also one of the reasons that made the market fall, Mr Don Lam said, trying to explain the fluctuations in the stock market recently under the view of a foreign investor.

Not long ago, several foreign institutions released reports which forecast the landing of a lot of foreign investment funds in Vietnam which would bring about several billion dollars. However, amid the optimistic reports, Merrill Lynch launched a controversial report, which suggested reducing foreign investment into Vietnam to zero.

Mr Don Lam said that Merrill Lynch released the report as an independent researcher. The institution may think that the stock prices in Vietnam have become overly high and advised its investors not to buy more.

“Foreign investors will absolutely not withdraw from Vietnam’s market,” he said.

It is clear that foreign investment funds are still moving ahead with their plans to march towards Vietnam’s market, which shows positive signs of high economic growth rate. However, a lot of factors, including regulations (foreign investors are allowed to hold up to 30% of total shares in local companies, and the ‘room’ for foreign investors is nearly running out), and the way of accessing investment capital of Vietnam, have kept the huge sums of capital continuing to wait.

According to Mr Don Lam, in general, new foreign investment funds will enter Vietnam after one, two or three years after the establishment. Several professional investors and funds, which have cash for investment, still are not making investments, because they find the stock prices overly expensive. They will make deposits at banks and wait for their opportunities.

In fact, in the last three months, both blue chips and penny stocks on the market were unsalable. Foreign investors did not buy shares in the last time, according to Mr Don Lam, because the P/E index was very high.

“They will buy stocks when prices go down,” Mr Don Lam said.

Regarding the recent unsuccessful auctions, he said that foreign investors offered low prices at the auctions because the stock prices were overly high at this moment. The P/Es of many share items were 30 or 40, and wise investors never accept such a high P/E level.

In fact, foreign investors aim at long-term investment; therefore, they will hold stocks and not sell out for profit.

Mr Don Lam said that the higher foreign ownership ratio in local companies was expected to help stimulate the market again. The market prices of many blue chips, like REE, SIS or VNM, have returned to their actual value after the continuous falls. However, foreigners cannot buy these shares any more because of no room.

Source: VNE