HANOI, VIETNAM – Foreign investors have net sold over 100 trillion Vietnamese dong (VND), equivalent to approximately $3.9 billion USD, in the Vietnamese stock market through the first nine months of the year, Market Insider has learned. This massive outflow surpasses the total net selling for the entire 2024 financial year, which stood at about 93 trillion VND.
The significant sell-off comes as the country is on the cusp of a potential market upgrade. Vietnam aims to transition from a Frontier Market to a Secondary Emerging Market by FTSE Russell, a global provider of stock market indices and data. The Ministry of Finance has indicated that Vietnam has worked to meet the organization’s upgrade criteria, with the review results due to be announced on October 7.
Divergent Trends: Outflows Amidst a Rising Market
Despite the heavy foreign selling, the VN-Index—Vietnam’s benchmark stock index—has shown remarkable resilience, climbing nearly 10% since the start of August to close at 1,645 points on October 3.
However, over the same period, foreign investors have offloaded 71.415 trillion VND on the Ho Chi Minh Stock Exchange (HoSE), the venue for 95% of their market transactions. Cumulatively, the year-to-date net sell figure of 107 trillion VND is the largest since 2021.
Technical Selling and Profit-Taking Driving the Exit
Analysts suggest the foreign selling is primarily technical and not a reflection of poor market fundamentals.
Portfolio Restructuring for Upgrade: According to Tran Quoc Toan, Director at Mirae Asset Securities, an impending market upgrade means that some foreign funds may be required to reduce their holdingsor divest to restructure their portfolios. This is typically done in preparation for inclusion in or adjustments related to the MSCI Emerging Markets Index.
Profit-Taking: Many large-cap stocks, a favorite among foreign funds, have seen strong growth since the beginning of the year. The heavy selling, which focused on key stocks like VIC, HPG, FPT, SSI, VHM, and VPB, is also viewed as quarterly portfolio rebalancing and profit-taking, particularly given the triple-digit percentage gains some stocks have posted.
Exchange Rate Pressure: The high VND/USD exchange rate is also contributing to the selling pressure. The VND has weakened by over 3% against the dollar year-to-date. The high exchange rate is expected to persist if the US Federal Reserve (Fed) does not cut interest rates soon, as Vietnam is currently pursuing an accommodative monetary policy to boost business activity.
Global Trends and Short-Term Outlook
The surge in US tech stocks has also drawn money away from emerging and frontier markets. Analysts at Yuanta Securities noted that foreign funds have been selling across several countries, including Vietnam, to redirect capital into US assets. This is evidenced by the S&P 500 index recently surpassing 1,700 points, driven by tech giants like Nvidia, Alphabet, and Apple.
In the short term, foreign net selling is predicted to continue, even if Vietnam achieves the market upgrade, primarily due to the ongoing high exchange rate, according to Yuanta Securities.
Long-Term Potential: A $7 Billion Inflow?
Despite the short-term turbulence, the long-term outlook remains highly positive, contingent on a successful upgrade.
Mirae Asset Securities estimates that a successful market upgrade could attract $4–5 billion in foreign capital, with approximately $1 billion coming from passive funds that track the indices.
Global investment expert Duong Ngoc Dung is more optimistic, estimating capital inflows of $3–7 billion once the upgrade decision takes effect. A swift deployment of this capital would provide a massive boost to the Vietnamese stock market.
Historically, markets that have been upgraded have seen significant pre-approval foreign investment. Pakistansaw a $327 million net inflow before its upgrade approval, and China saw inflows of over $13 billion, with accumulation typically peaking in the month of the announcement.
Will the expected market upgrade be enough to reverse the heavy foreign sell-off and unleash the predicted multi-billion dollar capital flood into Vietnam’s stock market?
