Following its upgrade to secondary emerging market status by FTSE Russell, Vietnam is contemplating an expansion of its daily stock trading band. This move aims to further enhance the market's appeal to international investors, as the current upgrade is seen as a necessary but not sufficient condition for significant long-term capital inflows.
Foreign investors have shown renewed interest, purchasing a net $54.2 million in local shares this week, marking the most substantial inflow in six weeks. However, this comes after over $3.6 billion in net selling this year. The FTSE upgrade is expected to redirect up to $6 billion into Vietnamese equities, with passive funds potentially injecting around $240 million in the first phase. Key beneficiaries are anticipated to be VPBank, Vinhomes, FPT, and Hoa Phat, though Vingroup might experience outflows.
Despite the upgrade, the VN-Index has seen a modest rise of about 1.4% this year, lagging behind Thailand's 24% and Singapore's 21%. Concerns persist regarding foreign ownership limits and free-float constraints. Market analysts suggest that while the upgrade is a technical milestone, the market needs new catalysts, such as improved company earnings and higher valuations, to attract sustained capital, rather than relying solely on the upgrade.
After the upgrade announcement, the VN-Index dropped by 0.84% on September 23rd, with foreign investors net selling over $40 million, primarily in large-cap stocks. This indicates that initial speculation around the upgrade might be subsiding, and the market could be retesting support levels. Experts emphasize focusing on individual stocks with strong fundamentals rather than broad market trends, as the market looks for more intrinsic growth drivers.
