Vietnam's stock market remains a bright spot in Southeast Asia, as net outflow of foreign investors has been reduced from the beginning of the year, reaching VND1.8 trillion (US$78 million) as of mid-August and staying in contrast to significant withdrawals of fund flows in other regional markets, according to KB Securities Vietnam (KBSV).

Such the figure, narrowing from a net outflow of VND12 trillion (US$519.63 million) since the benchmark VN-Index hit its March bottom with a 25% slump, indicated that foreign investors are returning to the stock market.

Year to date, net outflows in Thailand’s stock market stood at approx. US$7 billion, in Malaysia with US$5 billion and around US$2 billion in the Philippines and Indonesia, stated the securities firm, informed KBSV. 

In conjunction with the sharp recovery of foreign matching-order flow, the market has witnessed the come-back of foreign ETF flows since the middle of July including VanEck Vectors Vietnam ETF (around US$9 million), FTSE Vietnam ETF (US$6.3 million) and KIM KINDEX Vietnam VN30 ETF (US$7.7 million).

Based on past external shocks in Vietnam's stock market (global financial crisis 2008-2009, CNY devaluation in 2015, among others), after the strong net withdrawal in the first six months, matching-order foreign flows tend to come back, stated KBSV.

Capital flows to Vietnam in global shocks. Unit: USD million.

With the capability of containing Covid-19 while still maintaining positive economic growth, Vietnam is expected to start to enter the recovery phase in the last months of the year.

In this context, stronger foreign flow will be an important catalyst for stock market in the last four months of the year, KBSV asserted.

Foreign investors net sold over VND12 trillion (US$519.63 million) in the first three months of this year, marking its record net selling amount in Vietnam’s stock market to date.

KBSV said the foreign outflow is a global trend as investors are withdrawing capital from emerging and frontier markets to partly offset their losses in the US and European stock markets.

At the close last Friday, the VN-Index slipped 0.05% against the previous day to 850.74.