Foreign investment tipped to rise

Foreign investment in the Vietnamese stock market is expected to rise this year by about 20 per cent compared to last year, says the head of HCM City Securities Co’s research department, Fiachra MacCana.

The net stock buys of foreign investors surpassed VND16 trillion (US$768.6 million) in 2010, second to the 2007 peak of VND23 trillion ($1.1 billion), and this was remarkably high for a year in which many investment funds had faced difficulties in raising capital.

“The level of [foreign] investment is quite low in Viet Nam in comparison with other Asian markets, and, due to the cheap share prices here, Viet Nam will attract more investment this year,” MacCana predicted.

Foreign investment inflows last year, while positive, remained small compared to the amounts that foreigners were pouring into similar markets in Malaysia, Indonesia or Thailand.

Vietnamese shares were cheap and their price-to-earnings (P/E) ratio good, but those factors had not been enough to overcome such negative factors as high inflation, exchange rate fluctuations and State policies that have continued to undermine the confidence of foreign investors, he said.

“Solutions lie in Government policies, and when it sets a target, it should stick to it, at least in the medium term, for the market to have clear signals.”

Foreigners increased their buys whenever the market fell significantly and were active to sell whenever the indices climbed to high levels. “In other words, they were not confident enough to push the market too much higher,” he said.

Nevertheless, over the past time, foreign money frequently supported the market and cushioned declines in major indices – especially on the HCM City Stock Exchange, the market to which over 94 per cent of net foreign investment was directed.

Blue chips in the financial and real estate sectors attracted the greatest foreign attention, with the five codes most active in among this investor segment last year being property developers Hoang Anh Gia Lai (HAG) and Kinh Bac City Development (KBC), insurer Bao Viet Holdings (BVH), Saigon Securities Inc (SSI), and financial conglomerate Ocean Group (OGC).

“Return on investment in these sectors is much quicker than in other sectors,” MacCana explained, noting that profit margins in the manufacturing sector were low.

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