March is the strongest net withdrawal month in recent years of investment cash flow
The April market strategy report of SSI Securities Analysis Center (SSI Research) showed that the capital flow was continuously withdrawn from active investment funds in the past March. According to EPFR data, the Vietnamese market saw a net withdrawal of 100 million USD, ending the series of 4 consecutive months of capital and the largest net withdrawal month since March 2020 up to now.
For ETFs, VFM VN30 ETF and Premia Vietnam ETF sold strongly, VND 820 billion and VND 37 billion respectively. However, the purchasing power from VFM VN Diamond fund (850 billion dong), helped balance the total ETF inflows in March with a slight net buying value of 170 billion dong (equivalent to 7 million USD).
On the stock exchange, foreign investors recorded a net table value totaling 11,447 billion VND in March and 14,554 billion VND in Q1.
The movement of strong net selling in the past month was in the weakening trend of capital flows in Asia, but SSI Research noticed positive signals on ETF capital flows in the coming time. The first is that VFM VN30 ETF has stopped withdrawing money and has continuously added money since March 25. FTSE Vietnam UCITS ETF also had capital inflows back in the last 3 days of the month
Second is the Fubon FTSE Vietnam ETF which is the newest ETF to enter the Vietnamese market. This is a Taiwanese ETF that invests 100% of its assets in Vietnamese stocks. The fund portfolio includes 30 shares of the FTSE Vietnam 30 Index, of which the top of the portfolio are VIC (11.1%), HPG (10%), VNM (9.7%), VHM (9.7 %), MSN (8.9%), VRE (7%). The Fund aims to raise TWD 10 billion (about VND 8,000 billion), and it is estimated that during the IPO period (March 24-26), half of the above value has been raised. SSI Research believes that the fund will start to disburse from the beginning of April, helping to boost the cash inflow for the ETF group.
SSI Research believes that the trend of capital inflows strongly to the developed market only slows the capital inflow into emerging and frontier markets in the short term. In the long term, the economic growth story still attracts global stocks, similar to the period when Donald Trump was elected to the US President with strong business support policies that attracted capital inflows to the United States. Very strong at the end of 2016 and early 2017 but then capital flows in other markets also increased very well. With a stable business environment, tight money supply control, and low inflationary pressure, the Vietnamese market will remain an attractive destination for capital flows in the long term.
The VN-Index is on track to move to higher score areas
Vietnam’s stock market has continued to show strong internal strength when overcoming strong vibrations in March and has gone up to new highs in the first sessions of April with the active participation of individual investors. The pillar capitalization group has regained moment motivated to help vn-index’s psychological barrier of 1,200 points be convincingly surpassed and now become a strong support zone of the index.
April is expected to be a favorable month, creating many opportunities for investors as a conservative and stable monetary policy is expected to help limit inflation risks. Besides, banking stocks (30% weight on VN-Index) announced first quarter business results with remarkable growth and this momentum continued to spread to other industries in the second quarter. Last and foremost, the macro data shows that the clear recovery of the economy is the factor that drives the sustainable growth of the stock market.
The above foundational factors are expected to help reactivation of capital flows from foreign blocs. The strong net selling in Vietnam market in the past month is in the weakening trend of capital flows in Asia but SSI Research sees positive signals about ETF capital flows in the near future, such as cash flow back to VFM VN30 ETF and Fubon FTSE Vietnam ETF will start disbursement from the beginning of April.
Specific solutions are being implemented to overcome the transaction overload on HoSE, the active participation of individual investors and the return of ETFs will add momentum to VN. -Index is aiming for higher score areas with the close target area at 1,250 points and 1,350-1,400 points further in the near future. This is also the area that corresponds to the target P / E of 18 times of the VN-Index.
The banking sector will continue to outperform other sectors in the first quarter, thanks to relatively attractive margins and improved credit outlook as most banks have accelerated write-offs and increases. Increase the provision for bad debt in the fourth quarter of 2020.
For banks in the research scope, over the same period, it is estimated that profit before tax will increase by about 55% -65%. State owned commercial banks are likely to achieve more spectacular growth than average as they have increased provisioning to deal with problem assets. Occupying a market capitalization ratio of about 30% on the VN-Index, banking stocks are said to have many driving forces to lead the general market in the near future.
Source: ndh.vn – Translated by fintel.vn