Leading investment fund VinaCapital remains confident in the Vietnamese stock market in the last months of this year, despite foreign investors’ heavy net selling.

The VN-Index has grown 10 per cent so far this year, driven by an expected 19 per cent increase in the fiscal year 2024 earnings and strong buying of domestic individual investors, VinaCapital Chief Economist Michael Kokalari highlighted in his analysis announced on Wednesday.

The rebound in earnings growth from a 5 per cent drop last year to a 19 per cent growth this year is backed by an acceleration in the country’s GDP from 5.1 per cent in 2023 to an estimated 6.5 per cent in 2024. The local investors' strong buying has stemmed from the fact that deposit rates in Việt Nam have been below 5 per cent, even for 12-month deposits and the country’s real estate market has been frozen, making stocks and gold the preferred places for domestic investors to pour their savings.

Furthermore, retail investors have dominated stock market trading in Việt Nam, accounting for 90 per cent of daily trading value on average this year. Their purchases absorbed an estimated US$2.4 billion worth of Vietnamese stocks that foreign investors net sold this year.

The expert held that foreign investor selling was prompted by profit taking and concern about the 4 per cent year-to-date depreciation of the Vietnamese đồng, adding several are taking a wait-and-see approach towards investing in Việt Nam in the light of recent political developments in the nation.

However, a quarter of foreign selling transpired via exchange-traded fund (ETF) redemptions, including the dissolution of Blackrock’s iShares Frontier ETF which was liquidated in June. The monthly foreign net sales of the stocks hit a record-high in June, spurred by the liquidation of the ETF. As a result, the proportion of Việt Nam’s stock market owned by foreign investors fell to its lowest level in a decade.

The selling linked to the dissolution has finished, and some investors have taken advantage of foreign selling to increase their long-term strategic investments in Việt Nam, including Capital Group, Fidelity and many others who acquired a large amount of shares at retail lender ACB, Michael Kokalari revealed.

VinaCapital expects earnings growth to increase from 9 per cent year-on-year to 33 per cent in the second half on the back of the recovery of the domestic realty market.

Earlier, the investment fund said the real estate market began to recover in December 2023, and the process has gained considerable momentum since then. Realty transactions surged some 40 per cent year-on-year in the first half of this year thanks to a series of laws to revive the market recently enacted by the Government.

Against the backdrop, it expects the earnings of real estate developers, except for Vinhomes, will rise 80 per cent this year. Besides, a healthier property market should support banks’ earnings by boosting credit growth and reducing asset quality concerns of credit loss.

“The recovery of Việt Nam’s real estate sector is likely to further expand in 2025 which is one reason that we expect the VN-Index to grow by another 17 per cent in the year”, he said. — VNS