US stocks witnessed one more session of increase on December 19 (December 20, Hanoi time) following changes in the US FED’s monetary policy. Dow Jones Industrial Average increased for nine consecutive sessions, while the S&P 500 nearly set a new record. Nasdaq Composite increased by 0.67 percent, surpassing the 15,000 point threshold for the first time since January 2022.

At the meeting on December 12-13, the US FED sent a sign of cutting interest rates three times in 2024, putting an end to the period of monetary policy tightening which began in March 2022. 

Since then, the FED has raised interest rates 11 times, raising the operating interest rate from the low record of 0-0.25 percent to a 220-year peak of 5.25-5.5 percent.

According to Bank of America, the world may see spells of interest rate cuts in 2024. Central banks pump more money into circulation to help economies which were lackluster in 2023.

In theory, the moves by the FED of not raising the interest rate at the last three meetings and similar moves by European economies is good news for the world’s economy, including Vietnam.

The greenback depreciation has increased the world’s gold prices. In Vietnam, SJC gold price climbed to the new high of VND75.3 million per tael on December 20.

The recovery of large economies in the world will help Vietnam boost exports, which have been growing slowly in the last year.

The US dollar decline will help the dong/dollar exchange rate become more stable, thus bringing cash flow back to emerging and developing markets, including Vietnam. The FDI (foreign direct investment) remained active in 2023, while FII (foreign indirect investment) is expected to bounce back next year.

Nevertheless, foreign capital flow keeps going out of the Vietnamese stock market, while stocks have been put under selling pressure.

The VN-Index recently fell to below 1,100 points for the seventh time in 2023. Foreign investors continue witnessing strong net sales, worth up to $1 billion in 2023. On December 19, foreign investors’ net sales reached VND450 billion.

What is happening to Vietnam’s stocks?

A report found that foreign investors’ net sales had reached VND20 trillion this year, which is even higher than the net sales of VND15.74 trillion in 2020. Net sales have been reported for the majority of shares foreign investors are holding, including blue chips such as MWG (The Gioi Di Dong) and VHM (Vinhomes).

The net sales, analysts say, is an abnormal phenomenon as the dong/dollar exchange rate has been stable over the last two months, and Vietnam’s economy has maintained a relatively high growth rate and inflation has been curbed. The prospects are bright with exports and FDI to increase.

Vietnam has become a target for investors from the US, Japan, South Korea and China thanks to the openness of the economy and membership in many FTAs (free trade agreements). The upgrading of the Vietnam-US and Vietnam-Japan relationship to comprehensive strategic partnership, plus recent close cooperation with China, are expected to prompt international investors to come to Vietnam.

In fact, foreign capital is not only going out of Vietnam but also other Southeast Asian countries, and flowing to India and Taiwan (China).

Some analysts said foreign investors are selling stocks as a profit-taking move after Vietnam’s stock prices increased sharply in the first three quarters of 2023. 

The other reason behind the net sales is the risks that will exist in regional economies in 2024, caused by high interest rates and debt payment pressure, while demand in the region remains low. 

Vietnam remains a frontier market, so it is difficult for investment funds to disburse more money. Besides, goods on the market may not be suitable for foreign investors. 

However, some positive signs have appeared. Fubon, an ETF (exchange-traded fund), has recently made many of purchases, with focus on securities, bank and real estate shares.

Manh Ha