FPI will no longer be the main driver to attract foreign capital to VN in H2

The State Bank (SBV) Governor at the online government dialogue on July 2 said SBV bought over $11 billion in the first half of 2018, raising national total forex reserves to $63.5 billion. 

The huge net purchase of $11 billion just in the first six months of the year, which was close to the $13 billion net purchase value in 2017, is believed to have upset the finance market.

The government bond yield has dropped to a record low, 3 percent per annum for 5-year bonds, nearly equal to that of the US government bond yield. This is attributed to  high liquidity with cash surplus reaching VND300 trillion.

SBV had to lower the dollar buy price twice because of the high foreign currency supply. The huge foreign capital flow has led to the VN Index rising by 20 percent within the first quarter of 2018. With the growth rate of 48 percent in 2017, Vietnam is considered the fastest growing stock market in the world. 

Analysts believe that FPI was the major driving force of the foreign capital flow. Foreign investors poured multi-billions of dollars into Vietnam businesses. 

In May, Vinhomes sold $2 billion worth of shares to foreign investors. Another well-known investment deal was the one in which foreign investors spent $1.3 billion to acquire 257 million Techcombank shares.

According to the General Statistics Office (GSO), in the first six months of 2018, foreign investors invested $4.1 billion in Vietnam businesses, a sharp increase of 82.4 percent in comparison with the same period last year.

Vietnam could also attract foreign capital through foreign direct investment (FDI) with $8.4 billion worth of FDI pledged in the first half of the year. Vietnam’s trade balance saw a surplus of $3.3 billion during the same time.

However, analysts warned that though Vietnam’s total balance had a surplus of $9 billion in the first half of the year, the deficit may come back in the second half.

They also affirmed that FPI will no longer be the main driver to attract foreign capital in the second half. The anticipated interest rate hike in the US, plus the worry about the slowdown in the global economy, both have driven cash flow to the US. 

In Vietnam, foreign investors continued to be net sellers in May, June and the first half of July. Meanwhile, the share sales planned by Genco 3, Binh Son Refinery, PV Oil and BIDV will not be organized in the near future.

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Kim Chi