The attraction of the Vietnamese stock market

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Vietnam's stock market is changing positively. Photo: Internet

Moving upstream

The Covid-19 pandemic is still a factor that strongly affects the world economy. In addition, the US-China trade tensions, monetary and the fiscal policies of each country and the US presidential election that will take place in November will be factors that strongly affect the stock market.

The world stock market is not moving positively. For example, the US stock market since the beginning of the week has not started very well. At a stock trading session on September 23, the Dow Jones decreased by 524 points, equal to 1.92%, the S&P 500 also decreased by 2.38% and the Nasdaq Composite fell by 3.02%. The US stock market fell for many recent sessions, meaning all three indices have declined significantly since the beginning of the month.

In Asia, major indices such as Hang Seng, Nikkei 225, Shanghai Com and Singapore Straits Times also sank into the red.

Meanwhile, Vietnam's stock market is changing positively when it surpasses 900 points - the most difficult resistance level for many months. As of 10 o'clock on September 24, the VN-Index was firmly at 912 points. Since the beginning of September, the VN-Index has increased by more than 3%.

According to many experts, investor sentiment in the Vietnamese stock market has been much more stable, even amid the negative movements of the pandemic, the investment cash flow will not weaken but also become stronger. The stability of the Vietnamese stock market is attracting the attention of foreign investors. In the stock trading session on September 23, foreign investors have been net buyers for a fourth consecutive session. This is a very positive signal absent positive factors affecting the market.

Waiting for foreign capital flow

In a recent analysis report by VNDirect Securities Company, the world's leading stock index research and analysis organisation, Morgan Stanley Capital International (MSCI), announced it would delay upgrading Kuwait to an emerging market (Emerging Markets - EM) until the semi-annual market review and classification period in November.

Therefore, Vietnam will have to wait until as early as November to become the country with the largest share in the frontier markets (FM) of MSCI.

According to the MSCI report, the proportion of Vietnam in the MSCI Frontier Markets Index and MSCI Frontier Market 100 Index can jump from 17.2% and 12.2% to 25.2% and 30%, respectively.

VNDirect said Vietnam will benefit the most when Kuwait is upgraded to an emerging market because Vietnam's proportion is currently the second-largest in the MSCI Frontier Markets Index and MSCI Frontier Markets 100 Index (after Kuwait).

Based on data on September 14, 2020, VNDirect estimates Vietnamese stocks can absorb US$120 million from ETFs currently simulating the two MSCI's frontier market indices mentioned above (assuming net assets of ETFs remain stable at current levels). The scale of foreign capital inflows into Vietnam might be even larger, up to US$200-210 million, if additional contributions from active funds are included. This foreign capital inflow will strengthen the cash flow in the market as well as create an exciting sentiment among domestic investors.

VNDirect said foreign funds track net-buying frontier market indices of Vietnamese stocks in the MSCI Frontier Markets Index and MSCI Frontier Markets 100 Index's portfolio after Kuwait was upgraded to an emerging market, especially large-cap stocks with a high proportion such as VNM, VIC, VHM, MSN, VRE, HPG and VCB.