Foreign investors took advantage of Vietnam’s biggest stock-market retreat since 2001 to boost their holdings in a bet that losses spurred by escalating tensions with China will prove short-lived.
Overseas money managers purchased a net $11.5 million of securities on the Ho Chi Minh City Stock Exchange yesterday, the most in five weeks, as the benchmark VN Index sank 5.9 percent to a four-month low. Alan Richardson, whose Samsung Asean Equity Fund beat 96 percent of peers tracked by Bloomberg in the past five years, said in an interview yesterday he’s been buying.
“Foreign investors seem to be more confident than local ones who are getting panicked and sold,” Hoang Thach Lan, the Ho Chi Minh City-based brokerage unit head at MHB Securities Co., said by phone yesterday.
The country's State Securities Commission called on investors to respond rationally to news about the dispute.
"We suggest investors stay calm, careful and avoid being taken advantage of," it said in a statement issued yesterday.
The benchmark gauge for Vietnam’s $49 billion equity market has tumbled 13 percent from this year’s peak on March 24 amid growing tension with China in the East Sea. Vietnam said its vessels were rammed by Chinese ships in its own waters in the South China Sea. China’s Vice Foreign Minister Cheng Guoping said late yesterday in Beijing that tensions won’t get worse.
Concern over the dispute may not fade quickly, according to Marc Djandji, a partner at Asean Strategy Group. Tensions are escalating as Asian neighbors push back against Chinese moves to assert control over the resources of disputed maritime areas.
“This row between China and Vietnam has put cold water on the market,” Djandji said by phone. “This is a serious thing. It’s not something that is resolved in a day.”
Foreign investors have consistently shown more confidence in Vietnam than locals, Michael Kokalari, an analyst at CIMB Securities International Ltd., said in a telephone interview.
The country’s markets attracted $130 million of overseas funds this year and $263 million in 2013 amid growing appetite for assets in the least-developed nations. Firms including PXP Vietnam Asset Management say Prime Minister Nguyen Tan Dung may raise foreign ownership caps in 2014, giving investors even more room to boost holdings.
Even after the recent slide, the VN Index has advanced 4.5 percent this year as the central bank cut the benchmark refinancing rate to a six-year low and inflation slowed to less than 5 percent for the first time in more than four years. The VN Index’s price-to-earnings ratio fell to 12.7 yesterday, the lowest level since January, data compiled by Bloomberg show.
The nation’s biggest money manager said three days ago it’s been buying amid the selloff. Equities are “extremely attractive” because valuations are low relative to other markets in Southeast Asia, Andy Ho, chief investment officer at VinaCapital Group, which oversees about $1.6 billion, said in a telephone interview. Ho couldn’t be reached for comment yesterday.
“It’s a favorable buy at these levels,” said Samsung’s Richardson. “Once the negative psychology dissipates over the next few weeks, I expect a V-shaped recovery as investors try to pile back into an illiquid market.”