Decoding foreign capital trends: only net buying signals?

We saw a consistent significant net selling tendency by foreign money over the previous three sessions. Surprisingly, these were also three sessions of market gains.

Foreign cash flow has accrued a net selling value of about -12.587 trillion VND as of December 4th, according to statistical data. Since the beginning of the week, transaction trends in foreign capital's industrial groupings have also been observed, with the financial services and real estate sectors suffering the most substantial selling. It's worth mentioning that there has been a significant inflow of capital into the securities group in anticipation of the imminent "go-live" of the KRX system, as indicated by the regulatory body on December 25th. On the other hand, foreign capital has become net purchasers in the chemical and construction materials industries.

With huge capital flows continuing into the US and EU markets, ETF funds with a pattern of USD inflows into global assets have been more bullish. Meanwhile, the Vietnamese market has seen a string of outflows of foreign money. SSIAM VNFIN, in instance, experienced a net selling of -3.7 million USD on December 4th, increasing its total net selling for the week to -8.1 million USD. Xtrackers FTSE, on the other hand, had a net purchase of 3.1 million USD, helping to keep aggregate ETF outflows to -0.6 million USD.

According to data from the HoSE, foreign capital had a total net selling value of around -1.329 trillion VND on December 5th alone. HPG (-188 billion), VHM (-172 billion), and VNM (-92 billion) were the top three stocks in terms of net selling. KBC (12 billion), VGC (7 billion), and VHC (4 billion) were the top three equities in terms of net purchasing. Real estate had the largest net selling value during that session, reaching around -322 billion VND.

Individual investors remained the "liquidity pillar" in terms of net purchasing value in matched orders, reaching around 1.973 trillion VND throughout the session. Among the top three equities exchanged by foreign investors in net selling, HPG (212 billion), VHM (189 billion), and VPB (128 billion) are among the top three stocks purchased by domestic individual investors. Net selling in matched orders with a value of about -488 billion VND was accomplished via proprietary trading.

Looking back to November foreign capital transactions, there is a persistent tendency of net selling. Foreign capital recorded a net sale of -1,987.5 billion VND in November 2023 up to November 30th, maintaining the pattern of net selling in recent months.

Foreign cash has been net selling from the beginning of the second quarter, escalating when the market peaked at the end of August, and there is no prospect of it abating. Foreign capital had a net sale of approximately -11,573 billion VND as of November 30th. According to the statistics, since the end of the purchasing streak in August, foreign capital has primarily been net buying when the market falls dramatically and net selling when the market rebounds. A prominent example is when the market bottomed in late October; foreign capital had six sessions of significant net purchasing, a trend that has continued in subsequent sessions.

Prior to this, according to FIDT statistics, the transaction pattern of foreign capital in the last three months (the period the market switched to a downward trend) skewed towards a selling tendency when the STT closed in November.

The banking industry has been the most actively sold category by foreign investors since the beginning of the year. The selling pace has halted in recent months, with foreign investors net purchasing this group in November, since real estate prospects in the near future remain uncertain and dangerous. Meanwhile, the food and beverage industries, as well as the retail sector, have continued a selling trend throughout the year, and the prospects for this sector are unclear, making it difficult to match investors' hopes for a robust rebound in the final months of the year and the impending Tet vacation. Overall, spending levels among workers have remained low, particularly among those suffering job challenges as a result of limit  ed orders for firms.

Contrary to popular belief, the fundamental assets group has acquired the trust of foreign investors and has been consistently purchased by this group since the beginning of the year.

The market has been severely impacted by the heavy selling session of foreign investors in numerous large-cap equities. There has been a considerable net selling of foreign capital with Vingroup stocks (VHM, VIC, VRE), as well as MWG, MSN, HPG, and VNM, particularly in the previous three months. While the remaining blue-chip stocks were once highly valued, they are now facing many growth issues, leading to continuous restructuring choices in the portfolio of foreign capital.

This group's huge capitalization weight has damaged the psyche and confidence of other investment groups in the market, adding to the VN-Index's steep drop during the last three months. With numerous potential for the future of the Chemicals sector and inputs for semiconductor manufacturing, DGC is the company that international investors are most interested in and have purchased the most.

Experts believe that the record-breaking large net selling by foreign capital on December 5th was primarily contributed by closed-end funds and anonymous P-notes, which have the characteristic of being fast but can also withdraw capital quickly, particularly in a context where general investment capital flows still lack a clear trend. Predicting net selling in the next sessions is tough, but big net selling sessions like today are likely to persist.