Foreign Investors Accelerate Vietnamese Stock Sales Amid Trade Tensions
Foreign investors have significantly increased their sales of Vietnamese stocks in recent weeks, driven by growing trade risks despite the prospect of a market upgrade later this year.
Trade Risks and Outflows
Vietnam's reliance on exports, particularly to the United States, makes it vulnerable to potential U.S. tariffs. In January, foreign investors sold 6.4 trillion dong ($251.18 million) worth of Vietnamese stocks, nearly three times higher than in December. The outflow continued in February, with net sales of 4.2 trillion dong in the first week alone. This trend accelerated after the Trump administration announced tariffs on steel imports, as Vietnam is a significant supplier.
FTSE Upgrading Prospects Not Offsetting Outflows
The prospect of Vietnam's reclassification from frontier to emerging market by FTSE Russell has not yet offset the selling. FTSE added Vietnam to its watchlist for an upgrade in 2018, and the country has implemented reforms to meet the criteria. An upgrade could attract an estimated $5 billion in additional funding to the stock market.
Global Outflows and Timing
The key prefunding reform for foreign investors coincided with Trump's election win and a global outflow of foreign funds from emerging and frontier markets. This has contributed to the recent selling in Vietnam.
Impact on Vietnam's Economy
The protracted selling of Vietnamese stocks could potentially impact the country's economy by reducing investment and dampening valuations. However, the situation is still fluid, and the prospects of a FTSE upgrade later this year may mitigate the negative impact.