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Vietnam’s Foreign Investor Stock Sell-Off: Unpacked 2024

On March 27, foreign traders net-sold US$73.8 million worth of Ho Chi Minh City Stock Exchange–known colloquially as the HoSE–stocks. This was the biggest single-day net withdrawal from the market since at least December. It was, however, part of a trend that has seen foreign traders exit the market to the tune of US$1.18 billion in the six months to May 3 alone.

Indeed, the HoSE has lost its shine for foreign investors, though it does not look to be the exchange’s fault so much as there are a number of push and pull factors at play. In this light, this article looks at the five stocks that have seen the biggest foreign investor divestment over the last six months and why that might be.

Key stocks foreign investors have sold

The breadth, in terms of the industries included in the top 50 stocks that have had the biggest reduction in foreign ownership, is vast. No single industry accounted for more than five or six stocks and the industries covered vary from from real estate to energy to food to securities–foreign investors looked to have been selling-out of just about anything and everything.

Similarly, the five stocks that saw the biggest exodus of foreign investors were also from no one specific industry. These were as follows.

CNG Vietnam

Energy firm CNG Vietnam had the biggest change in foreign ownership of the 400 or so companies listed on the stock exchange. In December, foreign firms owned 13.6 percent of the company, however, by May that number had fallen to 5.22 percent.

CNG–which stands for ‘compressed natural gas’–has been a key player in Vietnam’s LPG market. It is, however, branching out into LNG. It has been licensed to transport LNG from the new Thi Vai LNG Terminal to Vietnam’s unfinished Nhon Trach 3 and 4 LNG power plants in Dong Nai. Of note, however, is that these power plants have been delayed by up to six months.

Furthermore, CNG ran into a little trouble in December when it was fined VND 270 million or US$10.6 million for making false tax declarations.

Truong Long Auto & Technology

Japan’s Sumimoto divested its seven percent stake in Vietnam’s automotive giant, Truong Long Auto & Technology, after 17 years. 

Vietnam’s car market has slowed considerably over the last year in line with the economy on the whole. Cars are a luxury item in Vietnam and well beyond the means of most Vietnamese. At the same time, competition is increasing with more cars flowing over the border from China.

It’s also worth noting that Turong Long Auto was fined VND 341.17 million or US$13,402 in January after the Ho Chi Minh City Tax Department discovered the firm had submitted falsified tax documents

Ha Do Group

Foreign traders held 23.69 percent of Ha Do Group in December, however, that fell to 17.52 percent, a fall of 6.17 percent, by May.

Ha Do has its fingers in a few pies but its energy arm has had some well-publicised problems of late. Back in December, the Government Inspectorate identified the Ha Do Hong Phong 4 Solar Power Plant as having been built on a national mineral reserve without the proper permits. This does not bode well for the continued operation of the power plant.

Furthermore, it has been reported that net profit for the firm in the first quarter of 2024 fell by 27 percent against the first quarter of 2023 and this was almost entirely due to lower returns from its energy assets.

PetroVietnam Drilling and Well Services Corporation

PetroVietnam Drilling and Well Services Corporation was 23.59 percent owned by foreign traders back in December but by May this year that had come down to 18.87 percent.

The company, which specialises in the supply of drilling rigs, saw a sharp downturn in profits in the first quarter of this year recording just VND 149 billion in profit compared to VND 207 billion in the fourth quarter of 2023.

Of note, Petro Vietnam Drilling was fined in December almost VND 4.2 billion or US$165,000 for failing to accurately report its taxes.

Thai Nguyen International Hospital

From 44.27 percent foreign ownership in May, Thai Nguyen International Hospital has seen its foreign ownership fall to 39.67 percent.

There are two hospitals in the TNIH ecosystem. One in Thai Nguyen and one in Yen Binh. TNIH also reportedly started construction on a third hospital in Lang Son back in February.

Thai Nguyen International Hospital appears to have had some challenges managing its debts, announcing two weeks ago that it would issue 15.2 million shares to clear a number of outstanding loans.

The broader context

With the stocks recording falls in foreign ownership spread across a range of industries, it’s worth looking at some of the push and pull factors currently influencing investment decisions in Vietnam. 

Firstly, inflation in the United States has seen US interest rates rise. But whereas US interest rates have gone up, interest rates in Vietnam have gone down. With a decent gap between the two, this is pushing up returns on US investments, comparatively speaking, and making the US a more attractive investment option.

Furthermore, wars in Eastern Europe and the Middle East, are creating broader global economic uncertainty and this is seeing investors look for safe haven investments–developed economies, for example, as opposed to riskier emerging markets.

There is also the stronger US dollar. This is weighing on returns for foreign investors looking to repatriate funds in US dollars. That said, the State Bank has been actively intervening to keep the local currency from devaluing too-much-too-fast against the US dollar. Investors from other Asian economies, where central banks have been reluctant to intervene or to a lesser extent, are watching the dong appreciate against their local currencies and for some, this is making it a good time to cash out.

It’s also worth noting that the real estate market is still struggling and this is such a huge part of Vietnam’s economy, that its struggles are having broad carry-over effects into other sectors–see also: Vietnam’s Real Estate Market Recovery 2024: Unpacked.

Finally, Reuters drew parallels last week between changes in Vietnam’s leadership and foreign investor withdrawals from the HoSE. Of course, correlation does not necessarily mean causation, however, it would be unusual if foreign investors were not concerned. The extent of the impact of these leadership changes, in the context of all of the other things going on, is difficult to determine.

With this in mind, it’s not clear that the mass exodus of foreign investors from the Ho Chi Minh City Stock Exchange will end any time soon.

What’s next?

For all the challenges the market is facing it may just mean that a buyer’s market is on the horizon and it could mean broad opportunities for astute and patient investors. Getting started trading stocks in Vietnam can take a bit of work–see: How to Open a Trading Account in Vietnam: Technical Guide 2024.

Furthermore, firms and individuals should remember that Vietnam can be a very dynamic market and the business environment can turn on a dime in just about every sector and industry. With this in mind, traders keen to stay up to date with key developments in Vietnam’s business environment and economy should make sure to subscribe to the-shiv.

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