2024 was another record year for foreign investors to sell Vietnamese stocks. This move took place in the context of frontier markets (including Vietnam) and emerging markets being less attractive than developed markets.
According to data from Fiintrade - Fiingroup's stock trading analysis platform, in 2024, foreign investors net sold a total of more than VND93,000 billion (USD3.7 billion) of Vietnamese stocks, of which net sales on HoSE were about VND90,000 billion, nearly 4 times higher than in 2023.
Thus, in the 5 years since the COVID-19 pandemic appeared, foreign investors have net sold a total of 167,200 billion VND, nearly double the value of their net purchases in the previous 13 years (2007 - 2019).
Fiintrade noted that this net purchase value only counts secondary transactions (not including primary transactions through private placements or equity issuances of listed enterprises).
Therefore, on December 31, 2024, the foreign investors' ownership ratio of domestic stocks fell to the lowest level in the past 10 years at 12.8% on the 3 exchanges and 16.8% if only calculated on HoSE.
Previously, the foreign investor ownership ratio on HoSE reached its highest level of 21% in early February 2020.
Entering the early stages of 2025, foreign net selling will still dominate due to exchange rate pressure and high expected profits in developed markets such as the US.
However, experts believe that foreign capital will soon return to Vietnam in the context of low valuations and positive impacts from market upgrades.
In the process of implementing solutions to upgrade the market, the Ministry of Finance issued Circular 68/2024/TT-BTC dated September 18, 2024, removing the requirement to have sufficient funds before making a purchase transaction by foreign institutional investors, and at the same time providing a roadmap for listed and registered enterprises to disclose information in English.
Circular 68/2024/TT-BTC takes effect from November 2, 2024, so the market upgrade is expected to take place at the next assessment in 2025.
FTSE Russell is expected to include Vietnam in its emerging market list in September 2025, while MSCI may make a similar assessment a year later.
KBSV Securities Company expects that the Vietnamese market will be upgraded according to FTSE Russell's assessment in September 2025 and officially added to the FTSE emerging market index basket in 2026, thereby bringing positive impacts on foreign capital flows into the Vietnamese market.
According to KBSV's estimates, after the upgrade, Vietnam can receive about VND36,000 billion in foreign capital from ETF funds simulating the FTSE emerging market index (about 1.5% of the total asset size of these ETF funds) and about VND100,000 billion in capital from passive and active funds with portfolios selected in the FTSE emerging market basket (about 1% of the total asset size of these funds).
Meanwhile, capital flows from active investment funds are expected to increase 4-5 times compared to present, as Vietnam becomes a potential and safer market in the eyes of foreign investors.
Historically, upgrades have attracted large inflows of both domestic and foreign capital; stock indices have shown positive movements starting on average 6 months before the upgrade.
Therefore, VN-Index has a high probability of attracting cash flow and performing more positively from March 2025, thanks to upgrade expectations.
