An investor watches stock indices on an electrical board. The capital flow into the Vietnamese stock market in September continued to be significantly influenced by the global trend. VNA/VNS Photo

The orientation of foreign capital flows pouring into Việt Nam is heavily influenced by global factors.

Thái Thi Việt Trinh, an expert from SSI Securities Company, said that the capital flow into the Vietnamese stock market in September continued to be significantly influenced by the global trend.

Around the world, cash flow into financial assets continued to decline as investors reduced the proportion of risky assets in their portfolios. Market sentiment did not improve in September, with major central banks such as the US and EU emphasising the pursuit of tight monetary policy with the central goal of controlling inflation, Trinh said.

In September, foreign investors net sold on the Vietnamese stock market, with a total value of VNĐ3.5 trillion (US$144.9 million), the highest level since March this year. Foreign capital flow had been less positive since the second half of August, and was similar to the movements of foreign investors in the region; except Indonesia, thanks to the advantage of exporting raw materials. As for 9 months and excluding sudden transactions, foreign investors net bought VNĐ2.5 trillion.

Besides external risks, internal factors that have a negative impact on market sentiment were becoming more obvious, such as slowing GDP growth or the State Bank’s continuing to raise interest rates to stabilise the exchange rate environment, said SSI Securities Co.

According to Petri Deryng, Founder and Director of PYN Elite Fund, there is still demand to pour capital from investors in Thailand and other Asian countries, but it is not significant. If the market is upgraded, foreign investors can participate more in Việt Nam.

He said that the Vietnamese market would still remain promising next year and be one of the most potential markets in the world. If the market is upgraded, more foreign investors could enter the market, which would be beneficial for the market in the long run.

In terms of global investment cash flows, SSI maintained a cautious view on the allocation of capital flows to financial assets, especially to equity funds, until the Fed meeting in November.

Although stock prices have reached low levels, the sentiment of the market will only become more positive if inflation decreases continuously, while the Fed's monetary policy management becomes looser in nature.

At the moment, SSI had not observed a big change in market sentiment. Similarly, equity inflows into emerging markets would be strongly influenced by the direction of the dollar, and there would be no breakthrough in inflows into emerging market for the rest of this year.

Analysts of VNDirect Securities also said that in the context of the Fed sending signals that the interest rate hike cycle might not be over soon, cash might still outflow from risky assets and markets; including the Vietnamese stock market.

Mirae Asset Việt Nam Securities Company recommended investors be aware of pressures from the world that may negatively affect the growth and stability of the Vietnamese economy. In September, the USD/VNĐ exchange rate increased by approximately 1.9 per cent compared to the previous month. These external pressures might indirectly cause foreign investors to be net sellers in the near future.