After average liquidity, which includes both order-matched and put-through transactions, on all of Vietnam’s three bourses dropped 28.9 percent year-on-year in value and 15.9 percent in volume in 2019, analysts at FiinGroup expect cash flow to return to the market this year.

Stable macro-economic indicators and the current low valuations of stocks will likely bring in more foreign capital, while international funds and speculative investors are likely to follow suit, given the prospects of Vietnam being upgraded from frontier market to "emerging market" status by American finance company MSCI, the firm's analysts said in its latest report.

Stock prices are currently at a low level compared to returns, with the overall price-to-earnings ratio (P/E) of Vietnam’s stock market at 15.5, equivalent to Vietnam’s P/E when the stock market boomed in mid-2017, they noted.

The VN-Index, which represents stocks on the Ho Chi Minh Stock Exchange (HoSE), had surged 48 percent in 2017. HoSE, home to most large- and mid- cap stocks, amounts to around 90 percent of the market cap for all listed companies in the country.

Average liquidity in 2019 was VND4.7 trillion ($202.6 million) per trading day, the lowest level in the last three years.

The FiinGroup report said low foreign cash flow was a main factor in last year’s liquidity drop. Over the whole year, foreign investors net bought VND7.3 trillion ($313.75 million) worth of shares on all exchanges, the lowest net buy in the past three years, of which VND5 trillion ($214.9 million) alone were of VIC shares of Vingroup, Vietnam’s biggest private conglomerate.

And VIC achieved a foreign net buying status thanks to a major acquisition deal in May, when South Korea’s SK Group forked out around $1 billion for a 6.15 stake in the conglomerate.

With indirect investment in Vietnam in 2019 estimated at over $2.7 billion, low net trading on the stock market indicates that foreign cash flowed into other channels such as government bonds, corporate bonds or private investment deals, the report said.

Another major factor was the lack of investment opportunities on the stock market. Last year, there were no major initial public offerings (IPO) of private companies or equitization of state-owned enterprises.

Out of the VND73.4 trillion ($3.17 billion) public companies raised from the stock market this year, VND56.8 trillion ($2.45 billion) was raised through private placements, while IPOs only raised around VND600 billion ($25.9 million), much lower than VND73.7 trillion ($3.18 billion) in 2018 and VND32.4 trillion ($1.4 billion) in 2017, the financial consultancy noted.

Vietnam has two major stock exchanges: HoSE and the Hanoi Stock Exchange (HNX) which is home to mid- and small caps and accounting for around 10 percent market cap of listed companies. The Unlisted Public Companies Market (UPCoM), a market with lower disclosure requirements, aims to encourage private companies to trade shares publically with a view to going public on the official exchanges later.