Foreign Investors' Net Sales Cause Stock Market Correction Amid Escalating Dollar Prices

Explore the influence of foreign investors' net sales on the stock market amidst the continuous surge in dollar prices. Analyze the market correction and its repercussions on specific stocks, shedding light on investment strategies moving forward.

Impact of Foreign Investors' Net Sales

Understand the influence of foreign investors' net sales on the stock market amid escalating dollar prices.

Foreign investors' net sales has had a significant impact on the stock market, particularly in the context of the continued dollar price escalations. The pressure created from these sales has resulted in a market correction and dampened investors' enthusiasm.

The net sales figures from foreign investors for the previous week stand at an impressive VND2.147 trillion at the HCM City Stock Exchange (HOSE). This surge in sales has triggered major portfolio restructuring of the top three ETFs on the bourse.

To put into perspective just how influential these net sales can be, several key shares such as HPG of Hoa Phat Group, STB of Sacombank, and SHB of Saigon-Hanoi Bank witnessed substantial selling volumes of VND709 billion, VND378 billion, and VND212 billion, respectively. 

Exchange Rate Factors as Key Driver

Examine the role of exchange rate factors and its influence on the withdrawal of foreign capital.

Analysts have pointed out that the selling pressure mainly originates from foreign investors due to escalating exchange rates. The dong/dollar exchange rate started escalating in April, triggering a change from net purchases to net sales by foreign investors. 

From April to September, an estimated VND13.16 trillion worth of foreign capital has been withdrawn from HOSE, with net sales amounting to VND3.456 trillion in the first half of September when exchange rate pressure was at its peak.

This trend of net sales among foreign investors coincides with capital withdrawal from significant ETFs since the beginning of the year, resulting in VND7.2 trillion in total net sales. Consequently, these withdrawals take place amidst rising exchange rates and diminishing investment advantages of holding Vietnamese stocks compared to the strong dollar. 

Calming the Storm: Stabilizing Measures

Explore techniques and measures adopted by stakeholders to stabilize the exchange rate amidst volatile foreign cash flow.

Though the exchange rate performance has raised concerns regarding foreign cash flow in the stock market, experts argue that the fluctuations aren't necessarily alarming. 

Mainly attributed to differences in authentic and black market exchange rates, the recent rise in dollar prices aligns with variations in VND and dollar interest rates as well as short-term enterprise demand. 

Expert opinions indicate that there is no cause for major concern; above all else, the robust position of the State Bank of Vietnam (SBV) serves to stabilize the exchange rate. With increased forex reserves, a healthy supply of foreign currencies from FDI, and a trade surplus, the SBV has ample tools to control and regulate the exchange rate. 

Conclusion

The recent trend of foreign investors' net sales in the stock market has created a correction primarily driven by the escalating dollar prices. The pressure from these sales has calmed the market's excitement and prompted investors to reevaluate their strategies.

The exchange rate performance, heavily influenced by seasonal factors and divergent monetary policies, has led to net sales by foreign investors and the subsequent withdrawal of capital from significant ETFs. However, experts reassure that the fluctuations are not a cause for major concern.

Stakeholders, particularly the State Bank of Vietnam, possess viable tools and measures to stabilize the exchange rate. With increased forex reserves, foreign currency supply through FDI, and a trade surplus, the market remains resilient and equipped to weather the storms that arise with international capital flows.

FQA :

How has foreign investors' net sales influenced the stock market?

Foreign investors' net sales have significantly affected the stock market, leading to a market correction and decreased investor enthusiasm due to the continuous rise in dollar prices.

What factors contribute to the withdrawal of foreign capital?

Fluctuations in the exchange rate, particularly the appreciation of the dollar, have influenced foreign investors' shift from net purchases to net sales. The withdrawal is also impacted by significant ETFs restructuring and diminishing investment advantages in Vietnamese stocks compared to the stronger dollar.

How is the exchange rate being stabilized amidst volatile foreign cash flow?

Stakeholders, including the State Bank of Vietnam, are implementing various measures to stabilize the exchange rate. These include leveraging forex reserves, a healthy supply of foreign currencies from FDI, and a trade surplus, giving stakeholders better control over the exchange rate and providing a sense of stability in the market.

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