(Bloomberg) — Foreign investors are scaling back their positions after Vietnam’s record stock rally, pulling out an unprecedented amount of money from the market.
Global funds sold a net $1.5 billion worth of local shares in August, the biggest monthly outflow in Bloomberg-compiled data going back to 2009. The benchmark VN Index was little changed on Wednesday after traders returned from a holiday.
“This was largely driven by profit-taking after the steep rally and concerns over an unfavorable exchange-rate outlook,” said Tyler Manh Dung Nguyen, chief market strategist at Ho Chi Minh City Securities.
Vietnam’s stock gauge has surged 33% so far this year, outperforming Southeast Asian peers amid optimism over the economy and a potential market upgrade. But elevated valuations and currency pressures are prompting foreigners to scale back, putting the market on track for its third year of outflows.
Analysts expect the local currency to weaken further after hitting a record low, with MUFG Bank forecasting the dong to hit 26,500 per dollar by year-end due to rising import demand and a narrowing current-account surplus.
The local currency traded 0.1% lower against the dollar early Wednesday.
Still, the market remains supported by domestic flows, according to Nguyen Anh Duc, head of institutional brokerage at SBB Securities. Improving corporate earnings also provide solid fundamental support.
The outflows appear concentrated, with around 13 trillion dong ($493 million) of net outflows from Vingroup shares alone last month, said Bloomberg Intelligence analyst Sufianti. “Most emerging markets also saw outflows, it doesn’t seem to be a country specific thing.”
