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Foreign capital will be the driving force for stock market in 2011   2011-01-06 - Dau tu

With the strong demand, the capital flow from foreign investors can help drive the domestic capital to the stock market in 2011, experts say.

 
According to the HCM City Stock Exchange (HOSE), in December 2010, foreign investors made the biggest net purchase volume of the year. They purchased 172 million shares and fund certificates, while they sold 116 million. As such, the net purchase of foreign investors in December alone reached nearly 60 millions units. If calculating the value of the purchased and sold shares, foreign investors purchased more than seven trillion dong worth of shares and sold more than 4 billion dong worth of shares, which means the net purchase value of three trillion dong, the highest net purchase value in 2010.

Economists believe that the demand from foreign investors may continue increasing in the first months of 2011. It is because Vietnam’s stock prices, though having increased recently, remain relatively low compared with the stock prices in other regional countries.

Le Xuan Nghia, Deputy Chair of the National Finance Supervision Council, also said that the stock prices in Vietnam are relatively low in comparison with the prices in the world, which is the main factor attracting foreign capital in the first months of 2011.

Another factor that has big impact on the stock prices, according to Nghia, is the interest rate. It is expected that the interest rates will go down by the first quarter of 2011. Meanwhile, in accordance with the economic laws, the interest rate decrease will help raise stock prices.

Commenting on the strength of the foreign capital flow in the first months of 2011, other economists also believe that the capital flow will be satisfactory, because the macroeconomic difficulties will be removed. Especially, in the last few months, the foreign capital has been running to Vietnam’s stock market with the average disbursed capital of one million dollar a month, while the trend of disbursement increase will continue in the time to come. This is believed to serve as the important driving force for the stock market, because this will positively affect the decisions by domestic investors.

This will prompt domestic investors to return to the stock market after a long period of sitting idle, when the market was gloomy.

Andy Ho, Director of VinaCapital, an investment fund management company, said that if compared with other regional countries, the investment capital volume in stocks in Vietnam is still lower, therefore, there is still room for the foreign capital to flow to Vietnam.

In fact, foreign capital began flowing to Vietnam in 2010, but at a moderate level, because investors still had worries about the high inflation rate (11.75 percent in 2010 vs 6.5 percent in 2009), the unstable local currency and pessimistic assessments about Vietnam’s investment environment made by international credit rating firms.

However, the shortcomings are believed to be settled soon thanks to the Government’s efforts. Once the factors such as the inflation rate, exchange rate, and interest rate return to the normal track, the foreign capital flow will serve as the strong driving force for the bounce back of the stock market.



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