Korean investors rush to buy Vietnam stocks

South Korean investors are rushing to buy Vietnamese stocks as the market is showing signs of a recovery. Analysts predicted export-oriented shares in the Southeast Asian country to benefit more from a global economic recovery in the second half.

South Korean investors last week purchased a net $20.3 million worth of VFMVN30 exchange traded fund (ETF) listed on the Ho Chi Minh Stock Exchange, according to the Korea Securities Depository’s (KSD) data on Aug. 11.

The ETF, which tracks the performance of the VN-30 Index, a basket of the 30 largest stocks by market capitalization and liquidity on the exchange, was the No. 3 top pick among South Korean investors last week and the only non-US name in the list of the 20 most favorite securities during the period.

The Vietnamese stock market had declined as the government tightened social distancing measures to curb a resurgence in the COVID-19. The benchmark VN-Index on July 2 hit a record close of 1420.27, but lost 14.2% in the following 11 sessions. The index, however, recovered from July 26, rising 7.4% in the 12 sessions.

“Market sentiment picked up as the Vietnamese authorities’ steps eased the spread of the COVID-19,” said Kim Dong-hyun, a deputy director of Korea Investment Management Co.’s global management unit in Seoul. “The government’s support to reduce the COVID-19’s impact improved the sentiment further.”

Vietnam’s new infection cases dropped to 3,964 as of 6 pm local time on Aug. 11 from a record high of 9,690 on Aug. 8, according to the country’s health ministry. The Southeast Asian nation has forced about a third of its cities and provinces to impose restrictions on movement and suspension of some business operations, foreign media reported.

HIGHER RETURN

Over the past week, the average return of 22 Vietnamese equity funds in South Korea stood at 3.6%, more than a triple of the average 1% of global equity funds. A return of Vietnamese funds so far this year was 34.3%, far exceeding the average 12.1% of global funds.

The second-half outlook on the country’s stock market was bright as an increased liquidity from the government and the central bank support was expected to accelerate an economic growth.

The central bank is closely monitoring the economic situation and will “adjust its policy rates timely when needed,” although it has no imminent plan to cut the rates to support the economy, its deputy governor Dao Minh Tu said on Aug. 10 in a statement.

The State Bank of Vietnam cut the rates three times last year.

Write to Hyeong-Gyo Seo at seogyo@hankyung.com
Jongwoo Cheon edited this article.