HÀ NỘI – Vietnamese shares may remain volatile this week as foreign investors continue to withdraw from local stocks on the review of foreign investment funds’ portfolios and expectations of a US interest rate hike this month.

“The stock market will likely suffer a strong decline this week as exchange-traded funds (ETFs) review their investment portfolios, which will change the market’s demand and supply,” Nguyễn Ngọc Lan, head of brokerage division at Agribank Securities Co (Agriseco) said.

The two largest ETFs in Việt Nam, FTSE Vietnam ETF and VNM ETF, will reduce their ownership in many large-cap stocks to purchase more of dairy firm Vinamilk’s shares.

On Saturday, VNM ETF decided to add shares of Vinamilk to its third-quarter portfolio. VNM ETF will purchase 4.3 million shares of Vinamilk worth US$27.56 million.  In the Saturday statement, VNM ETF also said that it would remove PetroVietnam Transportation Corp (PVT) and Sài Gòn-Hà Nội Bank (SHB) from its third-quarter investment.

“The decisions would help Vinamilk attract foreign investments, but reduce those in other companies among the top ten largest listed firms such as Vietcombank, consumer goods producer Masan Group and steel maker Hòa Phát Group,” Lan said.

Vinamilk could rise, however its sole efforts would not be enough to drive the market up as other blue chips mentioned above could fall.

“Therefore, the supporting level of 660 points for the VN Index is quite slim and easy to be broken if the market sees big changes in supply and demand.”

The benchmark VN Index on the HCM Stock Exchange on Friday inched up 0.1 per cent to finish at 666.88 points, edging up total 0.8 per cent after two days. The southern market index declined by 0.3 per cent from the previous week.

The HNX Index on the Ha Noi Stock Exchange closed down 0.3 per cent on Friday at 84.47 points. The northern market index was bumpy last week but able to rise 0.5 per cent after five trading days.

Market volatility last week was very much attributed to foreign selling. Foreign investors last week recorded a net sell value of more than VND1 trillion ($47.5 million).

Vinamilk (VNM) was the worst-hit stocks under strong selling pressure. VNM fell more than 7.1 per cent over a week.

“Foreign net selling is not something we should worry about,” Agriseco’s senior analyst Nguyễn Ngọc Lan said, adding that “It is just the re-arrangement of the cash flow.”

“Investment funds have withdrawn from local stocks as they may look forward to coming initial public offerings (IPO) of big companies such as Vietnam Engine and Agricultural Machinery Corporation (VEAM) and the Vietnam Glass and Ceramics for Construction Corporation (Viglacera).”

“Meanwhile, the expectation of a US interest rate hike this month have also motivated foreign investors to reduce their ownership in local firms,” Lan said.

Market analysts and investors have forecast an interest rate increase made by the US central bank at the meetings on September 20 and 21, and the expectation has been bolstered by recent reports on the US banking sector’s rising lending rates, proving that businesses are becoming stronger.

Such an expectation has given more power to the US dollar against local currencies, including the Vietnamese đồng. Việt Nam’s central bank raised the daily reference mid-point rate for VND/USD trading to VND21,932 at the end of last week, an increase of VND7 from the previous one.

Strong selling also resulted in higher trading liquidity last week. More than 154 million shares were exchanged in each session last week, worth VND3.38 trillion. The figures were higher than the previous week’s. – VNS