Talking Shop

(31-01-2008)

Shrinking foreign investors’ heads

by Le Lan Huong

Although foreign investor transactions make up only about 10-20 per cent of daily stock market trades, they have a huge influence on domestic investors’ psychology.
Viet Nam News spoke to Thomas Ngo, director of Indochina Capital, one of the leading foreign funds in Viet Nam, to find out what drives the investment decisions of foreign investors.

How do you see the current state of the Vietnamese stock market?

The stock market is in an early stage of development, and we should see the current development within the big picture. We are very encouraged by the amazing development of Viet Nam’s stock market in 2007 and very positive about it in 2008.

The ups and downs of the market reflect many things: economic outlook, investor confidence, government economic measures and global stock market trends.

Authorities have pledged measures to help develop the securities market. What do you think?

At this point, we fully understand the Government’s caution about the stock market and the need to balance its development with overall economic development. We believe that, in the long run, the market will control and manage itself.

What advantages do institutional investors and management funds have over individual domestic investors?

Experienced investors have clearer, longer term perspectives. They look at the market strategically, using numerous methodologies to analyse market trends and make decisions based on that analysis.

Individual investors are easily influenced by a "sheep" mentality, driven by rumours and short-term perspectives. But that’s changing. Don’t forget that the Viet Nam stock market is only a couple of years old. Individual investors are learning, and they are learning quickly.

In watching the market, we see that foreign investors’ actions frequently run counter to those of Vietnamese investors. For instance, domestic investors have seen Government moves to support the market as positive signs and have bought in, but foreign investors at the same time have tended to sell out? What gives sway?

Again, we need to look at the bigger picture. There are many things that influence foreign investor decisions to buy in or sell out, not just Government actions. Their decisions reflect an overall analysis by investors about market trends, and sometimes it is a short-term business solution. And I can tell you, the decision is not always right laughs.

Domestic investors tend to follow the big investors. What do you recommend?

My advice is: make your own decision. The stock market has room for everybody. You need to set clear investment objectives and use many tools to make your own decision. Look at what the major investors are doing, but make your own decision.

Major institutional investors often wait for IPOs by major State-owned enterprises but, when the IPOs roll around, they don’t bid all that much. The transaction volume lags behind their financial capacity. Why is that?

There is big potential in equitised State-owned enterprises, and we have been very encouraged by the successes of past IPOs by the likes of Vinamilk and REE. Indochina Capital was actively involved and secured equity in those SOEs. When looking at whether to buy into an IPO, investors look at their potential, the market trends, corporate governance and, most importantly, value-added things the company brings. Investment volume reflects investors’ overall take on the value of that particular SOE. — VNS