Foreign money flow has emerged as an undeniable factor in the development of the Vietnamese stock market. With considerable influence, foreign investors play an important role in shaping the development of the stock market.
I. What is foreign block?
What is foreign block? Foreign investors, an indispensable term in the stock market, refer to investors from other countries participating in transactions in the Vietnamese stock market. These can be individuals or organizations that register to open a securities account to buy and sell stocks and other financial products.
Data about Foreign trading activities are monitored and aggregated separately, with regulations on stock ownership limits in the Vietnamese market.
Examples of foreign block members include investment funds such as BlackRock, Vanguard, Fidelity, investment banks such as Goldman Sachs, Morgan Stanley, insurance companies such as AIA, Manulife, and multinational corporations such as Samsung, LG, Toyota, Honda. These are important partners and have influence on the trading situation and fluctuations of the Vietnamese stock market.
2. What are the characteristics of foreign investors?
The foreign block transactions on the Vietnamese stock market is quite active and under the strict control of the State and the law. So what are the characteristics of What is foreign block?? Here are some of the highlights:
- Foreign investors are not just a part of the Vietnamese stock market, but also a force strongly influenced by global economic events and market cycles.
- Foreign trading activities often reflect fluctuations in the world economy, with strong buying at the beginning of the year and increasing selling at the end of the year. In particular, during the period from September to October each year, foreign investment funds often restructure their investment portfolios.
- The assessment from MSCI – Morgan Stanley Capital International also plays an important role, as a basis for foreign investors to make decisions about investing in the Vietnamese stock market.
- Importantly, foreign investors often have much larger capital resources than domestic investors, allowing them to engage in large transactions and have significant influence on market movements.
- Foreign investment psychology are often influenced by information from the US and international stock markets. Their analysis and understanding of the market are often highly regarded.
- In addition, foreign transactions tend to be independent of the domestic market. When stock prices tend to fall, domestic investors often sell off, while foreign investors tend to buy. This creates a balancing and stable factor for the Vietnamese stock market.
3. Foreign block transactions
Activities of foreign block can affect the performance of the Vietnamese stock market in many different ways based on many different classifications. So the transaction classifications What is foreign block?Below are 2 main foreign block classifications you can refer to:
○ Foreign net buying:
Concept Foreign net buyers simply means that foreign investors are placing more buy orders than sell orders. This action not only creates positive sentiment but also promotes the overall development of the Vietnamese stock market.
To determine whether foreign investors are net buyers or not, we compare their buying and selling volumes over a period of time. If the buying volume is greater than the selling volume, we say that foreign investors are net buyers. Conversely, if the selling volume is greater than the buying volume, it is called a net foreign seller.
○ Foreign net selling:
Foreign net selling is when foreign investors place more sell orders than buy orders. This is often considered a negative sign for the market, as it reflects foreign investors' concerns about the economic prospects of Vietnam or of businesses here.
There are many reasons for this phenomenon, including:
- Economic instability or recession: When the economy is in trouble, foreign investors are often concerned about the ability to recover capital and profits. This can lead to net foreign selling.
- Poor business results and low growth prospects of enterprises: If businesses do not have good business results, foreign investors may worry about the profitability of their investments. This also contributes to the phenomenon of foreign net selling.
- Attractive investment opportunities in other markets: When other markets have more profit potential, foreign investors may move their capital to those markets. This may also cause foreign investors to net sell in the Vietnamese market.
4. What is the impact of foreign investors on the Vietnamese stock market?
Foreign block plays an important role and has a significant influence on the Vietnamese stock market through the following ways:
- Stock price: With large investment scale, foreign investors can strongly influence stock prices in the market. Net buying activities of foreign investors often increase stock prices, while net selling activities can push prices down.
- Impact on liquidity: Foreign participation also affects market liquidity. When foreign investors participate heavily in trading, market liquidity increases. Conversely, when foreign investors withdraw from the market, liquidity often decreases.
- Impact on investor psychology: Foreign activity can cause psychological fluctuations in the domestic investor community. When foreign investors are net buyers, domestic investors often feel optimistic and may increase their purchases. Conversely, when foreign investors are net sellers, domestic investors often feel worried and may increase their sales.
Thus, foreign investors are not only a part of Vietnam stock market but also an important factor influencing its development and fluctuations.
Source: Onstocks
