20160513_BSC_Market Insights_EN_P-Notes_Lesson from History

Net Buy of Foreign Investors during the period 2009-2010
As reported in the last Market Insight, we have mentioned the fact that P-Notes
and ETF funds have operated in Vietnam for a long time,  however, they only
caught  attention  from  the  market  recently.  From  late  2009  to  2010,  Foreign
Investors  held  net  buy  position  for  15  months  in  row  with  trading  value
amounting to VND 18 000 billion  in total. In order to assess the  activities of Pnotes and  ETF, we have summarize the net purchase of foreign investors in
2010,  which  was  the  first  time  that  the  term  P-notes  and  ETF  spreaded  in
Vietnam market.

Assessment on foreign capital inflows
Compared with the report we published 10 days ago, foreign capital has  lifted
VN-Index over 600 pts, close to the strong resistant area 615-620.
Tracking  buying-in  activities  of  foreign  investors,  we  continue  to  maintain  a
positive view on P-notes capital flows, however, its effect on the market rally is
diminishing due to domestic investors’ cautious view and short-term pressure
from taking profit. Some assessments on foreign capital inflows into the market:
•  During  2  periods  that  P-notes  engaged  strongly,  Foreign  Investors  held  a
significant long position on large-cap stocks, especially on banking and oil and
gas stocks.
• Foreign net buy  amounted to only about 3%  -  5% of the whole market, and
the net accumulated net buying  trading was not large enough to cause strong
market  volatility  occurs  when  capital  was  withdrawn.  Moreover,  withdrawal
mechanism  of  P-Notes  also  didn’t  happen  as  fast  as  the  ETFs,  which  can
impose negative effects on the market.
•  Foreign  investors  tend  to  withdraw  capital  from  regional  countries  after  2
months of net buying (March and April). Will this inflow end soon,  following the
common trend in region? It is difficult to answer this question because there are
no effective tools to forecast the buying-in activity of P-Notes.
Foreigners  are  holding  net  buy  position  on  shares  of  BCs  that  support  VNIndex to create a new peak for the year, and to test the historical peaks in 2015
at  615  and  638  pts.  If  net  buying  activity  persists,  the  VN-Index  will  rise  in
suspicion and many investors will feel unhappy because their portfolios don’t
consist of BCs.