The Vietnamese stock market has plummeted to its lowest level in four months, yet some Korean funds have managed to maintain positive returns in the first half of the year. Amid margin calls and foreign selling pressure, strategies focusing on large-cap stocks like VIC (Vingroup) and VHM (Vinhomes) have differentiated the performance of two funds managed by Korean Investment Trust Management in Vietnam.
On July 22, the VN Index of the Ho Chi Minh Stock Exchange closed down more than 62 points at 1,668, marking the largest decline since late March and falling below the psychologically significant 1,700 level.
The VN Index has dropped significantly for four consecutive trading days, accumulating a 7.6% decline. Compared to its all-time high of 1,927 points recorded two months ago, the adjustment has reached 13.5%. The total trading value on the Ho Chi Minh Stock Exchange was approximately 23 trillion dong (about $1.68 billion), slightly up from the previous trading day, but buying interest remained weak.
The direct cause of this sharp decline has been attributed to margin calls and the resulting 'forced selling pressure.' Tyler Nguyen Minh Dung, a senior market strategy researcher at HSC Securities, identified the increased volume of forced selling as a primary reason for the drop. He noted, "Selling pressure concentrated between 10:30 and 11:00 AM, and again from 2:00 to 2:30 PM."
Forced selling has spread as declines in certain stocks prompted sales of other holdings. Dung observed that the selling affected speculative stocks, those that had already fallen significantly, and even large-cap stocks that had no apparent negative news. He suggested, "Cross-forced selling may have contributed to the widening adjustment during the trading session."
Truong Quang Binh, head of the Ho Chi Minh branch of ACB Securities, also diagnosed that margin calls and forced selling rapidly exacerbated the index's decline. He explained, "By the end of the second quarter, the balance of margin loans at securities firms had surged to about 450 trillion dong (approximately $25.3 billion), causing investors to feel pressured." Consequently, some investors appeared to have reduced their positions to minimize losses or protect existing gains.
In terms of supply and demand, foreign selling of large-cap stocks has added to the market's burden. On that day, foreign investors net sold approximately 5 trillion dong (about $281 million), marking the largest selling volume in the past month and a half. Stocks representing various sectors, including SSI, ACB, EIB, TPB, and VIB, were among those targeted by foreign sellers.
Binh explained that after funds exited major sectors such as banking, securities, oil and gas, and steel, pressure also mounted on stocks affiliated with Vingroup. Notably, VIC and VHM, which had previously supported the index amid selling in various sectors, accounted for 32 points of the index's decline on that day.
Meanwhile, despite the rollercoaster ride of the Vietnamese stock market in the first half of the year, some Korean-managed funds have reported positive returns. As of June 30, among 15 major foreign investment funds, only three recorded positive returns when converted to Vietnamese dong. Among them, the KIM Vietnam Growth Fund achieved a return of 1.7%, while the KITMC Worldwide Vietnam RSP Balanced Fund posted a 1.5% return.
Both funds are products of Korean Investment Trust Management. The KIM Vietnam Growth Fund invests in leading high-growth companies in Vietnam and maintains a significant allocation to listed stocks. The KITMC Worldwide Vietnam RSP Balanced Fund seeks long-term capital growth by investing in listed companies in Vietnam or those primarily operating in Vietnam, combining both stocks and bonds.
As of mid-July, the KIM Vietnam Growth Fund had net assets of approximately $310 million (about 4.58 trillion dong), while the KITMC Worldwide Vietnam RSP Balanced Fund had net assets of $192 million (about 2.83 trillion dong).
The performance difference can be attributed to their portfolios. As of the end of last month, the KIM Vietnam Growth Fund had the largest allocations in top market capitalization stocks in Vietnam, including VIC, VHM, and VCB (Vietcombank). Among these, the allocations to VIC and VHM were significant, along with holdings in MBB (Military Bank) and CTG (Vietnam Joint Stock Commercial Bank for Industry and Trade). The KITMC Worldwide Vietnam RSP Balanced Fund had a similar composition but with a larger allocation to VIC.
The strength of VIC and VHM has positively impacted the two Korean funds. These stocks have shown triple-digit growth rates over the past two years, leading the VN Index's rise. However, on the day of the sharp decline, these same stocks also faced selling pressure, contributing to the index's drop.
In contrast, other major foreign funds struggled to defend their returns. The JP Morgan Vietnam Opportunities Fund recorded a slight gain of 0.1%, while the Vietnam Enterprise Investment Limited and Vietnam Equity UCITS Fund managed by Dragon Capital reported returns of -3.7% and -6.6%, respectively. The Forum One-VinaCapital Vietnam Fund, part of the VinaCapital group, posted -0.3%, and the VinaCapital Vietnam Opportunities Fund recorded -2.6%, while the Finland-based PYN Elite Fund saw a return of -6.1%.
In terms of long-term performance, both Korean funds have outperformed the market. From December 31, 2019, to June 30, the KITMC Worldwide Vietnam RSP Balanced Fund achieved a return of 122.7%, surpassing the VN Index's increase of 93.6% during the same period, making it the highest among 15 foreign funds. The KIM Vietnam Growth Fund also recorded a return of 101.8% during that time.
* This article has been translated by AI.
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