Vietnam Stocks Near Record on Reform Hopes, Trade Deal Optimism
The government is undertaking its biggest administrative overhaul in decades to shrink bureaucracy as Prime Minister Pham Minh Chinh pushes for more than 8% economic growth this year. A trade deal that cut US tariffs on the nation's goods to 20% from 46% in April also clears an overhang for the market.
The moves have driven a 19% rally in the Vietnam Ho Chi Minh Stock Index this year, putting the market well ahead of its Southeast Asian peers. More gains could follow if Vietnam secures an upgrade to emerging-market status by FTSE Russell.
'Never before have we seen such strong reforms in Vietnam,' said Tyler Manh Dung Nguyen, chief market strategist at Ho Chi Minh City Securities Corp. 'I would allocate more in Vietnam right at the beginning of these changes.'
The government is cutting red tape and unnecessary costs to redirect funds to development projects, part of its aim to achieve high-income status by 2045. Its pro-growth policies are luring investors back to the country, reversing sentiment after global funds withdrew a net $3.18 billion from local stocks last year.
Foreign investors bought $411 million of Vietnamese shares on a net basis in July, the second month of inflows this year, while selling their holdings in Malaysia, Indonesia and the Philippines. Conglomerate Vingroup JSC, lender Vietnam Joint Stock Commercial Bank for Industry and Trade and Hoa Phat Group JSC are among the biggest gainers on the index this year as investors bet on major beneficiaries of the country's strong growth.
The economy expanded 7.52% in the six months through June, according to Vietnam's statistics office, supported by a surge in manufacturing as foreign buyers raced to avoid higher tariffs on sales to the US.
'We became more positive since May as valuations started to look compelling given the forecast earnings growth of about 15% and price-earnings multiples of 10 times in 2026,' said Christopher Leow, chief executive officer at Principal Asset Management in Singapore.
Investors are expecting a FTSE reclassification of Vietnam's market to take place as soon as September, which the index compiler projects may draw up to $6 billion in capital inflows. That would give another boost to the benchmark, which is less than 2% away from its all-time high in January 2022.
To be clear, Vietnam's growth outlook remains clouded by a potential slowdown in global growth in the second half of the year. Uncertainty over a 40% US tariff on goods deemed to be transshipped through the Southeast Asian nation also weighs on local businesses.
Still, the bullish case for Vietnam is hard to ignore.
'What makes Vietnam stand out globally is that it's almost inconceivable it won't become a much bigger economy' and returns on invested capital are much higher than in many other countries, said Johannes Loefstrand, portfolio manager at T. Rowe Price who manages a frontier markets fund with its largest allocation in Vietnam.
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