The Vietnamese stock market is on the brink of change as hopes rise for its inclusion in global Exchange-Traded Funds (ETFs) by March 2026. This anticipated inclusion is expected to attract significant foreign investment to the Vietnamese markets, propelling its upward momentum as the economy navigates complex international trade dynamics.
Nguyen Duc Hoan, General Director of ACB Securities, forecasts increased global capital flows as the macroeconomic environment shifts dramatically by 2025. He outlines potential challenges arising from international trade tensions and inflation risks as the U.S. Federal Reserve holds its interest rates steady, which could have broad repercussions for global markets and particularly for Vietnam.
The Vietnamese economy, which relies heavily on its export-import ratio (approximately 30% of GDP), stands to be affected significantly if it finds itself facing higher U.S. tariffs due to its considerable trade surplus. Should Vietnam be categorized alongside nations like Canada, Mexico, and China, its goods may encounter additional barriers, hampering exports to the U.S.
Yet, there exists optimism. If Vietnam successfully balances its trade surplus with the U.S. through imports of LNG, aircraft, chips, and more, the country may stay clear of severe tariff repercussions. Hoan asserts, “Despite the global tension, if Vietnam can achieve equilibrium through strategic imports, it can advantageously position itself against competitors, especially China.”
Hoan's insights shed light on several sectors poised for growth: industrial real estate, port infrastructure, and construction. He claims, “The textile, tra fish, and wooden export sectors have opportunities to capture market share from China, even if they are not on the forefront of the U.S.’s reshoring initiatives.”
While global challenges loom, Vietnamese stocks have their eyes firmly set on the goal of international market upgrade. It has been seven years since Vietnam was placed on FTSE's “watch list” for potential reclassification as an 'emerging market.' By the end of 2024, regulatory measures (specifically Circular 68) will assist foreign institutional investors by alleviating non-prefunding constraints.
The implementation of these measures, set to take effect on November 2, 2024, is seen as pivotal for Vietnam to meet necessary qualifications for potential upgrade. Hoan expects the stock market upgrade to become official with a 99.99% probability occurring within 2025, with decisions anticipated from FTSE during its review periods in March and September.
“The chances are high for Vietnam being upgraded this year, especially with the September review offering a more definitive decision,” Hoan stated. Should this upgrade occur, it will mean Vietnamese equities become part of the global ETF indices by March 2026.
Historically, many markets have experienced sharp rises from six months to one year prior to officially gaining their upgrade status. Therefore, 2025 is expected to be exceptional for investors, encouraging accumulation of stocks likely to benefit from this transition, especially those with larger market capitalizations.
ACB’s projections for 2025 suggest substantial growth, with total after-tax profits for listed companies expected to rise by 15-16%. The banking sector is predicted to experience growth of 14.9%, even as the net interest margin (NIM) anticipatedly compresses to maintain credit growth.
Notably, sectors involved with infrastructure, construction materials, ports, and residential real estate are expected to exhibit even more impressive profit increases. With these developments, market sentiments remain bullish, showcasing Vietnam’s resilience amid broader macroeconomic uncertainties.
With all these dynamics intertwined, foreign investors are watching closely. The shift could mark the beginning of substantial changes, highlighting Vietnam as not only a market to watch but as one to engage with actively over the coming years.