The Vietnamese stock market has reached a new high

The Vietnamese stock market is approaching historical record highs, driven by optimism from the country's large-scale reforms and trade agreements with the United States.

So far this year, the Ho Chi Minh Stock Index has risen 19%, significantly outperforming its Southeast Asian peers. Analysts point out that Vietnam is implementing unprecedented strong reforms, with a positive economic outlook and highlighted investment value. Currently, the benchmark stock index is less than 2% away from the historical high set in January 2022.

According to media reports, the Vietnamese government is advancing the largest administrative reform in decades, aiming to streamline the bureaucracy, with Prime Minister Pham Minh Chinh striving to achieve an economic growth target of over 8% this year. The trade agreement with the United States has significantly reduced tariffs on Vietnamese goods from 46% to 20%, eliminating important barriers for the market.

As previously reported by Xinhua News Agency, U.S. President Trump announced a trade agreement with Vietnam, stating that all Vietnamese exports to the U.S. would face at least a 20% tariff and that the U.S. would "fully open its market."

Additionally, foreign investors net purchased $411 million in Vietnamese stocks in July, marking the second month this year of net capital inflow, while funds were flowing out of Malaysia, Indonesia, and the Philippines during the same period. If FTSE Russell upgrades Vietnam to emerging market status, the stock market is expected to receive further boosts.

Reform Drives Growth Expectations

The Vietnamese government is cutting red tape and unnecessary costs, redirecting funds towards development projects, which is part of its goal to achieve high-income status by 2045.

Tyler Manh Dung Nguyen, Chief Market Strategist at Ho Chi Minh City Securities Company, stated:

"We have never seen such strong reforms in Vietnam. I will increase my allocation to Vietnam as these changes begin."

According to data from the General Statistics Office of Vietnam, the economy grew by 7.52% in the first half of this year, with manufacturing surging as the main driver, as foreign buyers rushed to complete purchases before U.S. tariffs increased.

Clear Trend of Foreign Capital Return

These pro-growth policies are attracting investors back to the Vietnamese market, reversing last year's trend of a net withdrawal of $3.18 billion by global funds.

Foreign investors net purchased $411 million in Vietnamese stocks in July, marking the second month this year of net inflow, while simultaneously selling Malaysian, Indonesian, and Philippine stocks.

Large companies such as Vingroup JSC, Vietnam Joint Stock Commercial Bank for Industry and Trade, and Hoa Phat Group have become the biggest gainers in the index this year, as investors bet they will be major beneficiaries of the country's strong growth.

Christopher Leow, CEO of Singapore's Singhaiyi Group, stated:

"We became more optimistic starting in May, as considering about 15% expected earnings growth and a 10x price-to-earnings ratio by 2026, valuations are starting to look attractive."

Index Reclassification May Bring Capital Inflow

Investors expect FTSE Russell to potentially reclassify the Vietnamese market as early as September, with the index compiler estimating that this move could attract up to $6 billion in capital inflow This will bring another round of boost to the Vietnam benchmark index.

However, Vietnam's growth prospects still face some uncertainties. The potential slowdown of the global economy in the second half of the year may pose a drag, and the uncertainty surrounding the 40% tariff imposed by the U.S. on goods transshipped through Vietnam also puts pressure on local businesses.

According to a previous article by Jianwen, Trump stated on social media that Vietnam agreed that goods from other countries, which are transshipped through Vietnam and ultimately exported to the U.S., will be subject to a 40% tariff by the U.S. side.

Nevertheless, the reasons for being bullish on Vietnam remain compelling. Johannes Loefstrand, a portfolio manager at T. Rowe Price managing frontier market funds, stated:

"Vietnam's global prominence lies in the fact that it is almost impossible not to become a larger economy, with investment capital returns far exceeding those of many other countries."

Risk Warning and Disclaimer

The market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk