The Vietnamese stock market has swiftly rebounded and reclaimed the 1,300-point mark after taking a significant hit due to tariff-related news from the US. However, the market continues to fluctuate around this level, despite numerous positive domestic developments, including robust GDP growth, low-interest rates, and Resolution 68 on private economic development, which provides a significant boost to the economy.
Meanwhile, the new KRX technology system has been successfully implemented, and an upgrade is on the horizon. So, what kind of impetus does the market truly need to surpass these levels and reach new heights as it has done in the past?
In a recent ‘Phố Tà i ChÃnh’ talk show, Ms. Tran Thi Khanh Hien, Director of Research at MBS, shared her insights. She attributed the challenge faced by the economy today to external uncertainties, particularly the Trump administration’s tariff policies and the retaliatory measures taken by China and the EU, which have cast a shadow on the economic outlook of developing countries, including Vietnam.
The most evident signs of this are the sharp decline in our PMI to 45.6 points in April and the contrasting FDI trends, with disbursed FDI increasing while registered FDI plummeting by 24% year-on-year, indicating the hesitation of global manufacturers amid the tariff storm. These points underscore the difficulties that the domestic economy will likely face in the latter half of 2025.
In fact, Vietnam’s stock market performance in May fared better than its regional peers, with the VN-Index climbing nearly 6% year-to-date, outpacing Singapore’s 3% and China’s meager 0.4% gains. Thailand and Malaysia’s stock markets, on the other hand, suffered double-digit losses of over 10% since the beginning of the year.
Given its nature as an emerging market with a significant proportion of individual investors, the Vietnamese stock market is inherently less resilient and more susceptible to external shocks, as evidenced by the April 2nd tariff announcement. However, it has demonstrated impressive recovery since then, surging over 20%, outperforming many other markets.
This recovery showcases the market’s potential for growth, and it is worth noting that during periods of trade war tensions, investment funds tend to gravitate towards a select few leading stocks with strong fundamentals and limited exposure to external factors. This dynamic explains the recent concentration of investment flows into a handful of robust sectors rather than a broad market rally.
The successful implementation of KRX and the anticipated upgrade by FTSE have been reflected in the market’s performance. As mentioned earlier, the VN-Index staged an impressive recovery, surging over 20% since the global tariff shock on April 2nd, outpacing the gains of Thailand and Malaysia, which only rose by nearly 10%. Additionally, since the launch of KRX, the VN-Index has climbed 100 points, with average trading liquidity surpassing 24 trillion VND per session. These factors attest to the market’s inherent strengths and resilience.
Nevertheless, the stock market remains apprehensive about tariff-related developments, trade tensions, monetary policies, and exchange rate dynamics.
In the coming weeks, the US is expected to finalize bilateral trade agreements with key partners like Japan, South Korea, and India, and potentially Vietnam. However, given the current US administration’s approach, these agreements may be subject to change. Additionally, monetary policy faces a new challenge as the Fed grapples with the dilemma of lowering interest rates, while Vietnam and other emerging markets maintain their accommodative monetary stance.
This situation exerts pressure on Vietnam’s exchange rate, with the USD retaining its weak position, yet the rate has climbed nearly 2%. The market will struggle to break free unless these concerns are alleviated.
“In my view, for the market to truly break through, we need to address the underlying tensions surrounding tariffs. Although there have been encouraging signs of tariff negotiation progress between the US and Vietnam, these remain speculative at best. Official announcements will be the much-needed catalyst to boost market sentiment,” emphasized Ms. Hien.
Furthermore, the anticipated upgrade to emerging market status by FTSE in September, if realized, would be a significant positive development, particularly in attracting foreign investment back into the market. Foreign investors have already started to return, evident in their net buying of nearly 500 billion VND worth of stocks in the past month.
It’s also worth noting that Vietnam’s stock market is heavily influenced by the real estate sector, and positive developments in addressing legal hurdles and unblocking capital for this industry will contribute to the revaluation of listed real estate stocks, attracting investment flows and propelling the VN-Index forward.
However, risks remain. Interest rates are the most sensitive factor for the stock market. The “stagflation” scenario in the US economy, characterized by rising inflation and weak growth, may hinder the Fed from lowering interest rates anytime soon. Currently, the market anticipates two rate cuts by the Fed this year, and any deviation from this expectation may trigger a negative response.
