KIS Securities observes that monetary policies from the Fed are still creating short-term pressure on the market as the Fed maintains high-interest rates and is forecasted to cut rates only once or twice in 2025. This keeps the yield on the 10-year US Treasury bond likely to hover around 4.3-4.5%, reducing the appeal of equities relative to bonds and thus putting pressure on global capital flows.
The Fed remains committed to high-interest rates with a predicted one to two rate cuts in 2025.
Additionally, trade tensions between the US and other countries, particularly China, are impacting Vietnam. The imposition of high retaliatory tariffs (46%) could significantly affect export activities if Vietnam fails to reach a trade agreement with the US. According to KIS Securities, this factor may influence the growth rate of the Vietnamese economy in general and the stock market prospects in particular. However, internal factors can compensate for these pressures.
Firstly, KIS Securities believes that monetary easing policies can positively impact the economy. Accordingly, the State Bank of Vietnam (SBV) is pursuing a flexible and growth-supportive monetary policy throughout 2024-2025. The operating interest rates are at historical lows. The refinancing rate is currently maintained at 4.5%/year, and the rediscount rate is at 3.0%/year from late 2023 to early 2025. The SBV has also consistently lowered lending rates, reducing the lending interest rate by approximately 1% compared to the end of 2023. As a result, businesses have easier access to cheaper capital, stimulating production and trade. Maintaining low-interest rates is currently a positive factor supporting the stock market, reducing listed companies’ capital costs and making term deposits relatively less attractive compared to equity investments.
Public investment is expected to be the most critical growth driver in 2025.
Moreover, promoting public investment disbursement is considered crucial at this stage. Public investment is likely to be the most important growth driver in 2025 to compensate for the challenges in exports. In the first five months, budget investment capital was estimated at VND 221 trillion, accounting for 24% of the 2025 plan and a substantial increase of 17% compared to the same period last year. Hanoi led the way with a 41% increase, followed by Ho Chi Minh City with a 14.3% rise.
Chart: State Budget Investment in the First Five Months of 2025. Source: GSO, KIS
Attractive Valuations Will Boost the Stock Market
Although the VN-Index is trading around its highest level in 2025, KIS Securities still believes that the market valuations are attractive. Firstly, the forward P/E 2025 is estimated at only about 10 times, significantly lower than Vietnam’s 5-year average P/E (12 times) and usually below 11 in the past three years. This level is even equivalent to the March 2020 bottom when the market was affected by the COVID-19 pandemic. Within Southeast Asia, this forward P/E is the lowest compared to Singapore (12 times), Thailand (13 times), the Philippines (10 times), Indonesia (11 times), and Malaysia (13 times).
Additionally, the market upgrade prospect will attract new capital inflows. The current goal of the Vietnamese stock market is to be announced for an upgrade by FTSE Russell in September 2025, with implementation from 2026. To achieve this goal, a series of market infrastructure reforms have been synchronously implemented, such as the Ministry of Finance issuing Circular No. 68/2024/TT-BTC – a significant step in removing obstacles for foreign investors. FTSE Russell highly values this move, helping Vietnam meet seven out of nine criteria for the FTSE upgrade. Furthermore, the operation of the new KRX trading system (in cooperation with South Korea) from May 5, 2025, enhances the market upgrade prospects. Specifically, the KRX system brings new features to the Vietnamese stock market, approaching international practices: intraday trading (T+0), controlled short selling, shortened settlement cycles, and enabling the deployment of new products such as options. These efforts will promote the market upgrade in September 2025. Once upgraded, new foreign capital will flow into the Vietnamese stock market.
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