What Will the Vietnamese Stock Market Look Like in 2025?

21 December, 2024

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Awaiting Domestic and International Signals

Vietnamese economic forecasters predict that the country’s economy will continue to face challenges in 2025 due to changes in the international economic context, which will impact investment opportunities in the Vietnamese stock market during the same period.

The US dollar-dong exchange rate negatively impacted the stock market, prompting consecutive net selling by foreign investors. Photo: LE VU

Dr. Nguyen Tri Hieu, an economic forecaster, predicts that interest rates in the US market will increase, leading to a shift in the Fed’s monetary policy. The cause of this shift is the increasing risk of inflation.

Additionally, the exchange rate has already increased by 4.5% from the beginning of the year until now. According to Mr. Hieu, this rate could rise to 5% for the whole year and then continue to fluctuate upwards, depending on US monetary policy.

Moreover, the new immigration policy will cause a labor shortage in the US market. And the tax reduction policy for the rich will increase the budget deficit.

“This leads to the possibility that the US government will have to issue high-interest bonds to balance the budget. As a result, interest rates in the US market will increase, leading to a shift in the Fed’s monetary policy,” said Mr. Hieu at a workshop on investment opportunities in 2025.

Presenting a softer perspective, Mr. Trinh Ha, a strategy expert at Exness Investment Bank, argued that the DXY index of around 106-107 points reflects investors’ expectations and has been pushed up too high. However, the positive point is that the Fed continues to cut interest rates in 2025.

In addition, the easing of oil and gas extraction measures under the Trump administration could affect the prices of these two products, thereby reducing inflationary pressures to some extent.

“The pace of interest rate reduction may slow down compared to previous forecasts, with the long-term neutral interest rate likely to be between 3% and 3.5%. But if we exclude the year-end seasonal factor and inflation cools down, exchange rate pressure will be somewhat relieved,” said Mr. Ha.

Despite these less optimistic forecasts, experts say that there are still profitable investment opportunities arising from internal factors. Mr. Tran Hoang Son, Market Strategy Director of VPBank Securities Company, assessed that the VNIndex has passed the bottom zone and built a solid foundation around 1,200-1,300 points, despite the pressure of rising exchange rates and consecutive net selling by foreign investors in 2024. Therefore, the market is entering an accumulation phase and waiting for a breakthrough moment thanks to the following driving forces: the growth of profits of listed companies; attractive valuation; and investment capital flow to catch the ‘wave’ of market upgrade.

According to Mr. Son, the total revenue and profit of the whole market in the first nine months of 2024 increased by 10% and 21%, respectively, compared to the same period in 2023. Notably, the high-profit growth of the non-financial group reflects a significant change in the business context, along with the recovery of the economy.

“The profit picture for 2025 is still expected to be favorable. With a profit growth rate of about 25-30%, the economic recovery trend will be a driving force for the growth of various sectors,” said Mr. Son at the VPBank Securities Talk 4 on the afternoon of December 16.

In addition to profits, the forward P/E and P/B ratios of the VNIndex are currently at attractive levels compared to the 10-year average, which is also a driving force for capital inflows into the market. Specifically, the market valuation is still much more attractive than the MSCI Emerging Markets and some countries in the region. Meanwhile, Vietnam’s ROE is among the highest ROE countries, and its P/E is also attractive.

“The current P/E of VNIndex is 14.9 times, lower than the 10-year median of 16.6 times. Vietnam is at an attractive level for a new growth cycle. With the forecast of profit recovery, reasonable valuation is still the basis to attract capital to participate in the stock market,” Mr. Son expected.

Besides the above two factors, the prospect of upgrading the Vietnamese stock market is also a bright spot in 2025. Accordingly, capital inflows will increase again in the second half of 2025 – the time when the market is about to be upgraded, triggering capital disbursement from both domestic and foreign blocks.

With these factors, the market liquidity in 2025 is expected to be more than VND 23,000 billion/session, and the VNIndex is forecast to fluctuate around 1,341 points, and may reach 1,419 points in an optimistic scenario.

“In the period of late 2024 – early 2025, the market is expected to continue to move horizontally due to low liquidity and net selling by foreign investors. The trough months could be April, May, and June, creating conditions for investors to allocate capital,” said Mr. Son.

Choosing Profitable Stocks Based on Sector Stories

Sharing about investment opportunities in the new year, Mr. Barry Weisblatt David, Director of the Analysis Division of VNDirect Securities Company, said that the National Assembly’s target of 8% growth in 2025, while the consumption sector – contributing 60% to GDP – has not recovered as expected, will affect investment opportunities in many stock industry groups. However, if the public investment disbursement reaches 100% of the plan, stocks of enterprises related to public investment such as HHV of Deo Ca or ACV will benefit.

The CCP mechanism is expected to help the Vietnamese stock market thoroughly solve the pre-funding problem and upgrade the market. Illustration: Dung Minh.

Regarding the banking group – which accounts for more than 40% of the total market capitalization, Mr. Nguyen Tu Anh, Director of the Center for Analysis and Economic Forecast, Central Economic Committee, said that excluding the group of 5 banks under special control, the bad debt ratio on the balance sheet of the whole industry is about 1.96%. If we add the VAMC debt and potential risky debt (according to the calculation method of the State Bank – PV), the bad debt ratio is about 3.28%.

“With this level of bad debt and the rapid credit growth rate, the banks with quite low bad debt ratios have good credit quality, which is the basis for credit growth in 2025,” predicted Mr. Tu Anh.

In addition, Mr. Tu Anh said that the bad debt ratio of retail banks would be higher than usual, but at the current ratio, the credit quality is still quite good.

“Investors may be concerned about the net interest margin (NIM) in the context of increasing capital mobilization demand, leading to higher mobilization costs. But many banks have promoted digitization, helping to maintain the minimum capital adequacy ratio (CAR) at a good level, and NIM will improve, for example, VPBank. Moreover, with the scale of economic growth according to the target to 2030, banks will have to undertake a larger task of capital supply. Wise investors can take advantage of this opportunity,” said Mr. Tu Anh.

Mr. Barry Weisblatt David assessed that the possibility of Vietnam being upgraded in terms of national credit rating is an important factor to consider. According to Fitch and S&P, borrowing costs could fall by 2% if Vietnam’s credit rating is upgraded to investment grade.

“Fitch and S&P assess that Vietnam’s fiscal foundation is very strong. But the CAR in the banking sector has not yet complied with Basel III standards, along with the incident at SCB. Therefore, improving the CAR is very important, especially for the group of state-owned banks,” said Mr. Barry Weisblatt David.

Van Phong