Strategy Report

Vietnam’s growth story remains intact, but the source of growth is changing. Rather than relying on exports, consumption, or a favorable global cycle, growth is increasingly being driven by domestic investment, infrastructure development, institutional reform, and capital-market deepening. The widening trade deficit should therefore be viewed less as a sign of weakness and more as the import footprint of a country expanding its productive capacity.

The deeper story of 2026 is that Vietnam is becoming increasingly focused on building its own growth engine. Across infrastructure, housing, capital markets, SOE reform, and administrative simplification, policymakers are shifting from short-term demand management toward expanding long-term productive capacity. Public investment, FDI attraction, deregulation, and legal reforms are increasingly working toward the same objective: lowering the cost of doing business and increasing the economy’s ability to absorb capital.

This philosophy is perhaps most visible in financial markets. Vietnam’s market-upgrade story is evolving beyond the traditional focus on FTSE or MSCI classification decisions. The more important development is that policymakers are increasingly focused on making Vietnam genuinely investable—through higher free float, SOE divestment, deeper capital markets, improved settlement infrastructure, better governance, stronger investor protection, and a growing pipeline of investable assets. In this sense, market upgrade is becoming less about receiving a classification and more about building the conditions that justify one.

The same principle extends to sovereign credibility. Infrastructure reforms, PPP restructuring, fiscal discipline, legal execution improvements, and efforts to resolve long-standing project bottlenecks all strengthen the country’s ability to attract long-term capital. Sovereign ratings, like equity market classifications, are ultimately outcomes rather than objectives. The objective is to create an economy that global investors can deploy capital into with confidence.

We recently had a lively discussion with several new clients on the AI Reset theme — especially around whether Vietnam can realistically compete in an AI-driven productivity race dominated by the US and China. That debate prompted us to map out our thinking in a short text-only thematic report, “Vietnam's AI Overlay: Reform as the anchor, AI as the upside,” which is attached for your reading.

Our core view is simple: Vietnam does not need to win the race to build AI to benefit from it. The more relevant investment question is which companies can use available technology to strengthen their existing business — improving efficiency, customer monetisation, risk selection, logistics, or market share. In other words, Vietnam’s AI story is best understood as an overlay to the broader structural reform and market-upgrade case.

Vietnam’s equity market entered 2026 with strong momentum, approaching our base-case target of 1,920 early in the year before experiencing a March correction. The pullback was primarily driven by profit-taking, rising domestic interest rate concerns, and heightened geopolitical uncertainty. We view this volatility as tactical rather than structural, with the medium-term outlook supported by a set of reinforcing catalysts.

1. Strong Macro Growth Ambition

Vietnam’s targeted 10% GDP growth trajectory signals a clear shift toward a higher-growth economic model. Accelerated infrastructure investment—across transport, energy, and urban development—is expected to drive both near-term demand and long-term productivity gains, providing a robust foundation for sustained corporate earnings expansion. GDP grew an estimated 7.83% YoY in Q1 2026 (vs. 7.07% in Q1 2025); stronger momentum from Q2 onward is needed to meet the full-year target.

2. Relative Attractiveness vs. Other Asset Classes

As property and gold markets show signs of cooling and regulatory tightening continues in crypto markets, domestic liquidity is likely to rotate back into equities. Concurrently, a strong IPO pipeline—including Highlands Coffee, CP Vietnam, and Dienmayxanh—is expected to broaden market depth and support trading activity.

3. FTSE Russell Emerging Market Upgrade – A Structural Catalyst

Vietnam remains on track for potential FTSE Emerging Market reclassification in 2026, with estimated passive inflows of approximately USD 1.7 billion from global ETFs. These inflows are expected to be phased over multiple quarters, supporting orderly market absorption. Historical precedents indicate meaningful medium-term upside post-upgrade, despite the likelihood of short-term volatility.

2026 Outlook & Risks

Vietnam’s stock market outlook for 2026 is positive, supported by a 10% GDP growth target, large-scale infrastructure investment, pro-growth and prudent monetary policy, and attractive equity yields relative to other asset classes. Key investment themes include banking, consumption recovery, construction materials, SOE restructuring plays, and a potential rebound in IT. However, risks remain, including limited room for further monetary easing, property market pressure following sharp price increases, and volatility from rising margin lending levels. Despite these challenges, structural reforms and strong domestic fundamentals provide a solid foundation for continued market growth.

Vietnam’s Growth Playbook for 2026

Vietnam enters 2026 with strong momentum, targeting 10% GDP growth as a new five-year cycle begins. This phase shifts from credit-driven growth to execution-led drivers: record infrastructure investment, robust FDI, services normalization, and a consumption rebound fueled by tax incentives and rising incomes. Fiscal space is ample, but execution efficiency will be key.

Macro stability is intact, risks are manageable, and disciplined implementation—not stimulus—will define success. For equities, the VN-Index could hit 2,120 (~18.8% YoY) under our best-case scenario.

Vietnam’s equity market entered 2025 with renewed strength and rising optimism, standing at the threshold of a new growth cycle. VN-Index has climbed 55% from its April 2025 trough and is on track for its third consecutive year of gains. The transition from post-crisis rebound to sustainable expansion is now well underway, supported by robust domestic participation, improving liquidity, and tangible progress in institutional reforms.

We maintain our VN-Index target of 1,800 for 2026, reflecting both fundamental and valuation-driven upside. At a forward P/E of 12x for 2026, the market continues to trade below its 10-year average of 14x and at a deep discount to prior bull-market peaks of 15–16x. This valuation backdrop, coupled with an improving earnings trajectory and growing foreign investor interest, leaves room for continued re-rating.

Macroeconomic momentum remains a key anchor. Vietnam’s economy is projected to sustain high growth under the government’s new 2026–2030 development plan, targeting double-digit annual GDP expansion. Structural reforms spanning capital market development, digital transformation, and infrastructure upgrade will reinforce the private sector’s role as the main growth engine. Meanwhile, the expected global monetary easing cycle should relieve exchange-rate pressure, helping the State Bank of Vietnam maintain a favorable interest rate environment and credit growth.

The market upgrade story adds another structural tailwind. Vietnam’s reclassification into emerging market by FTSE Russell, and eventual alignment with MSCI Emerging Market standards, could channel an estimated USD 1.6 billion in passive ETF inflows right from October 2026, with significantly more from active managers. This milestone marks not just capital inflow potential, but Vietnam’s arrival on the global investment stage.

Vietnam is accelerating capital market reforms to align with international standards and strengthen its case for FTSE Emerging Market upgrade. Recent policy moves—including the launch of the KRX trading system, adoption of the Non-Prefunding model, and streamlined account-opening — are complemented by Decree 245/2025, a landmark revision of Decree 155. Together, these measures enhance transparency, broaden market access, and modernize infrastructure, laying the foundation for stronger IPO activity and deeper market development. 

The government's issuance of Decree 245/2025, which revises Decree 155/2020, marks a pivotal step in advancing Vietnam’s capital market reform agenda. This comprehensive regulatory overhaul is designed to enhance transparency, expedite the listing process, strengthen investor protection, and align market practices with international standards—supporting Vietnam’s strategic objective of attaining emerging market status. Importantly, this ambition extends beyond the initial upgrade, with continued efforts aimed at sustaining secondary emerging market classification and progressing toward inclusion in the FTSE Advanced Emerging Market and MSCI Emerging Market indices.

In our August Strategy Note titled “Hope in the Heat: Positioning amid Optimism”, we maintain our expectation that the VN-Index will advance toward the 1,750–1,800 range in 2026. This growth trajectory is underpinned by a robust recovery in corporate earnings, supported by several key drivers:

1. A clear rebound in both the real estate sector and public investment.
2. Interest rates remain at favorable levels, facilitating the return of capital flows to the market.
3. Easing tariff-related risks, which help improve investor sentiment.
4. Most notably, the anticipated market upgrade in October is emerging as a critical catalyst.

We continue to forecast full-year 2025 market-wide NPATMI (Net Profit After Tax of Parent Company Shareholders) growth at 13.8%, implying a 15.5% year-over-year increase in the second half — subject to minor adjustments following the earnings season. In terms of valuation, the forward P/E has risen from 8.8x (April 9) to 13.2x (August 15), yet remains well below the historical peak range of 15–17x observed in previous growth cycles.

Nearly two weeks after the report’s release, the VNIndex has surpassed the 1,600 level. Since the beginning of the year, this index has increased by 28.7%, with the average trading value of the HSX alone increasing sharply by 21% over the same period to 25 trillion VND/day, of which the average liquidity in the first half of the third quarter reached 40 trillion VND/day, more than double the average level in the period 2024 - first half of 2025. This has prompted investor inquiries about the sustainability of the recent rally. While we see no immediate reason to revise our outlook, this is an opportune moment to take a deeper dive into this heated topic from multiple perspectives.

Vietnam enters the second half of 2025 with renewed momentum, underpinned by resilient domestic demand, robust public investment, and accelerating institutional reforms. GDP growth in H1 reached 7.52%-the highest first-half performance in 15 years—driven by manufacturing, consumption, and infrastructure-led investment. While external uncertainties persist, particularly around trade protectionism and geopolitical tensions, Vietnam’s economic trajectory remains firmly on an upward path.

The macro landscape is defined by stability and strategic ambition. Inflation remains contained, credit growth is healthy, and fiscal performance is strong. The government’s commitment to streamlining legal frameworks and empowering private sector participation—through Resolution 68 and landmark legislative reforms—signals a shift toward more agile and inclusive governance. The reciprocal trade framework with the U.S, with targeted support measures from the government and diplomatic engagement helping to mitigate risks for foreign and domestic investors.

Vietnam’s capital markets have responded positively, with the VN-Index rebounding 28% from its April low and liquidity surging on the back of retail investor confidence and low interest rates. The anticipated FTSE upgrade to emerging market status in October 2025 could unlock significant foreign inflows, reinforcing valuation appeal and sector re-rating potential. Key structural drivers include earnings growth in banking and property, digital asset innovation, and the rollout of the KRX trading system.

Sector outlooks are broadly constructive. Banking is transitioning from margin pressure to performance, aided by credit quota reform and NPL resolution. Retail and consumer staples are benefiting from regulatory formalization and VAT incentives. Residential property, construction, and materials are supported by the removal of legal bottlenecks in real estate projects, the acceleration of infrastructure disbursement, and favorable interest rates. Industrial parks face short-term leasing headwinds but remain strategically positioned for long-term FDI inflows. Technology and telecom are anchored by AI and data center expansion, though sentiment remains cautious.

Looking ahead, Vietnam is entering an acceleration phase—not merely recovering, but redefining its growth model. With reform engines firing and digital transformation gaining altitude, the country is preparing to scale new heights. The countdown is over; Vietnam is not just aiming for growth—it is rocketing toward transformation.

Today, the US President announced a long-awaited tariff plan to address "unfair trade practices." This plan includes a universal baseline tariff of 10% and a discounted reciprocal tariff for specific trading partners (Vietnam: 46%, China: 34%, Japan: 24%, EU: 20%).There might be some exclusions, like steel/aluminum, autos/autos parts, copper, pharma, semiconductors, lumber articles, bullion, energy, certain mineral…etc. 

We believe that the reciprocal tariff (which replaces the baseline tariff) acts as a ceiling rate and serves as a starting point for negotiations. However, it is cumulative to the current punitive rate. For example, for China, the total tariff would be 54% (current 20% plus 34% reciprocal tariff). Canada and Mexico are exempt from this tariff for now. The effective dates for the baseline and reciprocal tariffs are April 5th and 9th, respectively.

The Vietnam stock market upgrade to emerging markets might grace headlines again, as the 2025 Interim Update Announcement will be published on Apr. 8th, 2025. What we can say is that in theory, Vietnam meets all the requirements after introducing the Non-Prefunding Solution (NPS) last year (with one failed trade having occurred). Anyway, in practice, concerns over a standardized procedure or a consistent mechanism in NPS would be a must. There are a couple of concerns that we noted earlier: (i) mixed settlement cycles; (ii) need to conduct additional transaction in case of cross-backs from the designated broker, as investors prefer to keep it to 1 transaction; (iii) Credit limits provided, list of stocks available for NPF are inconsistent across securities firms, and can create unfairness in the market; (iv) “name and shame” approach in failed trade cases are unencouraging and should be abolished, and (v) last but not least, need for foreign ownership limit improvements. 

SSI recently hosted the first webinar in the "Gateway to Vietnam" series for 2025, focusing on the global economic landscape and its impact on Vietnam. The discussion provided insights into geopolitical shifts, economic policies, and Vietnam's strategic position in the evolving global market.

For the background, recently, President Trump imposed new tariffs on Canada, Mexico, and China for non-economic reasons, such as homeland security and health concerns. In response, Canada agreed to stricter border controls while China announced higher tariffs on U.S. goods.

The panel was hosted by Thomas Nguyen (Chief Global Markets Officer, SSI) and included speakers such as Frank Kelly (Founder and Managing Partner, Fulcrum Macro), Eva Yi (Chief Economist, Huatai Securities), and Hung Pham (Chief Economist, SSI).

In the webinar, panelists expressed optimisim and opportunities for Vietnam in Trump 2.0 presidency term, given the strategic position of Vietnam as a connecting country to benefit from both US and China relationships. The key growth drivers for Vietnam in 2025 remains consumption recovery and public investment, with the government setting ambitious double-digit growth target in a favorable case scenario.

With both positive global opportunities, strong domestic growth momentum and potential market status upgrade by FTSE, we remain positive for Vietnam market as a whole, with VN-Index 2025 target of 1,450 points at the end of 2025, in line with forecasted NPAT growth of 16.4% YoY for the stock under our coverage.

From our vantage point, 2025 looks to be a year of catalysts that unfold: would-be growth events that have been pent up after so much waiting and longing for changes that have created past concerns and doubts about the capability of Vietnam to address the key economic issues at hand.  To that end, the new leadership has been tasked with the challenge of reviving an economic growth supercycle to test their mettle. In an interview on the last day of 2024, the General Secretary of the CPV To Lam mentioned that the country is now stepping into a new era: the era of the nation’s rise.  The top priority in this new era is to successfully achieve the strategic goals, turning Vietnam into a developing nation with a modern industrial base and upper middle-income by 2030. 

The new era means that we might need to prepare for the Unexpected.  The reforms that are being implemented starting from late 2024, including the Vietnamese government’s comprehensive institutional reform, determination in accelerating public investment in infrastructure, and removing the painful issues in the property sector, if successfully navigated, are the three domestic variables that can be uncoiled to spring forth growth in our view.  The country is in need of capital for its overarching development plan charted out for the next 5 years, and we believe these are shaping the foundation for the stock market to spring forth in 2025.

Following the 2 big themes mentioned above, our Top 10 calls for 2025 include HPG, MWG, FPT, DPR, CTD, NT2, CTG, TCB, ACV and KDH.

Given the SSC chairwoman in the most recent conference hinted for a potential implementation of KRX in 2025, the report pointed out a comparison of KRX and current trading platform.

We emphasize the superiority of the KRX trading system over the medium and long-term to cater to all the needs for Vietnam’s capital market development though at the beginning, we do not expect there will be a lot of advance technology from the KRX system to apply, but rather more of basic stock trading application.

There are still some difficulties which in turn might result in delays for KRX implementation, including the longer time for testing and incorporating this new system to market

Another question is on whether the KRX system implementation might affect on the FTSE Russell upgrade decision or not. KRX is just an extra bonus in the eyes of an FTSE evaluation, rather than a critical deciding factor.

Following the introduction of Circular 68/2024 on non-prefunding solutions for foreign institutional investors (FIIs), investors have positively received the regulatory change with a moderate usage, accounting for about 35% of foreign buying transactions and no failed trade reported.

The practical use of NPS are to reduce funding burdens and possible FX risks while there are still some difficulties regarding paperwork procedures, communication issues and capacity usage.

FTSE Equity Country Classification Advisory Committee is scheduled to meet in January 2025 and in our best-case scenario, FTSE could announce the possible inclusion in March 2025, with actual implementation potentially starting in September 2025.

SSI recently hosted a webinar titled “Gateway to Vietnam: China’s Stimulus – Flows and Fundamentals” to analyze the fundamentals of China’s stimulus package and its impact on global liquidity, particularly in Vietnam. The panel featured Thomas Nguyen (Chief Global Markets Officer, SSI), Phat Cao (Director of Sales and Trading, SSI), Ning Ding (Executive Director, Huatai Securities USA), and Xiaoyu Chen (Huatai Financial Holdings).

Summary of China’s Stimulus Package:

• Reserve Requirement Ratio (RRR) Cut: The People’s Bank of China (PBOC) reduced the RRR, injecting one trillion RMB into the market.
• Mortgage Rate Reduction: Existing mortgage rates were cut by 50 basis points, increasing disposable income for Chinese citizens.
• Innovative Programs: Introduction of a 300 billion RMB relending program and a 500 billion RMB swap program, with potential for expansion.