2025 a turning point for Vietnam stock market: broker

Vietnam's stock market has struggled to capture the attention of both domestic and foreign investors in recent months, reflected by persistent foreign capital outflows and a steady decline in market liquidity, but next year will be a turning point for the market, says Chen Chia Ken, CEO of Phu Hung Securities JSC.

Although the VN-Index, representing the Ho Chi Minh Stock Exchange (HoSE), has increased nearly 8% from the end of 2023, foreign investors have continuously been net sellers with total net value reaching billions of US dollars.

Since the start of 2024, they net sold over VND84.6 trillion ($3.33 billion) on the HoSE, with some particularly heavy sell-off sessions like the one on October 29 with VND5.2 trillion ($204.68 million).

At the Pho Tai Chinh (The Financial Street) talkshow on Monday, Chen pointed out that despite facing challenges from the complex global economic landscape over the past year, Vietnam has still showed its internal strength, with policies aimed at boosting economic growth.

He expressed optimism that the country's economy will see further improvement in 2025, with the potential for an upgraded stock market status from “frontier” to “emerging” that could attract foreign capital flows back.

However, he noted that Vietnam’s stock market growth has been relatively modest compared to major global indices, with the S&P 500 up 24%, the Nikkei 225 17.7%, and the Hang Seng 20.5%. The trend of shifting cash flows to developed markets and technology stocks have been evident in 2024.

Chen identified several key challenges facing the Vietnamese market, starting with liquidity and capital flow within the economy. Since April 2023, foreign investors have net sold in 19 out of 20 months, totaling approximately $4.4 billion. This trend has occurred amid rising exchange rates and widening interest rate differentials between the USD and the VND.

Another issue is the lack of new investment opportunities for foreign investors. Restrictions on foreign ownership and the unfinished state-owned enterprise divestments have limited the market’s appeal.

Meanwhile, domestic individual investors have not been injecting as much capital as before. Despite a rise in new individual trading accounts, data shows that investor deposits at securities companies have declined for two consecutive quarters.

“The increase in bank deposit rates, coupled with a resurgence in traditional investment channels like real estate and gold, means that capital previously flowing into stocks is now being diverted,” he added.

Another challenge, the CEO noted, lies in the investor structure. The majority of daily trading on the Vietnamese stock market comes from individual investors, who tend to be more reactive to market news and easily influenced by emotions.

This is reflected in the VN-Index’s struggle to break through the psychological barrier of 1,300 points, with many investors opting to lock in profits when the index neared this territory, further stalling market momentum.

In contrast, institutional investor participation remains limited. Although the number of exchange-traded funds (ETFs) has increased in recent years, they have not yet reached widespread popularity among Vietnamese individual investors.

2025 and the return of foreign capital

Despite the current challenges, Chen remained optimistic about the Vietnamese stock market’s future, particularly in 2025.

He said next year will be a turning point for the country’s stock market, given efforts by the State Securities Commission to address the issue of market upgrading, including the amendment of the securities law. The pre-funding requirement for foreign investors has recently been removed. These moves, he believed, will pave the way for an eventual upgrade to emerging market status.

“If interest rates in developed countries decrease more rapidly in 2025, it will likely prompt foreign investors to turn to emerging markets with strong growth prospects, like Vietnam,” he said. “Additionally, the government’s plans to accelerate the equitization and divestment of state-owned enterprises will provide a significant boost to the market, thus drawing back foreign capital.”

Chen held that once Vietnam achieves emerging market status, several sectors will become particularly attractive to foreign investors. The banking sector, in particular, is expected to draw significant attention as it plays an important role in the economy, with a large size and high liquidity. The real estate and consumer sectors are also poised for growth, supported by the expansion of the middle class and rising per capita incomes.

The securities industry is also set to benefit, as increasing foreign participation and higher liquidity will provide a direct boost to brokerage firms, expanding their services and increasing revenue from brokerage and investment advisory.

Finally, the technology sector, especially with the boom in AI, also presents many new development opportunities. In markets that have been upgraded such as Qatar, Pakistan, and most recently Kuwait, these sectors have attracted large foreign capital flows and become prominent fields in the market, he added.

The VN-Index on Tuesday lost 0.98% to close at the intraday low of 1,205.15 points as foreign traders extended their selling spree. Volume was moderate, with 511.89 million shares worth VND13.25 trillion ($521.55 million), compared to 642 million shares valued at VND15.38 trillion on Monday.