Banking stocks to gain as Vietnam market nears status upgrade: experts

Banking stocks are set to benefit the most from the impending upgrade of Vietnam’s stock market to “emerging market” status, with an influx of foreign investment and heightened market activity in the near future, experts say.

At a recent working session with the State Securities Commission in Hanoi, FTSE Russell praised Vietnam’s continued efforts to meet the criteria for an upgrade, while Morgan Stanley noted that once upgraded, the Vietnamese market could attract as much as $800 million from passive investors using FTSE indices and up to $2 billion from other passive investors using alternative indices.

With the market upgrade, active funds are also expected to invest between $4-6 billion in Vietnam, further boosting stock market liquidity and driving up value in certain sectors.

At a Saturday talk show titled “The Financial Street”, experts said that among sectors set to benefit from this shift, banking stocks were leading the charge. The sector, which represents around 35% of the market capitalization on the Ho Chi Minh Stock Exchange (HoSE), is widely seen as the backbone of Vietnam’s economy.

Phan My Hanh, product center director at private lender VPBank, highlighted the growing attractiveness of banking stocks, especially in the context of the anticipated upgrade.

“The banking sector is the largest contributor to the stock market's total capitalization. Experts have forecast banks to remain on a strong growth trajectory in the fourth quarter and the whole year of 2025. This will have a positive impact on the stock market,” she noted.

Furthermore, with the State Bank of Vietnam (SBV) maintaining a stable monetary policy to foster credit growth. the banking sector can attract foreign investment inflows, she added.

Other factors to drive further growth in the banking sector include gradual recovery of the corporate bond market and liquidity support for real estate companies.

Moreover, the SBV and commercial banks are at the forefront of trends like digital transformation, pursuing the ESG (environmental, social and governance) strategy and adopting international practices in corporate governance.

“These priorities, combined with a stable economic environment and government support, will help the banking sector grow even stronger in the future,” Hanh said.

Echoing her, Phan Dung Khanh, investment advisory director at Maybank Securities, said banks should focus on improving technology applications and offering customer-friendly financial products.

In a recent report on the banking sector, broker Saigon Securities (SSI) stated that although the economy was recovering gradually, credit demand remained slow and uneven, particularly in the retail sector.

In this context, many banks have launched low-interest loan packages, but credit growth was only improving towards the end of the month or quarter, making minimal contributions to interest income.

Additionally, banks were struggling to raise lending rates due to increasing competition while deposit rates were trending upward again. In some cases, banks have had to restructure repayment schedules to align with customers' financial capacities.

Given lower-than-expected net interest margins (NIM), SSI has adjusted its pre-tax profit growth forecast for banks in 2024 from 16.9% to 13.3% over the previous year.

Next year, the broker expects banks to have more opportunities to increase lending rates and catch up with the rise in deposit rates. While interest rate competition will continue, it will be less intense. The sector’s 2025 pre-tax profit is predicted to increase by 17.9% year-on-year.