Earnings strength meets market consolidation

Global appetite for emerging markets is still cautious, constrained by high returns in developed markets amid geopolitical uncertainty, while pressure on the Vietnamese dong has been compounded by seasonal FDI profit repatriation, writes Minh Dang, head of research at Dragon Capital.

Vietnam's benchmark VN-Index reached a new intraday high of 1,794.58 in October before easing 0.7% by month-end.

The mild pullback reflects profit taking after a long rally rather than any deterioration in fundamentals. Average daily trading value was steady at $1.4 billion, while retail investors opened more than 310,000 new accounts, the highest monthly figure in a year.

Foreign investors continued to net sell around $825 million, taking total outflows to approximately $5 billion in the year to date.

The ability of domestic liquidity to absorb these outflows underscores the depth of local participation, but the persistent foreign selling remains a pain point.

Global appetite for emerging markets is still cautious, constrained by high returns in developed markets amid geopolitical uncertainty, while pressure on the Vietnamese dong has been compounded by seasonal FDI profit repatriation.

Nonetheless, macro indicators continue to confirm Vietnam’s underlying momentum. Industrial production rose 10.8% year-on-year in October and PMI climbed to 54.4, signalling renewed strength in both domestic and export demand.

Public investment disbursement reached $24.3 billion in the year to date, up 27.8% year-on-year, as infrastructure projects move from approval to implementation at a steady pace, and disbursed FDI hit $21.3 billion, up 8.8% year-on-year, the highest in five years.

CPI remained contained at 3.3%, providing room for the State Bank of Vietnam, the country's central bank, to maintain accommodative policy conditions.

Corporate earnings added weight to the recovery story. Q3/2025 net profit after tax rose 21.2% year-on-year on 7.2% revenue growth, while nine-month net profit after tax increased 22.4% year-on-year on 9% revenue growth.

The improvement was driven by better margins and stronger volumes rather than one-off financial income, showing a genuine recovery in operating performance. Financials and industrials remained the main growth drivers, while strong signs of recovery in real estate and consumption suggest broader participation ahead.

For Dragon Capital’s Top80 universe, base-case profit growth of 21% in 2025 and 17% in 2026 looks achievable as earnings quality strengthens and performance broadens beyond the large-caps.

Public debt remains moderate at around 33% of GDP, giving the government space to maintain this investment drive without creating fiscal strain. Concurrently, capital market reform is gaining traction. VP Bank Securities completed a $480mn IPO in October, and another large brokerage is preparing its own offering.

A new decree has shortened the IPO-to-listing window from 90 to 30 days, which should improve liquidity and reduce time-to-market for future issuers. With an estimated $50 billion IPO pipeline over the next few years, FTSE EM inclusion expected in 2026 followed by MSCI EM by 2030, the shift from policy design to execution is now well under way.

Risks remain centered on the global interest rate path and FX pressure, which will likely determine the pace of foreign re-engagement.

Vietnam’s fundamentals remain supportive, but near-term market direction will depend on policy consistency, foreign investor participation, and how well domestic liquidity holds up if external conditions tighten. The next stage of progress will be defined less by sentiment and more by execution.