How easing US-China trade tensions could impact Vietnam's benchmark VN-Index?

Analysts have turned bullish on Vietnam's benchmark VN-Index as the U.S.-China reached a positive tariff deal, delivering a wave of upbeat signals to financial investors.

U.S. Treasury Secretary Scott Bessent said the two powers had agreed to pause their reciprocal tariffs for 90 days, with both sides bringing their rates down by 115%.

In their joint statement released on Monday, the two sides consented to “establish a mechanism to continue discussions about economic and trade relations.”

"I think we leave with a very good mechanism to avoid the unfortunate escalations," Bessent said.

China’s Ministry of Commerce also said both sides had committed to take action before Wednesday, May 14.

Following the news, Dow Jones futures reacted positively, at one stage climbing nearly 1,000 points. Elsewhere in Asia, Hong Kong’s Hang Seng Index closed up 2.98%, mainland China’s DJ Shanghai rose 0.93%, South Korea’s Nikkei 225 gained 0.42%, and Thailand’s SET advanced 0.36%.

The VN-Index tracked regional gains, rising 1.26%, or 15.96 points, to close at 1,283.26 on Monday, with trading liquidity showing strong momentum.

Do Bao Ngoc, deputy CEO of Vietnam Construction Securities JSC (UPCoM: CSI), said the Monday session would likely continue the positive momentum of the VN-Index, noting the easing of U.S.-China trade tensions has clearly boosted domestic investor sentiment.

Furthermore, the event has raised investor expectations for more trade agreements between countries, including Vietnam, and the U.S. in the near future, he added.

Looking ahead, Ngoc said the Q1/2025 earnings season highlighted sectoral divergence, but most negative news has likely been priced in. While the VN-Index has approached pre-tariff levels, yet many stocks have yet to catch up.

Ngoc expected these lagging stocks, particularly those with solid earnings, to rebound as more positive tariff-related developments unfold, while those that have already surged past pre-tariff levels may see gains slow.

“The market is likely to experience sector rotation while maintaining a positive tone. The VN-Index may undergo short-term corrections but trend higher in the medium term,” Ngoc said.

“Capital flows will rotate across sectors, supporting both price and liquidity. Investor participation is expected to pick up, particularly in fundamentally strong stocks with solid earnings that have yet to post significant gains.”

VN-Index poised to surpass 1,300 points

Truong Hien Phuong, a senior director at KIS Vietnam Securities Corp. (OTC: KIS), said the outcome of the U.S.-China negotiations not only delivers a short-term boost but also eases medium- and long-term concerns for many countries.

“If the U.S. and China impose high tariffs on each other, it could disrupt global supply chains,” Phuong said.

“Some Chinese companies, in an effort to address excess production, may ramp up exports to markets outside the U.S., potentially impacting exporters in other countries, including Vietnam.”

The expert remained optimistic, stating that investor sentiment has improved and the VN-Index is poised to break above the 1,300-point mark.

The domestic market had surpassed 1,300 points, but the initial tariff plan of up to 46% by the U.S. government caused a continuous decline in the VN-Index, he said.

“However, I expect the market to reclaim this level as recent positive developments, such as the U.S. delaying tariff implementation for 90 days, the U.S.-UK trade deal, and positive U.S.-China negotiations, continue to emerge,” Phuong commented.

In addition to the positive external developments, the domestic market is also supported by several internal factors.

According Nguyen The Minh, head of research & development for retail clients at Yuanta Securities Vietnam, Vietnam’s 5-year Credit Default Swap (CDS) index cooled last week after surging to 150 in early April, driven by concerns over tariff policies affecting the macroeconomy.

This indicates a reduction in country risk and signals that long-term risks have eased as negotiations continue, with expectations that Vietnam could secure positive outcomes in the coming weeks, he said.

Minh added that another key catalyst comes from Resolution 68-NQ/TW, issued on May 4, 2025 by the Politburo - the country's supreme decision-making body, introducing breakthrough perspectives on the position and role of the private sector.

Given the challenges and changes in the global economic landscape that will impact Vietnam's growth, the government needs to boost the domestic economy and support Vietnamese businesses alongside measures to stimulate consumption and public investment, he suggested.

After the U.S. unveiled its trade deal with the UK last week, U.S. Trade Representative (USTR) Jamieson Greer described the ongoing trade talks with Vietnam and other countries as “fruitful”, saying “they understand what we're trying to solve for.”

“I would say that with some countries, we will have additional deals,” he said.