Vietnam at development crossroads as capital market lags: Dragon Capital exec

Vietnam is entering a critical phase of its next development cycle but risks missing a historic opportunity unless it rapidly deepens its capital markets, said an executive at Vietnam-focused asset manager Dragon Capital.

Speaking at a forum on Vietnam's capital market outlook 2026 on Friday, Luong Thi My Hanh, head of domestic asset management at Dragon Capital, said the country is benefiting from the combination of favorable factors, including a highly open economy, a demographic dividend, and abundant labor.

However, time is limited, she noted. The country is expected to begin ageing around 2039 and has set a goal of achieving high-income status by 2045. “If Vietnam fails to make a breakthrough within this window, the opportunity could slip away.”

She stressed that capital must lead growth in the next phase, but Vietnam’s capital market remains shallow and heavily skewed towards bank lending. Credit outstanding exceeded 134% of GDP at the end of 2024, underscoring the economy’s reliance on banks, while the country has only about 100 investment funds after more than two decades of development.

Hanh identified distribution as a key bottleneck, noting that current regulations prevent commercial banks from directly distributing fund certificates. Short-term investment behavior also remains prevalent, with most retail investors holding fund units for just over a year and benchmarking returns against bank deposit rates.

Pension funds, key providers of long-term capital globally, remain underdeveloped, Hanh told the forum. After eight years of legal recognition, pension assets amount to less than VND2 trillion ($76.03 million), with fewer than 30,000 participants, limiting their role in both social security and long-term capital formation.

To unlock long-term domestic capital, the executive called for tax incentives to encourage longer investment periods, citing examples in Thailand, India, and Taiwan. She also urged regulators to ease legal barriers to expand fund distribution channels, particularly by allowing greater participation from commercial banks.

Further priorities include aligning pension fund regulations with international standards, broadening their investment scope, and launching a national financial literacy program to improve public understanding of saving and investing.

“Without financial knowledge, people cannot make sound decisions,” Hanh said, adding that Vietnam’s financial literacy ranks among the lowest globally and should be addressed from early education onwards.