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[HO CHI MINH CITY] Vietnam’s stock market has come alive as foreign investors return from positions near historic lows, following news that the country has clinched a trade deal – albeit a preliminary one – with the tariff-trigger-happy US.
Recent gains have driven the key index higher by 4 per cent since Jul 2, and 14 per cent year to date, after US President Donald Trump announced the agreement with Vietnam. Although lacking in detail, the pact appears to be more favourable than those Washington has so far made with most of the country’s South-east Asian peers.
JPMorgan Chase on Wednesday (Jul 9) upgraded its rating for Vietnam to “overweight” within Asean, reflecting a bullish outlook that the nation’s equity market will outperform its regional counterparts.
The investment bank believes the US’ 20 per cent tariff on domestically produced goods will help Vietnam’s exports remain competitive against those from China, which are up against a 55 per cent tariff, as well as rivals elsewhere, which face duties averaging 15 to 18 per cent.
“With key overhangs being lifted, we expect equity flows to reverse into Vietnam equities, which have seen significant risk-off over the past few months,” JPMorgan’s analysts said.
For now, Vietnam’s foreign positioning remains at a near record low, with about US$1.3 billion outflows year to date and US$2.3 billion since the US election, they added.
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Tyler Nguyen, chief market strategist at Ho Chi Minh City Securities Corporation (HSC), echoed this viewpoint. He noted renewed activity in both participatory notes – offshore instruments which grant foreign investors indirect access to Vietnamese stocks – and active foreign funds.
This marks a significant shift in sentiment, as foreign investors begin to return after 18 months of continuous net selling, he added. He attributed the turnaround to the relatively more favourable tariff rate that the US has announced for Vietnam.
“As uncertainties surrounding Vietnam’s economy gradually subside, attention will likely shift towards the country’s structural catalysts,” he said, highlighting the nation’s political transition and key reforms aimed at supporting high, long-term growth.
Despite external challenges, Vietnam’s economic expansion accelerated to nearly 8 per cent year on year in the second quarter of 2025, driven largely by robust public spending and investment disbursement.
“This is a key differentiator within Asean, in our view, as most countries see limited fiscal room to buffer growth,” JPMorgan said.
Analysts at investment manager VinaCapital pointed out that Vietnam’s infrastructure spending surged 40 per cent in the first half of this year – fuelled by legal reforms, streamlined disbursement procedures, and a heightened sense of urgency among local governments to fast-track projects ahead of historic provincial mergers, which took effect on Jul 1.
While Vietnam’s negotiators continue to finalise the US trade deal details, VinaCapital believes the country will maintain its existing advantages in workforce quality, costs, demographics and location, “as long as Vietnam’s tariffs are (under) 10 per cent higher” than those of regional competitors, it said in a Jul 3 note.
Earlier this week, Trump sent out letters setting out tariffs of 25 per cent or more on some of Vietnam’s Asean peers, such as Thailand, Malaysia and Indonesia. The Philippines, meanwhile, will be slapped with a 20 per cent duty – higher than the 17 per cent announced in April.
These countries have until Aug 1 to negotiate deals with Washington before the new levies take effect. In addition, significant concerns remain regarding the definition of transhipment through Vietnam – transhipped goods are subject to a 40 per cent tariff imposed by the US.
Reuters on Thursday reported that Vietnam was preparing stricter penalties to combat trade fraud and illegal transhipment, as part of efforts to meet commitments it had made to Washington.
Tailwinds from possible market upgrade
JPMorgan expects the VN Index, Vietnam’s primary stock market benchmark, to end 2025 in the range of 1,500 to 1,600 points, implying a 6 to 14 per cent gain from current levels. Meanwhile, HSC forecasts the index to finish the year at 1,430 points, and climb further to 1,512 in the first half of 2026.
Analysts say that a possible FTSE reclassification of Vietnam from frontier to emerging market this September could result in additional tailwinds for foreign inflows. The London-headquartered index provider has included the market in its upgrade watch list since 2018.
In May, Vietnam rolled out its new trading system, KRX, which is intended to enable key functionalities critical to achieving a market status reassessment.
Regulators had earlier removed a pre-funding rule requiring foreign institutional investors to deposit entire funds before placing “buy” orders – bringing Vietnam more in line with other emerging markets.
JPMorgan predicts that the upgrade could attract more than US$500 million in passive inflows and boost investor sentiment.
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