Quiet market players begin stock accumulation as Vietnamese stocks fall to bargain levels

Against a backdrop of slowing major economies, Vietnam has stood out as a market that has sustained high and stable growth, making it an attractive destination for foreign capital.

On the morning of April 8, the Vietnamese stock market reached a key milestone as FTSE published its mid-year assessment results. The update was widely viewed as a crucial test for Vietnam’s progress toward moving out of the frontier market group.

Foreign capital outlook after the FTSE assessment

At Dragon Capital’s Q1 Investor Day, Dang Thanh Tung, Senior Director of Market Operations, discussed the foreign capital scenario as Vietnam is upgraded.

Mr. Tung said foreign capital was ready to re-enter once valuations became attractive. He noted that the biggest difference after an upgrade lies in the nature of capital flows.

In his view, frontier markets tend to attract more active funds that can deploy flexibly and sometimes allocate based on sentiment. By contrast, the emerging markets segment is more driven by passive funds.

“When Vietnam is included in the new index basket, passive funds will almost certainly have to allocate to track the index. This is capital that is stable and more sustainable for the market,” Mr. Tung emphasized.

Active funds returning before passive flows begin

Mr. Tung also pointed out that even before passive funds officially start deploying, independent studies have indicated that active funds have begun to return. The shift was linked to Vietnam’s market valuations becoming more attractive following recent adjustments.

Macro factors supporting capital inflows

From a macro perspective, a Dragon Capital expert said Vietnam’s double-digit economic growth target acts as a magnet for global capital. In an environment where many major economies are slowing, a market that has maintained high and stable growth is more likely to draw foreign investment.

Near-term flows vs. longer-term milestones

While the FTSE Russell upgrade is an important milestone, it is not the final destination. The expert noted that short-term foreign capital flows remain heavily influenced by external factors. Excluding periods of volatility, the first two months of the year still showed positive net buying sessions, indicating continued international investor interest.

Looking further ahead, the upgrade under FTSE Russell standards is described as a step toward broader market elevation. To strengthen Vietnam’s financial market profile, the content highlights the importance of aiming for inclusion in MSCI indices and improving the sovereign credit rating, which are presented as foundational factors for future progress.

Overall assessment

Therefore, while geopolitical variables should be monitored closely, the combination of upgrade expectations and strong domestic fundamentals supports a well-founded medium-term trend of foreign capital returning to Vietnam’s stock market.