A new phase of Vietnam’s stock market

Vietnam’s stock market closed out 2025 with striking milestones posted, as the VN-Index surged more than 40 per cent and total market capitalization approached VND10,000 trillion ($384.6 billion). Behind that powerful rally, however, lay clear sectoral divergence and a highly-concentrated flow of capital, raising major questions about sustainability.

Entering 2026, with the prospect of an upgrade to Secondary Emerging Market status from FTSE Russell and the government’s ambition for double-digit GDP growth, Vietnam’s capital market is expected to step into a new era, one defined by qualitative change and a repositioning on the global financial map.

Distinct market

2026 is widely seen as a pivotal phase, as the long-discussed market upgrade comes closer to reality. Analysts argue that the impact of reclassification will extend well beyond short-term index gains, amounting instead to a structural transformation of capital flows.

Mr. Kim Thien Quang, CEO of Maybank Investment Bank Vietnam (MSVN), said an upgrade would effectively “reposition” Vietnam on the global capital allocation map. “Once a market enters the ‘emerging’ category, it no longer competes primarily with frontier markets,” he explained. “It is instead benchmarked, assessed, and selected alongside other emerging economies within the same allocation basket.”

Based on FTSE estimates cited by MSVN, the upgrade could attract around $6-8 billion in new inflows. More importantly, greater participation by institutional investors would help lift valuation levels, which have historically traded 10-20 per cent below regional peers.

Similarly, Ms. Nguyen Thi Bao Tran, Research Manager at Mirae Asset Securities (Vietnam), emphasized that the greatest opportunity lies in the qualitative shift of capital. Access to global pension funds, insurers, and index funds would bring more disciplined capital, reducing volatility driven by short-term sentiment.

“Unlike previous cycles that relied heavily on margin trading or sector rotations, an upgrade creates a new valuation baseline, lowers the cost of capital for businesses, and enhances national credibility,” she said. “This is a structural reform process.”

Ms. Nguyen Thi Phuong Lam, Head of Research at Rong Viet Securities (VDSC), also described the upgrade to Secondary Emerging Market status as a key milestone marking Vietnam’s transition to a more “mature” phase, strengthening its role as a long-term capital conduit for the economy.

The most significant benefit, she noted, is the ability to attract large-scale, long-term institutional capital, such as exchange-traded funds (ETFs), pension funds, insurers, and sovereign wealth funds, which are currently restricted from investing in frontier markets. Once upgraded, Vietnam would meet the basic criteria for allocation by these investors, fundamentally differentiating future capital quality from past cycles dominated by speculative retail flows. “We expect this to help the market establish more reasonable valuation levels and reduce dependence on short-term money,” Ms. Lam added.

Removing bottlenecks

Despite the promising outlook, analysts stress that Vietnam must address longstanding structural bottlenecks to attract and retain large-scale capital.

According to Mr. Quang, the biggest challenge lies in the lag between market openness and the pace of institutional and corporate adaptation. While international capital is increasingly ready to look at Vietnam, the market’s capacity to absorb large, long-term inflows remains limited.

The most visible constraint is foreign ownership limits. Banking stocks, which account for about 40 per cent of total market capitalization and have driven growth in recent years, are capped at 30 per cent foreign ownership. As a result, many listed banks have already filled their foreign room, limiting entry points for new capital.

In addition, Decree No. 155/2020/ND-CP imposes foreign ownership caps in several conditional business sectors, including aviation (34 per cent) and real estate, construction, and oil and gas (50 per cent), creating further barriers.

One positive development is Decree No. 69/2025/ND-CP, which allows three private joint-stock banks - HDBank, MBBank, and VPBank - to raise their foreign ownership limits to as high as 49 per cent. These banks are participating in the restructuring of weak credit institutions under the State Bank of Vietnam. MSVN views this as a significant change that could attract foreign capital, strengthen financial capacity, and support systemic restructuring.

From an operational perspective, Ms. Tran highlighted the gap between earnings results and operational standards. International investors focus not only on profits but also on their sustainability and transparency. Three key bottlenecks remain: the quality of English-language disclosures, differences in accounting standards, and low free-float ratios.

Many companies have yet to adapt to stricter governance requirements around related-party transactions and minority shareholder protection. High governance risks often lead long-term investors to apply steep valuation discounts, regardless of headline earnings.

Ms. Lam added that an upgrade is only the starting point. Retaining long-term capital depends on whether companies proactively improve their operating models. Investors seek clear growth stories, transparent governance, professional management, and sustainable development, not just short-term profits.

Analysts agree that pursuing environmental, social, and governance (ESG) principles have become a mandate rather than an option. Mr. Quang believes ESG should be treated as a core component of long-term competitiveness, as approaching it as a compliance checklist risks missing opportunities to upgrade business models and access higher-quality capital.

Entering a new growth cycle

After a booming 2025, with the VN-Index up nearly 41 per cent, Vietnam’s stock market enters 2026 with a different mindset - more cautious and selective yet also more optimistic. Major securities companies believe the market is moving into a new cycle driven by earnings growth, structural reform, and improved capital quality.

Ms. Lam said 2026 will mark a critical shift. While 2025 was a phase of “Index-driven expensiveness,” fueled by a handful of large-cap stocks with very high P/E ratios, 2026 is expected to be “broad-based attractive,” with corporate earnings growth regaining leadership.

Under a conservative scenario, VDSC estimates market-wide earnings per share (EPS) growth of about 17 per cent and a target VN-Index P/E of 14.5 times. This implies a VN-Index level of around 2,021 points within 12 months, nearly 13 per cent above end-2025.

Ms. Lam cautioned that this scenario does not yet factor in a strong return of foreign inflows. During 2016-2018, heavy foreign buying pushed market P/E ratios to 18-22 times. In the first two to three quarters of 2026, however, a similar re-rating remains uncertain due to the need to balance domestic growth momentum against external risks such as geopolitics, global monetary policy, and US market volatility.

Potential headwinds in 2026 include geopolitical tensions, policy uncertainty in the US, delayed rate cuts by the Fed putting pressure on exchange rates and domestic interest rates, and possible corrections in large-cap stocks if earnings fail to meet expectations.

From another perspective, Mr. Quang believes Vietnam is entering a new cycle at a “higher baseline” than before, reflected in stronger macro fundamentals, greater institutional participation, and improved market discipline. Growth is likely to be more selective, better reflecting corporate quality and earnings sustainability.

With supportive monetary policy, listed company profit growth forecast at around 18 per cent, and a return of foreign capital alongside improving credit growth, the market could still achieve double-digit gains in 2026. “On that basis, after reaching a record high of 1,784 points in 2025, the VN-Index could move towards 2,000 points or higher in 2026,” Mr. Quang said.

As Vietnam targets 10 per cent economic growth in 2026 and beyond, greater reliance on domestic drivers will be essential. Public investment, capital markets, and tourism are expected to deliver key breakthroughs.

Viewing 2026 as a transition from recovery to a structurally-driven growth cycle, Ms. Nguyen Hoang Bich Ngoc, Director of Corporate Client Research at Mirae Asset Securities (Vietnam), said the biggest opportunities lie in the upgrade prospects, improved liquidity, and a clearer recovery in business confidence. Under the company’s base case, market-wide EPS is forecast to rise about 20 per cent in 2026, supporting a VN-Index target near 2,300 points, equivalent to a long-term average P/E of around 17 times.

Still, sustaining double-digit growth will require navigating global volatility, geopolitical pressures, and rising demands for capital quality and governance standards. Outperformance beyond the base case hinges on three factors: smooth progress towards the upgrade, a clear improvement in liquidity, and continued strengthening of business confidence.

“In 2026, market capital is expected to become far more selective, favoring stocks that directly benefit from the economic growth cycle and offer solid fundamentals with clear profit expansion potential,” Ms. Ngoc believes.