“Bad start, good end”, breakthrough momentum comes from market upgrade

The upgrade will not only increase liquidity but also help businesses mobilize capital more effectively, making Vietnam an attractive destination on the global financial map. Technology, renewable energy and manufacturing will benefit greatly.

Securities 2025: "Bad start, good end", breakthrough momentum comes from market upgrade

The upgrade will not only increase liquidity but also help businesses mobilize capital more effectively, making Vietnam an attractive destination on the global financial map. Technology, renewable energy and manufacturing will benefit greatly.

The possibility of upgrading Vietnam's stock market to the "Emerging" group in the 2025 - 2027 period is expected to be a breakthrough driving force, promoting the development of the financial market. According to the criteria of FTSE and MSCI, the upgrade will attract large international capital flows, improve the structure and increase the transparency of the capital market.

FIDT's Asset Allocation Strategy 2025 report believes that this event will reshape the stock market, from a trading tool to a financial platform that supports long-term growth, promotes sustainable economic development and enhances national status.

Looking back at the Vietnamese stock market, we can summarize the "tight accumulation" trend of the VN-Index in the period of 2023 - 2024. Looking at the "VN-Index Development" image in 2024, the market continuously moved sideways, accumulating in the range of 1,100 - 1,300. This is a reasonable fluctuation range in a year with many "uncertain events", creating a stable price level in the medium term.

According to FIDT, the deep corrections from the 1,300 peak (8% - 10% or more) in March (point 1), June (point 2), and October (points 4, 5, 6) all originated from exchange rate pressure factors that negatively affected the SBV's exchange rate hedging actions, such as (1) net withdrawal of liquidity in the OMO market and selling USD; (2) strong net selling actions by foreign investors; (3) very high global risk conditions in the above periods, which rapidly weakened the market's cash flow psychology, leading to very deep corrections. VN-Index has tested the 1,280 - 1,300 point zone at least 6 times in 2024, which is a very uncomfortable resistance level in the short and medium term.

Mr. Bui Van Huy, Director of FIDT Investment Research, shared in the 2025 Asset Management Seminar that from 2025 - next year, the main trend is "bad at first, good at last" thanks to the market's tight accumulation, valuation in an attractive area, along with other important driving forces including positive corporate profit growth and the upgrading of the market to an emerging market.

Source: FiinX, FIDT synthesis and analysis

Valuing VN-Index in 2024, P/E ratios fluctuated narrowly in the range of 12.8 - 15.0, while the P/B trend was stable in the tight accumulation range of 1.6 - 1.7. This shows that the market is pricing VN-Index in a balanced and somewhat cautious manner, in line with the context of a slight economic recovery, with forecasted EPS growth having many highlights.

Notably, the current context has similarities with the period 2014 - 2016, when the market recovered from the economic recession. Economic growth at that time could not accelerate and still depended heavily on the accumulation trend, but it created the foundation for outstanding growth in the following years. This opens up the expectation that the market in 2024 can create a solid foundation for a breakthrough period when macroeconomic factors are more favorable.

FIDT forecasts a 16% growth in overall market profits in 2025, with potential coming from banking (expected to grow by 17%), technology (expected to grow by 20%) and real estate (expected to grow strongly with overall industry profits increasing by 58%, thanks to improved supply, smooth legal procedures and restored investment confidence.)

In addition to the trend of profit recovery and economic recovery, the Vietnamese stock market also welcomes a historic "once in 20 years" upgrade opportunity in the coming years.

Vietnam's stock market was put on the watch list for upgrading to emerging market status by FTSE Russell in September 2018. However, since then, Vietnam has not been upgraded to emerging market status by FTSE Russell because it has not been able to improve the criterion: "Clearing".

On November 2, 2024, the revised Circular 68/2024/TT-BTC took effect, untangling this issue. FIDT therefore expects that the Vietnamese stock market will be upgraded to an emerging stock market by FTSE Russell in the September 2025 review period (or most positively, March 2025).

According to MSCI, the Vietnamese market has basically satisfied the quantitative criteria, but with the qualitative criteria related to foreign market access such as Foreign ownership limits, Information disclosure in English, Degree of freedom of the foreign exchange market... Vietnam still needs to improve to meet these criteria.

This leads to a target of VN-Index at the end of 2025 in the range of 1,300 - 1,500 points , based on two main drivers (1) Total market profit growth is expected to reach 16% in 2025. Market P/E valuation continues to fluctuate at 12 - 14 in 2025, below the 10-year median. Valuation level is "cautious".

“If the corporate profit growth rate is 16% in 2025 (baseline scenario), the stock market P/E is 11 times (currently about 13 times), which is a relatively clear investment opportunity,” Mr. Huy emphasized. In the positive scenario, the VN-Index could reach about 1,360 - 1,620 points, assuming EPS increases by 20 - 22%, P/E reaches 12-14 times.

Profit growth from key sectors such as Banking, Real Estate and Information Technology will be the main drivers, including the Banking sector with expectations of strong credit growth and improved net interest margin (NIM) will boost profits, with a forecast growth of 17%. The Real Estate sector will recover strongly thanks to complete legal policies and high housing demand, with profits forecast to increase by 58%. And the Information Technology sector with the trend of Digital Transformation and demand for high-tech services will boost profit growth to reach 20%.

FIDT assesses the stock market outlook for 2025 as positive, with high growth potential as the economy recovers and enters a period of sustainable growth. The market is expected to enter a medium-term acceleration cycle after 2025, thanks to strong macro dynamics and a steady recovery of key sectors.

FIDT recommends that, with its strong performance and outstanding growth potential, the Vietnamese stock market should be a key investment channel in 2025. Compared to other asset classes, the Vietnamese stock market offers higher growth opportunities, especially in the context of economic recovery and favorable macroeconomic factors. This is a strategic time to optimize profits and take advantage of the market's long-term growth potential.

However, the key risk that needs to be noted for the stock market is that the Donald Trump administration's stronger-than-expected application of trade protection policies could disrupt global investment capital flows. This would cause major fluctuations in the international financial market and seriously affect foreign capital flows into Vietnam. As a result, pressure on exchange rates, liquidity in the financial market would decrease, and the trend of capital outflows from Vietnam could become more serious, weakening foreign investor confidence.

In addition, there are exchange rate risks, liquidity risks and international capital flows may continue to withdraw from emerging markets, including Vietnam. This causes liquidity in financial markets, especially the stock market, to decline significantly.

The real estate sector, a pillar of the Vietnamese economy, may not recover as expected. This has a negative spillover effect on related sectors such as banking, construction and building materials. In addition, the weakening of real estate also reduces GDP growth, erodes investor confidence and negatively affects the macro economy.

Source: https://baodautu.vn/chung-khoan-2025-tien-hung-hau-cat-dong-luc-dot-pha-den-tu-nang-hang-thi-truong-d243870.html