Foreign investors slow Vietnam stock selling ahead of FTSE upgrade: insider

Speaking at Investor Day organized by Dragon Capital Vietnam, Tuan said foreign investors’ net selling has continued at a pace comparable to or even faster than in 2025.

Tuan said the continued foreign selling should not be viewed as entirely negative, noting that foreign investors now hold only around 12 percent of the Vietnamese stock market and have fewer shares left to sell.

Despite clear improvements in corporate fundamentals, foreign investors have remained net sellers since the beginning of the year, prompting Tuan to twice revise his earlier forecasts on when the trend would reverse.

However, the pace of selling has recently slowed, while some major foreign investors have begun showing renewed interest in Vietnam’s market.

Looking at capital flows over a 12-month period rather than quarter by quarter, Tuan said foreign capital flows were likely to improve, particularly as global index provider MSCI is expected to assess whether Vietnam can be added to its watch list for promotion to emerging market status in its June 2027 review.

Meanwhile, FTSE Russell has announced Vietnam’s upgrade to secondary emerging-market status, effective September 21.

Against this backdrop, Tuan advised investors to focus on large companies with solid fundamentals rather than spreading investments across speculative stocks.

He also recommended a periodic investment strategy, in which investors spread their capital over time instead of trying to predict market peaks and troughs.

“Periodic investing remains more optimal than all other methods at this point,” he said.

Attractive valuations but risks remain 

Tuan said the VN-Index’s price-to-earnings ratio currently stood at around 13-13.4 times based on earnings over the past 12 months.

He said the valuation was lower than when the market reacted to the Iran-U.S. conflict in the middle of the year and only slightly higher than during a period of sharp market volatility triggered by developments involving Van Thinh Phat Group.

“We cannot say valuations are high. They are at a fairly attractive level,” he said.

However, investors should continue to monitor three factors: high global funding costs, U.S. tariff risks and elevated domestic interest rates.

According to U.S. figures, Vietnam’s trade surplus with the U.S. reached $114 billion in January-June 2026, surpassing China and Mexico, and could reach $180-200 billion for the full year.

However, Vietnam is among 16 countries being investigated by the U.S. over alleged excess capacity.

The investigation began in March 2026, with preliminary findings expected in August and final results due by the end of the year, after which the two sides could enter further negotiations.

Regarding forced labor, the current tariff rate is 12.5 percent and could fall to around 10 percent if Vietnam introduces additional appropriate policies over the next six to 12 months.

If the two countries reach a bilateral trade agreement, Tuan said tariff-related risks would no longer be a major concern.

Domestic interest rates have also risen sharply since the beginning of the year. Some banks are offering interest rates of nearly 9.5 percent for six-month deposits and around 9-9.2 percent for 12-month deposits, compared with just above 5 percent at the beginning of the year.

Tuan attributed the increase to strong demand for capital to support Vietnam’s goal of achieving annual GDP growth of 10 percent over the next five years.

The country is estimated to need around $1.46 trillion in capital for this growth target, including about $776 billion from the private sector, while Vietnam’s current GDP is around $500-510 billion.

The gap between bank credit growth and deposit growth has widened rapidly, from $34 billion at the end of 2024 to $68 billion in early 2026 and nearly $90 billion currently, indicating that the banking system is facing a shortage of funds to meet capital demand.

On the positive side, the exchange rate on the unofficial market is currently lower than the interbank rate, potentially allowing the State Bank of Vietnam to purchase foreign currency and increase its reserves.

Inflationary pressure is also limited, with underlying inflation estimated at around 3.4-3.5 percent after seasonal factors are excluded.

Corporate earnings grow strongly

Listed companies recorded combined profits of around $7.6 billion in the second quarter of 2026, up 46 percent year on year and 12 percent from the first quarter.

Net revenue also rose nearly 40 percent year on year.

“This is probably one of the years in which corporate profits have recorded their strongest growth in the past decade,” Tuan said.

After the first six months, listed companies had achieved 59 percent of their full-year profit targets, compared with 46 percent during the same period in 2025.

Full-year profit growth is projected at 22-23 percent, meaning profit growth in the second half is expected to slow to around 12-16 percent.

Tuan said Dragon Capital was preparing for two interest-rate scenarios.

If interest rates fall significantly, by around 0.5-1.5 percentage points, the fund manager will increase its exposure to interest-rate-sensitive stocks and broaden its investments across the market.

If rates remain high and the tariff outlook remains unclear, it will prioritize high-quality companies with stable growth and strong cash buffers.

According to an estimate by MB Securities released in early August 2026, passive capital from exchange-traded funds tracking FTSE indices could bring around $1.5 billion into Vietnam’s stock market within a year of the upgrade taking effect.

FTSE is expected to allocate the inflows in four rounds from September 2026 to September 2027.

The first round, worth around $150 million, is expected to be deployed from September 21, when Vietnam’s secondary emerging-market status takes effect.

The remaining three rounds are scheduled for the March, June and September 2027 rebalancing periods, with each subsequent round expected to account for a larger share than the first.