Foreign investors’ net selling in Vietnam’s stock market reached a record high in 2025. Will this trend reverse in 2026? What factors could entice them to return in the near future?

Reasons behind the record net selling in 2025 Foreign investors recorded net selling of more than VND136.4 trillion in Vietnam’s stock market in 2025 (as of the December 29 trading session), marking a 47% surge compared to 2024. This figure represents the highest annual net selling value ever in the history of foreign participation in the local market. With the exception of 2022—when the market hit bottom and foreigners turned net buyers with nearly VND30.8 trillion in purchases—the period from 2020 to 2025 was dominated by foreign net selling. According to statistics, foreign investors offloaded VND92.5 trillion in 2024, VND22.1 trillion in 2023, and VND78.8 trillion across 2020–2021. In total, net selling by foreign investors during 2020–2025 amounted to approximately VND300 trillion, with 46% of that volume concentrated in 2025 alone. Several factors explain the persistent net selling strategy adopted by foreign investors in 2025. Foremost among them was the U.S. Federal Reserve’s decision to slow the pace of interest rate cuts, which kept dollar-denominated interest rates elevated for longer than anticipated. This sustained strength of the U.S. dollar, along with the appeal of assets tied to it, drew international capital flows back toward developed markets such as the United States. Conversely, frontier and emerging markets—including Vietnam—saw capital outflows as investors reallocated funds to safer, higher-yielding destinations. Vietnam was no exception to this wave of capital withdrawals from riskier markets. The sustained strength of the U.S. dollar placed persistent pressure on developing economies such as Vietnam, particularly in terms of exchange rate stability. In 2024 and 2025, the dong experienced frequent and unpredictable fluctuations against the dollar, amplifying foreign exchange risks and further discouraging foreign investors from maintaining positions in the local market. Tariff risks also weighed heavily on foreign investor sentiment in 2025. In April, the United States imposed steep reciprocal tariffs on many nations, including Vietnam, prompting investors to reassess their trading strategies. Although these risks eased by July following positive developments in bilateral trade negotiations, exchange rate pressures persisted. By late August, the dong had depreciated by approximately 3.86% compared with end‑2024 levels, marking the year’s peak in currency volatility. August also recorded the highest monthly net selling by foreign investors, with divestments exceeding VND42.2 trillion in the domestic stock market. In 2025, global capital flows gravitated toward sectors such as big tech, artificial intelligence (AI), defense, and energy—industries largely concentrated in major markets like the U.S., Japan, and Europe. Vietnam, not being a beneficiary of this trend, inevitably saw its stocks reduced in weight within the strategic allocation portfolios of many large investment funds. According to SSI Research, the net selling pressure from foreign investors in 2025 was driven primarily by external factors, particularly exchange rate volatility and the broader trend of global capital reallocation. As foreign exchange risks intensified, emerging and frontier markets—including Vietnam—were often deprioritized to preserve investment efficiency after currency conversion. In response, global funds commonly adopted defensive portfolio strategies, emphasizing liquidity and flexibility over exposure to higher-risk markets. Should the return of foreigners be anticipated in 2026? In the second half of December 2025 (as of December 29), foreign investors shifted back to net buying, with purchases totaling VND1.66 trillion across all three exchanges. This rebound during the final trading days of the year offered a hopeful signal that foreigners may re‑emerge as net buyers in 2026. The most significant catalyst is FTSE Russell’s decision to upgrade Vietnam’s stock market from Frontier Market to Secondary Emerging Market (SEM), effective September 21, 2026. Announced in October 2025, the upgrade reflects recognition of Vietnam’s reform efforts and is expected to unlock substantial new investment inflows. By broadening access to global capital and strengthening Vietnam’s financial standing, the reclassification could mark a turning point in foreign investor sentiment. According to a recent FTSE Russell report, Vietnam is projected to represent 0.04% of the FTSE Global All Cap Index, 0.02% of the FTSE All‑World Index, 0.34% of the FTSE Emerging All Cap Index, and 0.22% of the FTSE Emerging Index. These inclusions highlight Vietnam’s growing presence in global equity benchmarks and are expected to attract incremental foreign capital inflows. At the same time, pressure from foreign exchange risks is anticipated to ease in 2026. Although the U.S. Federal Reserve has signaled only one rate cut for the year, it already lowered interest rates three times consecutively in the fourth quarter of 2025—at its September, October, and December meetings—reducing rates by a cumulative 0.75 percentage point to around 3.75%. This shift has significantly reduced the relative appeal of the U.S. dollar, potentially creating a more favorable environment for capital allocation into emerging markets such as Vietnam. With the wave of investment in big tech and AI stocks beginning to cool, international capital flows are expected to shift away from these sectors and developed markets more broadly in search of new opportunities. Vietnam, targeting 10% economic growth in 2026, supported by policies for economic stimulus and investment expansion, stands out as a potential beneficiary of this reallocation. The recent establishment of an international financial center further enhances Vietnam’s appeal, positioning the country as a promising destination for global capital inflows. That said, Vietnam must tackle several structural challenges to effectively attract foreign investment. The foremost issue lies in foreign ownership limits and the excessively low free‑float ratios of many stocks—particularly large‑caps, which are typically favored by foreign investors. In numerous cases, foreign ownership thresholds have already been reached, restricting investment funds from restructuring their portfolios or increasing their holdings, even when valuations remain attractive. This constraint diminishes market accessibility and undermines Vietnam’s potential to capture greater foreign capital inflows. On November 6, 2025, the Ministry of Finance issued Decision 3761/QD-BTC, setting out a strategic plan to implement Decision 2014/QD-TTg and approving a project aimed at strengthening the position of Vietnam’s stock market. A central element of this plan is addressing the issue of foreign ownership limits. Specifically, the list of sectors restricted or closed to foreign investors will be reviewed and potentially revised, with the goal of increasing or even removing ownership caps in areas not tied to national security. Such reforms are expected to improve the investment environment and enhance the attractiveness of Vietnam’s capital markets to global investors. The Government has recently promulgated Decree 245, amending certain provisions of Decree 155/2020/ND-CP and eliminating the previous practice of allowing companies discretion over their maximum foreign ownership limits. This regulatory change is expected to create a more transparent and consistent framework for foreign participation in Vietnam’s capital markets. Nevertheless, compared with other emerging markets, Vietnam’s stock market still faces challenges in terms of liquidity and market depth. Several large-cap stocks continue to suffer from low trading volumes, while the general index remains heavily influenced by only a handful of stocks. These structural weaknesses pose difficulties for large investment funds seeking to make new disbursements. In periods of uncertainty, such funds often withdraw early to mitigate liquidity risks. Strengthening overall market health and improving liquidity will therefore be critical to enhancing Vietnam’s attractiveness to foreign investors.