Internal strengths attest to commitment to progress

With renewed resolve, Vietnam will enter the Year of the Horse with the greatest of aspirations and ambitions that I have witnessed over my thirty-year association with the country. It would be difficult for me to be anything but positive.

Dr. Christian Kamm

There are many significant factors that support a very positive view about the country, its prospects and its citizens. Embarking on a new era, Vietnam is on the verge of an historical change.

Something amazing occurs when fiscal policy, monetary policy, and investment interest from domestic and foreign investors coincide. With all aligned in the common purpose of stable progress, a period of sustained growth occurs. Vietnam is entering a stage when all these interests are clearly aligned.

With the recent approval of state budget estimates for 2026, policymakers have solidified their commitment and support of economic activity by expanding fiscal policy by an unprecedented amount.

Looking out over the 2026-2030 plan, development investment will increase 50 per cent over the previous five-year period. An aggressive, but doable goal, as Vietnam’s debt to GDP ratio lags other Southeast Asian nations by a significant margin. The development investment agenda is about, in part, upgrading infrastructure, infrastructure that is badly needed to continue to secure and support sizeable foreign investment projects.

When a government increases its commitment to development, the actions solidify confidence in the country’s future. Foreign direct investment (FDI) naturally follows. In some cases, it supports the fiscal investment – even working coincidentally. Foreign interests seize new opportunities, especially in technology related development projects, which often garner a high return on investment for the country and the foreign direct investor.

Generating interest

In 2025, even as world’s FDI figures declined, Vietnam remained positive with a 9 per cent growth in foreign direct investment, highlighting the country’s overall attractiveness. Certainly, Vietnam will continue to contend for large, high-profile foreign-led projects in infrastructure and technology.

The benefit of consistent and growing FDI can be profound. Such investment has a far-reaching effect on the economy. Large foreign investment inflows provide stability to gross domestic product. Stable GDP is often considered a sign of stable government economic policy. Ordered and systematic FDI can hold inflation in check.

Coupled with supportive government development, the positive effect of FDI is truly unstoppable. Such stability results in higher employment levels and higher per capita growth in income. The benefits trickle down through the economy and ultimately provide a better standard of living for the country’s citizens.

The government of Vietnam has vowed to continue to simplify the investment process and to remove bureaucratic barriers to investment. From a foreign investment standpoint, this is a needed change and is paramount. The level of difficulty in conducting business in an investment environment can greatly support or greatly reduce the amount of investment, depending on how accommodative an environment is.

The reforms that the Vietnam government will institute will continue to make the investment environment more dynamic and constructive for foreign investors. Obviously, this will also spur more interest in foreign investment in Vietnam, as the country is perceived to be a better investment destination than other countries.

Considering all these positive developments, one must also consider the effect on foreign indirect funding into the Vietnam stock market. With the soon-to-be realised upgrade to FTSE rating to emerging market status, Vietnam is guaranteed future improved inflows. Investment funds mirroring the FTSE Emerging Market Index will need to invest in the Vietnam stock market to comply with their investment mandates.

Although these investment amounts can be quantified, the positive sentiment created by such a change cannot be directly measured, but I would suspect it would be greater than most conservative predictions. Often, in the investment community, as an opportunity becomes more evident, that opportunity attracts greater interest.

Therefore, the stock market should post solid gains through the foreseeable future and might very well rank in the top performing stock markets in the world this year.

Prominent features

Another effect will be the focus and further development of a large, less concentrated corporate bond market. Evidence of the emergence of a strong corporate bond market will likely result from more foreign indirect investment interest and will further propel monetary stability.

As the passive capital flows enter the Vietnamese market from global funds seeking their set allocation, it is likely that the large-capitalised stocks will be the first beneficiaries. Later, mid-cap and small capitalisation stocks will benefit. With increased trading volume, eventually the whole stock market will increase. The ultimate result is a strengthening of investor sentiment, allowing the market to maintain a strong positive bias. This bias can continue for the foreseeable future.

Further supporting this development, the Vietnam stock market appears attractive on a valuation basis. The Vietnam stock market, by such measures as adjusted price to earnings and price to sales ratios, continues to rank more inexpensive than most Asian markets. Other less prominent measures also provide a compelling investment thesis.

Also, against other developing markets, Vietnam also ranks inexpensive. Although an inexpensive stock market is not always a signal of value, in the case of Vietnam at this juncture it is positive since Vietnam is entering a period of consistent and sustainable economic growth.

As the economy continues to grow, corporate profits growth will naturally coincide. From an economic standpoint, high corporate profits translate into positive consumer spending and further corporate profit growth. Corporate profits will often lead to higher GDP and from an investment standpoint will lead to price-earnings expansion. This will in turn bring the Vietnam stock market more in line with other similar countries on a valuation basis.

Contrary to general opinion, a stock market that is priced to similar countries will be an even more attractive investment destination as foreign investors view the valuation as a validation of current and future progressive opportunities.

Vietnam has set many goals for the next five years. One clear goal is the ambitious GDP for the next five years, including double-digit growth for 2026. Many goals, if not all, I believe, are attainable. The country is entering a golden period when public and private investment is synthesised to create a more productive and prosperous economy.

With such advantages as competitive labour costs and a more modern and productive infrastructure, the stage is set for a very bright future.

Many analysts believe that the geopolitical tensions that exist in the world today can definitely derail this positive story of Vietnam. Macroeconomic stability could provide a backdrop to more stable growth if stability is maintained. Currently, though, the macroeconomic stability in the world seems at risk. It seems that almost all countries are at odds on so many macroeconomic and political issues.

Although the world faces many uncertainties, including a possible AI bubble bursting and rising global tariff-led inflation, internal strengths attest to the country’s commitment to progress. In my view, such geopolitical tensions might slow, but certainly not derail, this positive story.