VinaCapital CEO believes Vietnam will adapt and thrive in 2025

Looking back over 2024, what were the key drivers behind Vietnam's economic growth, and how did they contribute to exceeding the initial GDP targets?

Vietnam’s economy has made remarkable progress this year, with GDP growth at 6.8 per cent in the first nine months, surpassing forecasts and exceeding the growth target of 6-6.5 per cent set by the National Assembly earlier in the year.

Following this positive economic data, the government then set a new ambitious goal of achieving GDP growth of over 7 per cent for the whole year.

Looking at the factors driving economic growth in 2024, we see many positive signs, such as a 26 per cent increase in exports to the US, 18 per cent growth in exports of electronics and high-tech products, and a strong recovery in the tourism sector. These achievements confirm the resilience of the economy and highlight Vietnam’s ability to adapt and thrive in a rapidly changing global context.

At VinaCapital’s 2024 Investor Conference held in Ho Chi Minh City late October, we stated to international investors our belief that Vietnam will continue to pursue the same kinds of long-term growth strategies that have brought significant success over the past 20 years. These strategies include attracting foreign investment, boosting international trade partnerships, and increasing investments in infrastructure and technology to further strengthen the economy.

How do you assess the likelihood of achieving the government's new target, and what do you see as the key growth drivers in 2025?

This is an ambitious growth target amid global economic and political fluctuations, particularly in relation to trade policies with the US, Vietnam’s largest export market, as the incoming administration there could bring significant changes. Additionally, the American economy is expected to slow down in 2025. Therefore, Vietnam’s export growth in 2025 is likely to be lower than in 2024. However, we believe the impact will not be too severe, as Vietnam remains a key trading partner of the US.

Currently, we forecast Vietnam’s GDP will grow by approximately 6.5 per cent in 2025, with growth mainly driven by domestic factors rather than exports, as seen in 2024.

While consumer sentiment has not fully rebounded this year, consumption still accounts for more than 60 per cent of the economy, and the growth of production and exports will likely have a positive spillover effect on household income.

Furthermore, the real estate market is recovering, which should boost consumer confidence. As a result, domestic consumption will likely offset the slowdown in export growth. Moreover, the government has set a goal to increase infrastructure investments in 2025, which will stimulate growth across multiple sectors of the economy.

Over the long term, favourable demographic trends, rapid urbanisation, deeper participation in global supply chains, and the boom in the digital economy will continue to be important drivers of Vietnam’s sustainable growth.

What impact would upgrading Vietnam's stock market have on attracting foreign investment, and what steps are needed to achieve this?

Upgrading Vietnam’s stock market is of great significance to the country's economic development and listed companies. An upgrade would help entice foreign capital and reduce volatility, addressing the issue of retail investors accounting for more than 90 per cent of market transactions. This is a crucial moment, as international capital is withdrawing from China due to trade tensions with the US, and large institutional investors are seeking new emerging markets for investment.

The immediate goal for Vietnam’s stock market is to achieve an upgrade by FTSE Russell, a global provider of benchmarks, analytics, and data solutions, in 2025. However, after achieving this, we need to set our sights on the more important goal of upgrading by Morgan Stanley Capital International (MSCI), as its indices are used as benchmarks by many large investment funds.

The MSCI upgrade process is more complex than FTSE Russell, with stricter criteria such as limits on foreign ownership, new account registration requirements for international investors, and foreign exchange liberalisation. As a result, the MSCI upgrade process will be more time-consuming and challenging.

What key factors are expected to drive Vietnam's stock market growth in 2025?

The main drivers for growth in the stock market in 2025 will be economic growth, the strong performance of listed companies, more attractive valuations compared to regional markets, and the outlook for upgrading to emerging market status.

At VinaCapital, we forecast that the profits of listed companies will grow by about 20 per cent in 2025, excluding any one-off income. With such growth, the price-to-earnings ratio of the VN Index in 2025 is expected to be around 10.5x. When compared with other emerging markets in the region, such as Thailand, Malaysia, Indonesia, the Philippines, listed companies on Vietnam’s stock market are expected to achieve higher profit growth in 2025 and be valued about 20 per cent cheaper.

The profitability of listed companies on Vietnam’s stock market is also expected to outperform regional markets, with a forecasted return on equity (ROE) of around 16 per cent in 2025, while ROE in regional markets ranges from 10-14 per cent.

With such growth potential, operational efficiency, and valuation, once upgraded to an emerging market, Vietnam’s stock market will be seen by international investors as a more attractive investment opportunity compared to other ASEAN markets.

What are the main priorities for market participants to achieve these goals?

We believe the most important factors for boosting the development of the stock market are maintaining macroeconomic stability, improving the quality of listed companies, and enhancing market regulation.

Listed companies should focus on improving corporate governance, ensuring transparency, and improving operational efficiency to build investor confidence. Meanwhile, regulatory authorities should continue to reform and refine regulations and oversight mechanisms to protect investor interests and ensure sustainable market development.

VinaCapital CIO forecasts further stock market growth Andy Ho, chief investment officer of VinaCapital Group and managing director of the VinaCapital Vietnam Opportunity Fund, shared his insights on CNBC in early April on the potential of the Vietnamese stock market following its upgrade to a frontier market.

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