According to information from the State Securities Commission (SSC), the Vietnamese stock market is expected to maintain stable growth in 2024, affirming its role as an important medium-to-long-term capital channel for the economy. The growth momentum of the VSM is driven by the recovery of the domestic macroeconomy, along with the flexible and effective policies of the Government in managing exchange rates, interest rates, and overseeing the real estate market. Additionally, the monetary policies of the U.S. Federal Reserve (FED) and exchange rate fluctuations have also impacted the stock market over the past year. Furthermore, the efforts of regulatory authorities in strengthening management and supervision measures have contributed to ensuring the sustainable development of the VSM.
Vietnam – A Bright Spot in P/E Ratios in Southeast Asia
In 2024, the Vietnamese stock market continues to mark positive milestones, particularly with a Price-to-Earnings (P/E) ratio of 14.17. Compared to other Southeast Asian countries such as Singapore, Indonesia, and the Philippines, Vietnam stands out with a relatively high P/E ratio, reflecting strong investor expectations regarding the growth potential of the economy. This ratio is not merely a statistic but also a gauge of market sentiment and confidence in the future of Vietnamese enterprises.
Market Capitalization of the Vietnamese Stock Market: Significant Growth Potential
Despite achieving notable milestones in 2024, the market capitalization of the Vietnamese stock market remains modest compared to other countries in Southeast Asia. Specifically, Vietnam's total market capitalization is estimated at $214 billion, equivalent to only one-fourth of Indonesia's $829 billion and less than one-third of Thailand's $693 billion or Singapore's $622 billion. This figure partly reflects the limited scale of Vietnam's financial market amidst robust regional growth.
Notably, when comparing the market capitalization-to-GDP ratio, Vietnam also ranks low at 45.8%, significantly lower than neighboring countries such as Thailand (131.0%), Singapore (117.3%), Malaysia (99.2%), and the Philippines (71.7%). This highlights Vietnam's untapped potential for capital market development and presents opportunities to attract additional investment inflows in the future.
Financial Sector: The Main Growth Driver of Vietnam's Stock Market
The stock markets in Southeast Asia heavily rely on the financial sector, which holds the largest market capitalization share in many countries across the region. In Singapore, the financial sector accounts for 58.2% of total market capitalization, while in Vietnam and Indonesia, this proportion is 34.7% and 30.7%, respectively. This underscores the financial sector's pivotal role in driving growth and development in regional stock markets.
Overall, compared to the stock markets of other Southeast Asian countries, Vietnam's stock market remains modest, with a significantly lower market capitalization than Indonesia, Thailand, or Singapore. Similar to these countries, however, the financial sector serves as a key driver of growth for Vietnam's stock market.
Market Classification: Vietnam in the "Frontier" Group
According to the FTSE Equity Country Classification as of September 23, 2024, Vietnam's stock market is currently classified as "Frontier," ranking lower than other Southeast Asian countries such as Indonesia and the Philippines (Secondary Emerging), Malaysia and Thailand (Advanced Emerging), and Singapore (Developed).
This classification reflects the current state of Vietnam's stock market, which remains relatively small, lacks high liquidity, and falls short of international standards compared to larger markets in the region. This presents both challenges and opportunities for Vietnam to enhance its financial infrastructure, improve policy transparency, and attract more foreign investment, moving closer to higher market classifications in the future.
Prospects of the Vietnamese Stock Market
The Vietnamese stock market has been experiencing persistent net selling pressure from foreign investors. This net selling trend began in 2020, extended through the end of 2021, saw a slight reversal at the end of 2022, and then surged again in the 2023-2024 period. As of November 15, 2024, foreign investors had net sold over VND 83,700 billion on the VN-Index (equivalent to approximately 3 billion USD). This marks a record high since the establishment of Vietnam's stock market.
Vietnam is not alone in this trend. In the ASEAN region, with the exception of Indonesia and Malaysia, which have seen light cumulative net buying since the beginning of the year, other markets such as Thailand and the Philippines have also been subject to net selling by foreign investors. Particularly in Q4 2024, foreign investors net sold across all markets in the region, with a significant increase in selling activity over the past month.
Country | Date | MTD | YTD | 12M |
Indonesia | 14/11/2024 | (555.2) | 1,975.2 | 2,566.9 |
Malaysia | 14/11/2024 | (158.8) | 234.6 | 388.9 |
Philippines | 15/11/2024 | (234.3) | (190.4) | (144.4) |
Thái Lan | 15/11/2024 | (300.4) | (3,726.4) | (4,067.2) |
Việt Nam | 14/11/2024 | (254.3) | (2,875.0) | (3,303.0) |
Despite Continued Net Selling, Vietnam Shows Strong Potential to Attract Foreign Investment Flows
Although the net selling trend persists, Vietnam offers several positive factors that promise to draw foreign capital back in the near future:
1. Economic and Political Stability
Amidst global uncertainties, such as political conflicts and economic recessions in various regions, Vietnam maintains its economic and political stability. Overcoming numerous challenges, Vietnam is estimated to achieve GDP growth exceeding 7% by the end of 2024, ranking among the fastest-growing economies in the region and the world. This solid foundation enhances Vietnam's appeal to international investors.
2. Prospects for Stock Market Upgrade
Vietnam has met 7 out of 9 upgrade criteria set by FTSE, positioning itself for a potential reclassification from a Frontier Market to an Emerging Market. Of the remaining two criteria, the pre-funding requirement has been revised and is awaiting FTSE’s evaluation, while the failed trade cost criterion is under development. Achieving an upgrade to Emerging Market status would bring significant benefits, including attracting substantial international capital flows from major investment funds, as many global funds are restricted to investing only in Emerging Markets, not Frontier Markets.
3. Government-Led Reforms
In pursuit of the stock market upgrade, the government is implementing reforms to improve market quality. Key initiatives include the issuance of Circular 68/2024/TT-BTC, which allows foreign institutional investors to trade without pre-funding 100% of their transactions, and enhanced disclosure standards. Additionally, the National Assembly is amending the Securities Law to address existing barriers. These regulatory updates aim to improve market accessibility for international investors, enabling greater foreign participation and contributing to increased liquidity and trading value in Vietnam's stock market.
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