Vietnam is booming, but foreign cash is fleeing from stocks

• Vingroup and its subsidiaries account for over 20% of Vietnam's benchmark index after surging 736% in 2025, trading at a lofty P/E ratio of 96 and creating concentration risks that deter diversified foreign funds
• Foreign ownership in Vietnam's market has dropped to roughly 14.5% as investors favor more liquid markets like Taiwan, South Korea, and China amid concerns about Trump-era tariff policies affecting Vietnam's China-redirected trade
• FTSE Russell is expected to upgrade Vietnam from frontier to secondary emerging market status in September, with MSCI potentially adding it to a watchlist as early as June, though full MSCI upgrade is not expected before decade's end

Vietnam Market Summary: Record Outflows Despite Strong Economic Growth

Key Developments:

Vietnam's benchmark stock index surged 41% in 2025—its strongest rise in eight years—as the economy expanded 8%. Despite this rally, foreign investors are fleeing, with net equity outflows hitting a record $5.1 billion in 2025. Foreign ownership has declined to approximately 14.5% of the market.

Market Upgrade Progress:

FTSE Russell is expected to upgrade Vietnam from frontier to secondary emerging market status, effective September 2025, with confirmation anticipated in March or April. MSCI may add Vietnam to its watchlist as early as June, though an actual upgrade is unlikely before 2030.

Vingroup Concentration Risk:

Developer-to-carmaker conglomerate Vingroup dominates the market, accounting for over 20% of Vietnam's benchmark index alongside its subsidiaries. The company's stock soared 736% last year, creating a nearly $50 billion valuation with a price-to-earnings ratio of 96—raising concerns about excessive single-stock exposure and market distortion.

Investor Concerns:

Foreign investors cite multiple obstacles:

• Tariff risks from uncertain U.S. trade policy under the Trump administration
• Foreign ownership caps creating 20-30% price premiums for international buyers
• Limited liquidity and transparency compared to Taiwan, South Korea, and China
• Lack of diversification with market heavily concentrated in banks, developers, and Vingroup

Broker Sentiment:

Eight brokers and fund managers either declined to recommend Vingroup or refused to discuss the company, with some citing fear of reprisals. Dragon Capital's flagship Vietnam fund saw two-thirds of shareholders exit, reflecting broader discomfort with market structure despite Vietnam's strong economic fundamentals.