Vietnam’s stock market remains attractive for long-term investors despite recent volatility, a senior analyst at Mirae Asset Securities (MAS) said, urging a cautious and phased investment approach.

The benchmark VN-Index had fallen for three consecutive weeks as of last Friday, marking its steepest monthly decline in six years amid global market turbulence linked to U.S.-Iran tensions. The index declined 56.62 points to close at 1,591.17 on Monday, extending losses into the fourth week of the conflict.

Dinh Minh Tri, head of research for retail clients at Mirae Asset Securities, said the recent correction has brought market valuations down to more attractive levels, with the price-to-earnings (P/E) ratio falling below 12 times, compared with a historical average of around 15 times.

“These factors support a positive outlook for long-term investors,” Tri commented in a talk show called The Financial Street on Vietnam Television (VTV).

Dinh Minh Tri, head of research for retail clients at Mirae Asset Securities. Photo courtesy of talk show The Financial Street.

Tri noted that with oil prices elevated, interest rates no longer low, and the market having corrected by more than 10%, investors should adopt a cautious and structured strategy rather than chasing short-term gains.

He recommended a three-layer approach, starting with risk management. Investors should limit leverage and allocate capital gradually, maintaining a certain level of cash to navigate potential volatility driven by geopolitical risks and commodity price swings.

The second layer involves building portfolios around major themes for 2026, including a potential market upgrade by FTSE Russell in September this year, state-sector development orientations under the Politburo's Resolution 79, and the public investment disbursement cycle. Sectors such as state-owned banks, securities firms, infrastructure construction, power and water utilities could attract capital flows at different stages.

The final layer focuses on defensive stocks with stable fundamentals, steady cash flows, strong dividend yields, and low leverage, helping to reduce portfolio volatility if the market continues to correct or move sideways.

Two-phase capital inflows expected

Tri said market liquidity could evolve in two phases leading up to a potential upgrade.

From March to September, active funds may gradually increase exposure to stocks eligible for inclusion in global indices, particularly large-cap names, as markets tend to price in expectations ahead of official announcements.

The second phase would likely coincide with the expected upgrade effective date around September 21, 2026, when passive funds tracking indices would need to buy Vietnamese equities to meet portfolio weightings, with inflows estimated at more than $500 million.

Structural drivers remain intact

Despite near-term challenges, Vietnam’s stock market continues to strengthen its role as a medium- and long-term capital channel for the economy, with significant growth potential, Tri said.

Key drivers in 2026 include the anticipated upgrade by FTSE Russell in September this year and a record public investment plan worth about VND8,500 trillion ($322.62 billion) for 2026-2030, which is entering a peak disbursement phase.

FTSE Russell held a key review meeting on March 19, with results expected on April 7. The review is likely to confirm Vietnam’s continued compliance with upgrade criteria, following regulatory improvements including Circular 08 allowing foreign investors to place orders directly via global brokers, effective from February.

Tri said sustainable market development would depend on addressing three key areas: improving regulatory quality and corporate governance, expanding institutional investor participation, and upgrading market infrastructure.

Vietnam’s investor base remains heavily skewed toward retail investors, making the market more volatile. In contrast, institutional investors account for 50-60% of market capitalization in more developed markets such as South Korea and Taiwan.

He also highlighted the need for stable operation of the KRX trading system and the rollout of a central counterparty (CCP) clearing system, expected in the first quarter of 2027, to meet criteria for a potential future upgrade by MSCI.