However, the VN-Index has shown a rather muted response. In the year to October 28, the index rose just 1.14%, better than September’s 1.2% drop but far below the gains of 9.15% in July and 12% in August.

Investor sentiment has also turned more sensitive to negative news such as the Government Inspectorate’s conclusions on several corporate bonds, rising bank deposit rates, and a continuously strengthening USD/VND exchange rate in the free market.

Talking with The Investor, Truong Hien Phuong, a senior director at KIS Vietnam Securities, said the VN-Index’s recent pause is a normal correction within a medium- to long-term uptrend. A stable macroeconomic foundation, the government’s goal of double-digit GDP growth for 2026-2030, and a low interest-rate environment will continue to underpin the market, he said.

The market has seen many positive developments in Q3, yet the VN-Index’s performance in October was modest. What are the reasons behind this?

The current movement of the index reflects a short-term correction within a long-term uptrend. From the April 2025 bottom to September, the VN-Index gained about 500 points - a strong rally that brought considerable profits to investors.

With valuations now relatively high, at a P/E ratio of 15-17 times compared with 12-13 times previously, many investors have chosen to lock in profits, while those holding high cash positions remain cautious about buying.

Large domestic capital - often called “smart money” - has not yet returned to the market. This can be seen in the recent drop in liquidity, with total trading volume over the five sessions from October 22 to 28 not exceeding one billion shares.

Foreign investors have also been selling heavily, with net outflows of several trillion dong per session (VND1 trillion = $37.98 million). Once foreign investors sell, they often do so aggressively, even accepting lower intraday prices. This selling pressure, combined with weaker liquidity, has weighed on the VN-Index and dampened domestic investors' sentiment.

In short, after a long rally since April, combined with valuation and foreign-selling factors, it’s clear that much of the positive news has already been priced in or are not strong enough to attract cash flows to return.

Yet many investors say that despite the index’s gains, their portfolios have underperformed or even lost money. Why is that?

The VN-Index’s rise has been driven mainly by large-cap stocks in the VN30 basket, particularly VIC (Vingroup) and VHM (Vinhomes). In 2025, VIC contributed more than 157 points to the VN-Index, and VHM added around 64.7 points - the two biggest positive contributors on the Ho Chi Minh Stock Exchange.

These stocks have rallied on solid business results, drawing institutional and fund inflows as well as speculative money from retail investors. However, few retail investors have the patience or capital to buy and hold such blue chips for the long term - they mostly trade them for short-term gains.

Instead, many retail investors chase small- and mid-cap stocks, or even penny stocks, assuming that when the index rises, their holdings will follow - a mistaken belief.

Furthermore, many individuals tend to buy aggressively when the market is rising and sell heavily when it falls. This behavior explains why, when leading stocks turn down, selling pressure quickly spreads across the market.

The free-market USD/VND exchange rate has been rising. Do you see this as a risk for equities?

A persistently high exchange rate affects both domestic and foreign investors. For foreign investors, a strong USD/VND rate eats into their profit margins once they convert back to dollars - one reason for the continued foreign net selling.

For domestic investors, currency pressure raises concerns that it could limit further monetary easing. In July’s regular government meeting, State Bank of Vietnam Governor Nguyen Thi Hong said that if exchange rate pressure keeps rising, the central bank may refrain from further rate cuts to preserve stability.

That’s why I expect signals of U.S. Federal Reserve rate cuts this week to help ease pressure on the Vietnamese dong and make Vietnamese equities - and emerging markets in general - more attractive.

When the Fed cuts rates, U.S. Treasuries become less appealing, the dollar weakens, and this creates positive spillovers for emerging-market currencies. It would also give Vietnam’s central bank more room to maintain an accommodative policy stance, which in turn could bring back foreign inflows.

Foreign investors also need currency-hedging tools to manage FX risks, and the absence of such instruments partly reduces Vietnam’s market appeal. I hope regulators will soon develop appropriate hedging mechanisms.

What factors could support the market going forward?

Many investors are overly driven by news - selling when negative headlines appear and buying when they see positive ones. But information alone doesn’t dictate market direction; the key factor is the behavior of smart money.

As we said at the beginning, despite the positive information, smart money has not entered the market.

Investors need to understand that smart money is a large amount of money that has its own rules. The stock market is currently in a resting phase, adjusting to bring the index back to a more reasonable price range.

A more reasonable stock market valuation will be a necessary condition for the cash flow to return. On the other hand, this is also a good opportunity for investors with a high proportion of cash to enter the market. Of course, cheap stock market valuation is one thing, which stocks to invest in is another.

Historically, in markets with stable macro fundamentals, short-term corrections of 5-10% are common within uptrends. Vietnam’s long-term story remains underpinned by three drivers: A stable macroeconomic foundation and the government’s double-digit GDP growth target for 2026-2030; Continued public investment; A low interest-rate environment; and the country’s stock market status upgrade trajectory.

Analysts estimate that once Vietnam's market status is officially upgraded, the market could receive over $1 billion in new foreign inflows. If it advances further to "advanced emerging market" status under FTSE Russell and MSCI, inflows could reach $5-10 billion.

To achieve its double-digit growth target, Vietnam cannot rely solely on bank credit - capital markets must play a larger role. Therefore, ongoing reforms to make the stock market more transparent, sustainable, and aligned with higher international standards will be crucial to attracting new investment.

What should investors do at this stage?

From its peak to the October 28 low, the VN-Index fell more than 10%, and many stocks are now trading at attractive levels - down 5-15% from recent highs. The index’s P/E has come down to around 12-13 times, which is a reasonable valuation for gradual accumulation.

Investors should focus on stocks with solid Q3/2025 earnings and consistent growth across quarters. However, they must be selective - not every stock will rise just because the market does.