The VN-Index, based on the Ho Chi Minh Stock Exchange (HoSE), has consistently climbed in the first year of a U.S. president’s term, irrespective of which party has won the election or what the market’s reaction was prior to election results, according to a report by securities firm KIS Vietnam.

The report, which analyzed the Vietnamese stock market’s performance in the last five U.S. presidential elections, also found that in the year elections took place, the VN-Index tended to fall or move sideways, primarily as a result of election anxiety and uncertainty over new policies.

Most recently, in 2017, the VN-Index surged 47.8 percent after U.S. President Donald Trump got elected. Trump issued a series of tough policies to reduce trade deficits and protect the domestic manufacturing industry.

These policies have caused many companies to move their operations from China to other countries, including Vietnam, helping the local stock market.

"Even when president-elect Joe Biden takes office, the supply chain shift from China to Vietnam is unlikely to be reversed in the medium term because the Democrats support protectionist policies", leaving room for the stock market to continue growing next year, the KIS report stated.

It said that Vietnam's stock market will enjoy some supportive factors when Biden takes office. To deal with the pandemic crisis, Biden has pledged to expand loans for small businesses, increase minimum wages and make stimulus payments to families.

In addition, the President-elect has also announced the provision of free Covid-19 testing to all people. This, along with news that pharma giants Pfizer and BioNTech are testing vaccines that are 90 percent effective will help maintain positive sentiment for both U.S. and Vietnamese equity markets, the KIS reprt said.

Biden's new tax policy is also likely to exert some pressure on U.S. financial markets, spurring cash flow that seeks out more profitable markets.

Vietnam is the second largest attractor of foreign portfolio investment into its Exchange Traded Funds (ETFs) in Southeast Asia, while neighbors Malaysia and Singapore have recorded negative cash flows, the report noted.As a result, although foreign investors have been net selling Vietnamese stocks in the last few months, KIS believes they will return to being net buyers when the new president takes office.

The VN-Index had soared 1.46 percent to 1,045 points last Friday, its highest level since the beginning of the year.