The Vietnamese stock market just finished the first eight months of the year with active signals, with the VN-Index increasing by 31.6% as of August 26, with the primary drivers coming from large-caps, particularly banking stocks, and certain leading ones, which gained up to 37.5%. This milestone has enabled the stock market to be among the top best global markets since the beginning of 2025, while also raising the issue of how much room the stock market has for growth in the final four months of the year.

“Bright door” in long cycle

In terms of valuation, the VN-Index now has a P/E ratio of 15.15, which is 5.4% higher than the long-term average since 2010. However, Huynh Hoang Phuong, Financial Analyst, stated that this value would still be low in comparison to the VN-Index's valuation history or the stock market's profit growth prognosis, which is expected to reach 16-18% in 2025 and continue to expand in double digits through 2026.

In terms of cyclicality, the VN-Index has barely progressed more than halfway through previous big uptrends (the last 500 trading sessions). As a result, if history repeats itself, the medium-term growth potential of the stock market remains enormous. "If stable EPS growth and market upgrades can become important catalysts, the VN-Index could move towards 1,800-2,000 points in 2026 when viewed from the fundamental factors," said Phuong.

Cash flow spread

Despite the strong medium-term view, Phuong believes the Vietnam stock market will see many short-term dips in September. Following two months of strong upswings with no evident correction, the VN-Index may begin a sideways trend for the reasons listed below.

First, there is pressure from foreign investors, who sold net strongly in August, and this trend may continue as the forward P/E valuation of the VN-Index has reached 13 times—equivalent to the MSCI average for emerging markets—in the context of the VND depreciating against the USD. Furthermore, the increasing participation of individual investors causes the market to experience greater fluctuations in the near future because they are both the driving force of the market and the factor that makes the VN-Index vulnerable to strong fluctuations in the face of unexpected unfavorable information.

Based on the foregoing, Phuong predicts that the VN-Index would move sideways or downward in September rather than swiftly increasing. This is the time for the market to "rest" in order to regain momentum for more sustainable development in the fourth quarters of 2025 and 2026.

It is worth noting that the valuation gap between bank equities and other stocks has recently widened significantly. This lays the groundwork for a wave of cash flow differentiation, similar to what occurred in 2021, when cash flow progressively expanded to other equities following a boom in banking and finance.

What stocks to pick?

In September, Phuong suggested that investors focus on the following stock groups:

The first is the retail and consumer sectors. The government has set a target of a 12% increase in overall retail sales for the second half of the year. Domestic consumer demand is projected to recover significantly in the near future. This is the primary reason for corporations to restructure their business sectors, such as MWG or MSN, in order to gain from increased market share.

The second is the construction and building materials sector. Accelerated public investment disbursement and real estate recovery have resulted in a significant rise in material and construction activity volume. Leading firms in the industry, including HPG, VCG, and HHV, are projected to gain.

The real estate industry ranks third. Despite a strong rally, several real estate stocks moved sideways again in August. When significant projects are launched on the real estate market later this year, these stocks may profit from individual investor money flows. Typical equities in this category include PDR, DXG, and KDH.

In summary, the Vietnamese stock market started September with a mix of positive long-term expectations and increased short-term pressure. This is not the time to become overly enthusiastic or stretch out your assets; rather, it is a moment for caution and analysis. When the market enters the next major wave, a strategy focused on sectors with solid fundamentals that are not yet overpriced and have the ability to attract fresh cash flows can help investors limit risks while maximizing return.