Cash Flow Explosion

During the August 5 trading session, substantial capital flow into banking blue chips and many other blue chips helped the VN-Index continue to rise, hitting 1,585 points. The entire trading volume reached more than 2.8 billion stocks, valued at VND 78,122.2 billion, more than doubling in volume and nearly 90% in value from the previous trading session on August 4.

MBB shares maintained their ceiling price of VND29,700/share, with almost 71.1 million shares traded. Meanwhile, STB, TCB, and TPB shares rose 3.4% to 5.7%, respectively. Similarly, SHB shares rose by roughly 6% at times.

Few investors thought the VN-Index would collapse to a low of 1,093 points in April, but it has recovered spectacularly in just over three months. According to MBS experts, this breakthrough is explained by the Vietnamese economy's continued positive growth, as well as a number of other supporting factors, including foreign capital flows, expectations for stable macroeconomic policies, and positive earnings prospects for listed companies.

Although the Vietnam stock market has recently fallen after each top, its uptrend remains solid in the last months of the year.

Foreign capital flows into the market

Foreign investors remained net sellers in recent trading sessions. On the HoSE alone, foreign investors continued to net sell VND2,237.66 billion during the trading session on August 5. The overall net selling value of foreign investors on the HoSE during the previous four trading sessions was VND16,592.48 billion.

However, several securities firms expected that when the Vietnamese stock market was formally upgraded, international investors would pour in USD 3-8 billion, primarily into large-cap equities. These are the stocks in the VN30, usually VIC, VHM, and VRE. In addition, there are banking stocks, including HDB, SHB, VPB, VCB, and CTG...

Mr. Tran Hoang Son, Director of Market Strategy at VPBank Securities Joint Stock Company (VPBankS), believes that the expectation of a market upgrade will help the Vietnamese stock market attract more international inflows. This is also the most crucial driver for the stock market between now and the end of 2025. According to Bloomberg data, most stock markets in nations experience a significant rise in foreign capital when they are officially upgraded. This foreign capital flow is frequently 5-7 times more than the average from the period preceding the upgrading.

Mr Nguyen Phan Dung, Deputy General Director of SSI Fund Management Company (SSIAM), commented on the subject, stating that when the stock market is upgraded, capital would flow into it via passive ETFs, with about USD 1 - 2 billion in the first stage of upgrading. Meanwhile, active ETFs can generate capital flows ranging from USD 5 to 10 billion.

"As a market participant, the SSIAM fund has always prioritised foreign consumers. Directing capital through ETFs to firms and assisting them in developing sustainably has a beneficial influence on the stock market,” said Mr Nguyen Phan Dung.

In preparation for the market upgrading, the government recently adopted several reforms and eliminated numerous obstacles. Notably, at a recent discussion with the Prime Minister, a representative from FTSE Russell (the London Stock Exchange) praised Vietnam's resolve and reforms in economic development and capital markets.

New growth cycle

Mr Petri Deryng, a representative of PYN Elite Fund, stated that in addition to the anticipated market upgrade, the FED is projected to initiate rate cuts within the next 6-12 months. This will actively support the Vietnamese bond market and help strengthen VND. In terms of macroeconomic policy, Vietnam's economy is predicted to grow at an 8% annual pace by 2025, with government support policies boosting growth through massive infrastructure projects, real estate projects, and extended credit. This will also help to build momentum for the Vietnamese stock market as it enters a new growth cycle.

The P/E of the VN-Index is near to the 10-year average as it reaches a new high; however, this peak is lower than that of 2021. Meanwhile, the monetary policy easing cycle in 2025, the high GDP growth forecast for 2025-2030, and the stock market upgrade all indicate that the P/E ratio will soon exceed the 10-year norm.

PYN Elite Fund expects the VN-Index to hit 1,600-1,800 points by the end of the year. Meanwhile, several securities firms estimate that the VN-Index will rise to between 1,600 and 1,700 points in the remaining months of 2025.