In the short term, however, the firm advised investors to reduce leverage, maintain ample liquidity, and remain cautious toward risk assets.

According to its latest market update, SGI Capital said Vietnam's economy continued to demonstrate solid fundamentals, with GDP expanding 8.18% in the first half of the year.

The industry-construction and services sectors remained the primary drivers of growth. Foreign direct investment (FDI) also stayed robust, with registered capital reaching $34.65 billion, up 61% year-on-year, while disbursed FDI totaled $13.03 billion, an increase of 11.2%.

However, to achieve the government's full-year double-digit growth target, the economy will need to accelerate significantly in the second half of the year, particularly through faster public investment disbursement and stronger private sector investment. In addition, risks stemming from U.S. tariff policies and ongoing global geopolitical uncertainties need to be closely monitored.

SGI Capital considered exchange rate stability one of Vietnam's key achievements during the first half of the year. Despite a trade deficit of $16.65 billion and continued foreign net selling in the stock market, the State Bank of Vietnam managed to keep the exchange rate stable.

The company attributed this to a range of policy measures, including forward U.S. dollar sales, expanded foreign currency lending, increased access to international funding for commercial banks, and tighter controls over the unofficial foreign exchange market and gold smuggling. Nevertheless, if the trade deficit persists while the U.S. dollar continues to strengthen, the central bank may need to intervene further to stabilize the exchange rate.

Regarding liquidity, SGI Capital noted mounting pressure as credit growth continues to outpace deposit growth. The banking system's loan-to-deposit ratio (LDR) has risen to around 115%, matching the peak reached during the 2010 credit cycle.

Meanwhile, plans to expand public investment through a fiscal deficit of around 5% of GDP, together with a higher public debt ceiling, are expected to increase government bond issuance. While large-scale infrastructure and urban development projects will support long-term economic growth, they will also significantly increase capital demand, placing additional pressure on liquidity, exchange rates, and interest rates.

Stock, real estate markets cool simultaneously

According to the company, liquidity in the stock market - the most sensitive indicator of monetary conditions - has declined by roughly 70% from the buoyant period a year ago, with average daily trading value falling below VND15 trillion ($571.25 million).

At the same time, real estate transactions have slowed considerably, while property prices in many previously overheated areas have declined by 10-15%. The automobile market and other discretionary consumer segments have also begun to experience weakening demand.

SGI Capital believed the property market is entering a period of oversupply following years of rapid expansion fueled by low interest rates. If property prices remain elevated relative to household income, the oversupply could persist for several years.

The company expected property investors using high leverage to be among the first affected as interest rates rise, increasing the risk of higher non-performing loans (NPLs) in the banking sector over the coming quarters.

Regarding foreign capital flows, SGI Capital noted that although expectations of Vietnam's market status upgrade remain intact, supported by ongoing regulatory reforms, foreign investor sentiment has yet to improve meaningfully.

According to the company's estimates, foreign investors recorded net sales of more than VND15 trillion in June and over VND80 trillion ($3.05 billion) year to date. Meanwhile, substantial liquidity has been absorbed by initial public offerings (IPOs) and new share issuances, leading to a sharp decline in cash balances held at securities firms.

Notably, SGI Capital estimated that margin lending as a percentage of free-float market capitalization has exceeded 14%, a very high level compared with many regional markets.

The company said that beyond the market upgrade story, global capital continues to favor companies and sectors linked to artificial intelligence (AI). Meanwhile, the VN-Index on the Ho Chi Minh Stock Exchange (HoSE) remains heavily dependent on a small number of large-cap stocks with relatively high valuations, limiting the return of foreign capital.

According to SGI Capital, although overall equity valuations have become more attractive, particularly among banks and blue-chip stocks, many cyclical stocks could continue to decline as the economy enters a slower-growth phase.

The company argued that the banking sector has already passed a decade-long growth cycle, while mounting liquidity pressure, rising interest rates, and deteriorating asset quality are likely to weigh on earnings going forward.

SGI Capital said the combination of rising interest rates, sustained foreign capital outflows, weakening market liquidity, and elevated leverage across both the stock and real estate markets has created significant market imbalances. Should interest rates continue to rise, the deleveraging process is likely to intensify, pushing many asset prices to more attractive levels.

"During previous interest rate tightening cycles, opportunities to purchase high-quality assets at discounted prices typically emerged after the market had gone through a deleveraging process," SGI Capital said.

Accordingly, the company said it will continue to prioritize risk management, preserve liquidity, and wait for more favorable market conditions before deploying capital on a larger scale. At this stage, SGI Capital recommended that investors reduce debt, accumulate cash, and accept deposit returns rather than increase exposure to higher-risk asset classes.