VN-Index in a new cycle: Where is capital flowing?

Positioning the Market

Amid ongoing volatility and clear divergence in global financial markets, investors are advised to approach the market systematically, based on cycle dynamics, macro capital flows, and long-term trends such as technology.

The VN-Index is currently entering wave 5 — the final growth phase of the cycle — with a target valuation range of 1,991–2,100 points. From a professional perspective, the most critical factor is identifying which phase of the cycle the market is in, in order to allocate capital more effectively.

According to Mr. Nguyen Viet Duc, an analyst at VPBankS, Elliott Wave theory indicates that the VN-Index has been operating within a growth cycle spanning from 2022 to 2026.

The early stage of the cycle, corresponding to waves 1 and 2, formed after the corporate bond crisis shock in 2022, when the market established a bottom and underwent a deep correction, retracing to around 1,150 points.

This was followed by wave 3, from May 2025 to November 2025, considered the strongest growth phase of the cycle, led by large-cap stocks — particularly companies within major ecosystems — driving the index sharply higher.

The market then entered wave 4, a corrective phase following an A–B–C pattern (decline A – rebound B – decline C), which ended in March 2026 at around 1,180 points. This bottom formation is strategically significant, as it created the largest accumulation opportunity of the year for institutional capital.

From that base, the VN-Index is now entering wave 5 — the final growth phase — with a target valuation range of 1,991–2,100 points. A key characteristic of wave 5 is the near-complete leadership of large-cap (blue-chip) stocks within the VN30 basket.

“This is also a phase of strong divergence. While the overall index continues to set new highs, mid-cap and penny stocks — many of which lost 50–70% of their value during wave 4 — are unlikely to return to previous peaks due to the required magnitude of gains. Therefore, portfolio restructuring toward large-cap stocks is not just a recommendation but a necessity to track the market’s primary trend,” Mr. Duc emphasized.

From a global perspective, positioning Vietnam’s stock market relative to other asset classes reveals a clear divergence. The U.S. market, represented by the S&P 500, has largely completed its growth cycle and is approaching the end of wave 5, carrying reversal risks at high valuation levels. Meanwhile, the VN-Index is only entering the strong phase of wave 5, implying substantial upside potential.

Other traditional assets are also showing signs of weakening: gold has broken its long-term uptrend and is exhibiting divergence, suggesting a possible peak; oil remains range-bound due to supply-demand balance; while Bitcoin has emerged as an effective speculative capital sink, gradually replacing gold’s role in high-risk portfolios.

Gold’s declining appeal — even amid geopolitical instability — signals a structural shift, with capital moving away from defensive assets toward higher-return channels such as equities and digital assets. In this context, Vietnam stands out as a key growth pole, combining macroeconomic stability with a favorable market cycle.

Momentum from the AI Industrial Revolution

One of the defining drivers of capital flows is the AI industrial revolution. No longer just a technological trend, AI is becoming a core determinant of economic productivity.

Forecasts suggest AI could contribute significantly to long-term GDP growth, even generating step-change improvements in production capacity. According to U.S. economist Nouriel Roubini, AI is a key solution for governments to address public debt pressures by boosting labor productivity.

In Vietnam, Mr. Nguyen Viet Duc noted that the AI race is creating clear differentiation among enterprises. The Viettel ecosystem — including VGI, VTP, and CTR — is emerging as a true leader in the new technology era, supported by advantages in infrastructure, data, and real-world deployment capability. Valuations for this group are no longer anchored to traditional metrics such as P/E or P/B, but instead reflect long-term technological dominance expectations.

Meanwhile, companies such as FPT and CMG represent the previous generation of internet technology firms transitioning into AI, albeit at a slower pace.

However, AI cannot develop without a foundation of energy and resources. This creates strong linkages with companies in rare earths and renewable energy such as MSR, KSV, PC1, and GEG — particularly as Vietnam commits to its Net Zero targets.

Alongside technological drivers, market reclassification is another key catalyst for capital flows. September 2026, when international ETF funds such as FTSE are expected to begin disbursement, is seen as a major milestone. Historically, smart money tends to move 3–6 months ahead, making the current period a strategic accumulation phase.

Stocks likely to benefit directly include HPG, transitioning from a cyclical to a long-term growth phase; VHM and VIC as large-cap leaders; GMD benefiting from international trade; along with other blue-chips such as VCB, VNM, and FPT.

On the downside, the real estate market continues to face severe liquidity constraints, as housing affordability declines sharply. This forces monetary policy toward easing, putting downward pressure on lending rates. As a result, banking sector margins are narrowing, making factors such as CASA increasingly critical in stock selection rather than broad-based investment.

Beyond long-term pillars, the retail sector is emerging as a bright spot, supported by domestic consumption recovery and IPO plans. MWG is expected to benefit from the listing of Dien May Xanh, with technical signals indicating entry into a strong growth phase after breaking a long-term bottom. Meanwhile, MSN represents a value investment strategy, with the CrownX IPO story appealing to patient investors willing to accumulate at low valuations ahead of financial deal realization.

Overall, the market is entering the most favorable phase of its growth cycle, where upward momentum is strong and corrections are limited. In this environment, maintaining exposure to blue-chip stocks while capturing long-term themes such as AI and energy will be key to maximizing returns before the market approaches its projected peak by the end of 2026.