Will stock market upgrade push the VN-Index to 1,800?

A Historic Rally in the Making

The VN-Index has surged 15.2% quarter-to-date (QTD), reaching a record high of 1,584 points on August 8, 2025. The U.S. announcement of a 20% reciprocal tariff on Vietnamese goods in early July not only eased investor concerns about the economy but also spurred a wave of speculative inflows driven by expectations of an upcoming market upgrade by FTSE, projected for September 2025. As of August 8, the VN-Index has gained 15.2% QTD and 25.1% year-to-date (YTD).

All sectors have posted gains this quarter. Securities brokerage led the pack with a 40% QTD increase, buoyed by speculation around the market upgrade and the potential launch of a cryptocurrency exchange in Vietnam.

Conglomerates (23.6% QTD), led by VIC and GEX, also contributed significantly to the rally. Real estate (23.5% QTD) remained among the top three best-performing sectors, benefiting from the accelerated resolution of project licensing issues.

Banks are attracting increasing attention as strong credit growth signals solid earnings momentum ahead.

Liquidity surged to record levels, with average daily trading value reaching VND 32.8 trillion (USD 1.3 billion) in July 2025—surpassing the previous record of VND 30.8 trillion in November 2021. Daily trading volume even hit VND 72.8 trillion (USD 2.8 billion) on August 5. Foreign investors net bought VND 8.7 trillion (USD 335 million) in July, the strongest monthly inflow since December 2022.

Slower but Higher-Quality Growth Expected in H2 2025

Earnings for H1 2025 have been released, with listed companies outperforming expectations by 10 percentage points and reporting 34% year-on-year (YoY) growth, driven by strong performance across most sectors.

Export-driven sectors (e.g., marine logistics 25% YoY) benefited from early delivery cycles, though export services (e.g., IT 21% YoY) faced headwinds due to delayed projects caused by tariffs.

Domestically, sectors linked to infrastructure investment (steel 26% YoY, real estate 64% YoY) received strong support from government spending. This also fuelled robust bank credit growth (10% YTD or 19% YoY), though increased competition weighed on net interest margins and overall banking profits (16% YoY).

Consumer sectors remained subdued, but effective cost management helped sustain positive results. Aviation logistics stood out (152% YoY), bolstered by the tourism boom.

The impact of the 20% tariff appears manageable, with uncertainty easing, helping Vietnam retain its FDI appeal.

Domestically, the government is aggressively targeting 8% GDP growth, backed by proactive fiscal policies. Local deposit interest rates are projected to rise by 0–50bps due to higher funding demand, though the SBV is likely to maintain an accommodative stance if the Fed continues cutting rates.

Government and corporate investment will remain the primary growth drivers in H2, while personal consumption is expected to recover later—supported by improving consumer confidence, potential personal income tax reforms, and wealth effects from rising real estate and stock markets. This should result in broader-based and higher-quality growth in H2 2025. Market earnings growth forecast for FY25E is revised up by 3.4 percentage points to 18.5%.

VN-Index Target Raised 20% to 1,800 Points

As previously noted, the VN-Index is undergoing one of the most impressive rallies in its history, repeatedly hitting new highs. Average liquidity reached record levels in July 2025, fuelled by favourable tax policy, upgrade expectations, and abundant capital. Optimism around the FTSE reclassification will likely continue to drive the market through August and September, though investors should be cautious of a potential "sell-the-news" scenario.

Despite two-thirds of YTD gains already priced in, market valuations remain near the 5-year average and are not overstretched, supporting the continuation of the rally. A positive outlook is maintained for H2 2025, with the VN-Index year-end target raised 20% to 1,800 points, based on a target P/E of 14.5x (in line with the 5-year average) and FY25 EPS growth of 18.5% YoY.

Five key sectors are prioritized: infrastructure-related (steel, real estate), strong credit growth (banking), and structural demand (IT, aviation).

Market Upgrade Within Reach

After one year of implementing the non-prefunding rule in Vietnam—without a single failed trade—FTSE is now expected to assign a “PASS” to the final outstanding criterion: “Settlement – Cost Associated with Failed Trades.”

In its latest review, FTSE had already deemed all other criteria as met, with only “Settlement” still marked as “Restricted.” Recent developments, including the meeting between Prime Minister Pham Minh Chinh and FTSE representatives, and Vietnam's status as the best-performing market in ASEAN YTD, significantly increase the likelihood of Vietnam being officially upgraded to Emerging Market status in September 2025.

Six stocks—HPG, MSN, VCB, VHM, VIC, and VNM—are expected to qualify for inclusion in the FTSE Emerging Markets Index.

In addition, 12 other stocks are close to qualifying, each missing only one criterion: BID, FPT, CTG, TCB, GAS, VPB, MBB, GVR, ACB, LPB, SAB, and STB.