Vietnam is a diversified and well-valued investment opportunity due to growth-oriented government reforms and a diverse stock market
Investors would be wise to take note of the enormous growth story that is taking place in Vietnam.
According to the World Bank, its economy expanded by 8% last year, making it the 13th fastest growing in the world.
Artificial intelligence (AI) hardware manufacturers dominate a large portion of the stock markets in the rest of Southeast Asia, but Vietnam's stock market is much more diverse, with a comparatively high weighting towards traditional industries, which means it can provide true diversification.
"A compelling long-term environment for active investors is created by the combination of economic growth, reform, and attractive valuations," stated Tung Dang, chief economist at Dragon Capital, an asset manager that focuses on investing in Vietnam.
Although it hasn't been classified as an emerging market yet, it will be in a few weeks. The redesignation will bring significant amounts of passive fund flows into the nation's stock market right away. Over the coming years, this could be followed by billions of additional capital from active managers, adding to the numerous reasons why Vietnam is currently the most desirable region to invest in.
Growth is being propelled by government reforms.
One of the strongest arguments for investing in Vietnam is its rapid growth, which is supported by government policies.
According to Craig Martin, co-chairman of Dynam Capital, Vietnam is one of the few global markets that provides investors with both political stability, structural economic growth, and appealing valuations.
"Vietnam has developed into one of Asia's most dynamic manufacturing and export economies over the past three decades," he stated. "Today, it is entering a new stage of development, propelled not only by exports but also by rising domestic consumption, household wealth, financial deepening, and adoption of new technologies. Government reforms are driving this."
By increasing foreign investment and RandD spending, for instance, these reforms are specifically aimed at strengthening Vietnam's private sector. Resolution 68 refers to entrepreneurs as "new warriors on the economic front," demonstrating the centrality of entrepreneurship.
The 65-story Lotte Center Hanoi is among Vietnam's tallest structures.
Vietnam's growth story is centered on urbanization, economic reforms, and consumption.
"The government has now set an ambitious target of 10 percent annual growth over the next decade and has rolled out a new wave of domestic reforms dubbed Doi Moi 2.0 to help get there," stated Vinacapital Vietnam Opportunity Fund lead portfolio manager Khanh Vu.
Vu continued, "Vietnam was lifted from poverty to middle-income status in the late 1980s by the original Doi Moi reforms." "This second wave seeks a similar transition to a high-income economy, following the same trajectory as other developed Asian economies."
This is supported by a robust demographic trend, similar to that of many emerging markets, which includes a young, growing, and consumer-driven middle class, as well as quick urbanization and increased productivity.
The stock market in Vietnam.
According to the MSCI Vietnam Index, the real estate and financial sectors control 44.4% and 24.6% of the Vietnamese market, respectively, as of June 30.
Due to the fact that two real estate stocks, Vingroup and its former subsidiary Vinhomes, together account for more than 38% of the index, this is somewhat skewed.
However, according to Vu, this dominance of finance and real estate is to be expected in an emerging economy.
"Banks continue to be the main source of funding and the foundation of economic growth, while real estate developers are crucial in propelling urbanization, which is only about 40 percent in Vietnam compared to 67 percent in China, 63 percent in Thailand, and 75 percent in Malaysia," he stated.
Hoa Phat, the nation's biggest steel producer, was identified by Vu as a major beneficiary of urbanization and infrastructure spending. He also emphasized the significance of hard asset-linked sectors (industrials, construction materials, energy, and utilities) within the Vietnamese market.
"With rising incomes, urbanization, and an expanding middle class, consumer businesses are another important theme," Martin stated. "Food producers, retailers, and consumer services continue to experience long-term structural growth."
The relative absence of state-owned businesses in its biggest stocks makes Vietnam stand out among emerging markets. "Many of the leading companies were started by entrepreneurs," Martin notes. State investment in the financial sector does exist, but it usually occurs in conjunction with specialized foreign investors.
Verified is Vietnam's emerging market status.
Vietnam will be reclassified from a frontier market to an emerging market, according to FTSE Russell's April 2026 announcement. This process will start on September 21 and be carried out in four stages over the next 12 months.
As Vu notes, foreign investors have been net sellers of Vietnamese stocks in recent years, so this might be a significant shift.
"The AI-related frenzy and the higher interest rate environment in the US have been pulling capital elsewhere," he stated.
Because the market will be open to a larger group of institutional investors and passive funds whose current mandates prohibit them from investing in Vietnam, emerging market classification may be able to buck this trend.
According to Dragon Capitals Dang, "passive investment from funds that track emerging-market indices will have the most immediate effect."
However, since the majority of the projected new funding is probably going to come from active investors, the impact is unlikely to materialize overnight.
"I believe the bigger story is that an upgrade raises Vietnam's visibility among global investors, even though passive inflows receive most of the attention," stated Martin. "Many active managers become interested once institutions start studying the market, resulting in more stable sources of funding."
When inclusion is finished, which is anticipated to happen in September 2027, Dang estimates that the potential passive tracker inflows will be between £1.5 and £2 billion. After this, active allocations are anticipated to increase total foreign inflows to £510 billion.
Discovering worth in Vietnam.
Despite its remarkable growth rates, Vietnam's market is frequently disregarded for various reasons, despite its exceptional value.
According to Vinacapitals Vu, "the market is currently trading at about 13x forward P/E and closer to below 10x if we exclude some anomalies." "That's not an economy expanding at one of the fastest rates in Asia; rather, it's a valuation usually associated with a period of economic stress."
Dang contends that despite growing earnings and the nation's robust economic expansion, Vietnamese stock prices are still appealing when compared to past levels.
"We anticipate strong profit growth for the larger companies, but the market is still trading below its own historical valuation ranges and at a discount to many regional peers," he stated. "Despite increased oil prices, tighter global financial conditions, and geopolitical unpredictability, earnings expectations have also held up well."
For the typical portfolio, which is often dominated by a small number of large-cap US technology companies, Vietnam can also provide diversification.
According to Vu, "investing in Vietnam means investing in the traditional sectors but experiencing tremendous growth potentials, following the same pattern as developed markets experienced 20-30 years ago."
How to make investments in Vietnam.
Passive investment isn't typically thought of as the best way to invest in Vietnam due to its small size, lack of investment coverage, and the excessive weighting of the index's two largest stocks.
Martin stated, "Vietnam is not merely an index story." "Quality, governance, and capital allocation vary greatly amongst companies. The choice of stock is still crucial."
Investors in the UK who are monitoring the Vietnamese market also have limited access to passive funds. Additionally, it is challenging to purchase the nation's stocks directly; however, there are a few investment trusts that concentrate on the nation.
Managed by Dragon Capital, Vietnam Enterprise Investments (LON:VEIL) is the biggest of these in terms of market capitalization. This focuses on Vietnamese businesses that have strong corporate governance, appealing growth and value potential, and alignment with the nation's fundamental economic growth drivers. As of June 30, Vingroup is the largest holding (although VEIL is much underweight in comparison to the index), followed by consumer retail chain Mobile World and state-owned bank BIDV.
Vinacapital Vietnam Opportunity Fund (LON:VOF) is sector-neutral and invests in both privately held and publicly traded Vietnamese businesses. Top holdings as of June 30 include Vinhomes and Mobile World, real estate development company Khang Dien House, commercial bank MB Bank (a subsidiary of the Vietnamese Ministry of National Defense), and port operation and logistics company Gemadept.
Lastly, Dynam Capital manages Vietnam Holding Ltd (LON:VNH), which concentrates on high-growth businesses in Vietnam, specifically in the areas of domestic consumption, industrialization, and urbanization.
See our article on The best funds to buy as Vietnam evolves for additional details on each of these investment trusts with a Vietnam focus.
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