In 2024, Vietnam’s main indices returned nearly 10 %, thanks to corporate reforms and a strong economic backdrop, which have resulted in a rise in risk appetite for the asset class. Despite disruptions caused by powerful Typhoon Yagi in September, the economy expanded by 7.4 % during Q3 2024, exceeding government estimates, which forecast growth between 6.8 % and 7 % for the year.
The financial performance highlights underlying endurance as well as a healing from weather-related setbacks. Q3 trade turnover increased by 19 %, while foreign direct investment ( FDI) reached$ 17 billion, according to Hung Nguyen, senior economist at Dragon Capital, Vietnam’s largest fund manager.
” The market is shifting cogs and grabbing global interest”, Nguyen said. As industrialization continues to strengthen the country’s producing capabilities, tech giants are expanding their footprint. In addition to the charge advantages, Vietnam is also the main receiver of multinational companies adopting” China 1″ strategies, where US businesses are diversifying their production reliance beyond a second nation.
The Chinese-Vietnamese purchase transition has taken place without compromising Beijing and Hanoi’s diplomatic relations. Vietnam continues to be its largest trading partner and major importer of goods. In the first three quarters, bilateral trade increased by 21 % in comparison to the same period last year, reaching$ 148 billion.
Vietnam is attracting powerful producers who need highly skilled workers to expand their existence, helping the nation proceed up the production value chain. This attracts both fundamental industries and powerful producers.
The introduction of new tax-subvention methods, such as the New Digital Industry Law, will provide a financial and administrative platform to encourage large-scale jobs in semiconductor and data centers, according to the New Digital Industry Law, which is scheduled to be passed in June 2025. Without a comprehensive national framework, most investment cases are handled on a case-by-case basis, which is less efficient, Nguyen explained to FinanceAsia.
Cautious approach remains
Hanoi’s success comes at a time when Washington and Beijing’s relations are at a sour. Through the use of a bamboo diplomacy strategy, a term that emphasizes a flexible foreign policy that embodies the characteristics of the indigenous plant that can bend in multiple directions without breaking, Vietnam is navigating through geopolitical difficulties that other countries have also encountered.
Vietnam has managed to position itself as a trustworthy partner to the economic rivals, according to Ismael Pili, head of institutional sales at Ho Chi Minh Securities Corporation, in a conversation with FA.
Despite the investment lags and stable relationships with the world’s two largest economies, Pili claims that fund managers are cautious as questions surrounding trade tariffs and their effects loom over the region. Vietnam is a victim of its own success, he explains, because it presents itself as an alternative hub to China and draws unwanted attention to its current account surplus with the US.
The criticism that Vietnam is transhipping goods in order to avoid tariffs on Chinese products, with nearly finished items imported solely to be shipped outside of the nation to avoid a” Made in China” label, is one of the unintended consequences.
According to Dragon Capital’s Nguyen, Hanoi is developing a systematic framework to better monitor these accusations. Additionally, Vietnam’s Ministry of Industry and Trade and the US Department of Commerce are working closely together to expedite the signing of a rule of origin agreement.
Investment implications
Trade tariffs anywhere could prevent new capital from entering the region because of the integration of Asia’s supply chains. With Trump’s re-election, his administration may favor a transactional strategy to achieve early victories, using tariffs or other economic tools to advance US interests, Nguyen said, adding that the Trump administration may even enshrine its restrictions even more.
Those concerns are not without precedent. During his first term in office, president Trump classified Vietnam as a currency manipulator, a mostly symbolic designation. Plans to accuse other Asian exporters of devaluing their currencies unfairly could indicate the administration’s priorities in the search for trade agreements as early winners.
In light of these uncertainty, the burden of making incremental investments shifts to Hanoi’s corporate reforms and market developments to attract foreign capital. Vietnam, which has been ranked as a FTSE Frontier market since 2018, hopes to be reclassified as an emerging market at some point in 2025, which would improve market liquidity by passive funds monitoring the global benchmark.
Although passive funds are good for the market, investors are still looking for potential future earnings, which could be hampered by increased demand for skilled labor and unreliable power supplies, according to Ho Chi Minh Securities ‘ Pili.
Elevated household savings rates reflect the current reluctance to spend, while the legacy of the anti-corruption campaign is also making corporations even more risk-averse, even .
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