Vietnam’s Economy Is Booming. Now It Needs to Sell More Stocks.
- Vietnam’s leader, To Lâm, is working to open the country’s financial markets and attract more foreign investment for infrastructure.
- FTSE Russell is poised to upgrade Vietnam to secondary emerging market status in September.
- Hurdles to opening the market include limits on foreign ownership, capital controls, and the legacy of recent domestic financial scandals.
Vietnam’s gross domestic product per capita has climbed nearly 40% over the past five years. Exports have surged 60%, shrugging off U.S. tariffs and benefiting from “China + 1” diversification.
The VanEck Vietnam exchange-traded fund has lost 15% over the same period. Thank limits on foreign ownership and antiquated plumbing that have held the country of 102 million in frontier market status, uninvestible for most global funds.
Tô Lâm, who took over as Vietnam’s Communist Party chief two years ago and added the president’s post in April, wants to change that. He is still more keen to attract buckets of foreign direct investment for the improved ports, railways, and data centers that could catapult Asia’s developing tiger into developed economy status. “This country is looking toward South Korea or Taiwan as a yardstick,” says Jens Lottner, CEO of Vietnam-based Techcombank.
If Lâm, 69, can dismantle his country’s iron financial curtain, the upside is substantial. “Vietnam has never looked this attractive throughout my career,” says Johannes Loefstrand, portfolio manager for T. Rowe Price’s Frontier Markets fund. “You have dynamic companies that are trading near their nadir.”
The process won’t be quick or easy.
Vietnam should cross a milestone in September when the index referees at FTSE Russell will upgrade it to “secondary emerging market” status, citing an end to prefunding requirements for foreign investors, among other improvements. The more influential shift from MSCI could take until 2030, Loefstrand predicts.
On the infrastructure side, Lâm increased state spending by 40% last year to $36 billion annually, aiming for double that amount from the private sector. Supporting declarations and directives have come thick and fast, culminating in a July 27 omnibus “decision” aimed at “a more balanced financial markets structure and reducing dependence on bank credit.”
Key details remain up in the air, however. Prevailing limits on foreign ownership of many listed Vietnamese companies is one. Still more important are capital controls and convertibility of the dong currency. “If they open up completely, they might see an exit of domestic savings for overseas investments,” Lottner says.
Lâm and his deputies don’t exactly have solid financial foundations to build on, either. Memories are still fresh from the 2024 conviction of real estate tycoon Truong My Lan for embezzling $12.4 billion from a bank she controlled. A smaller scandal surfaced last year when authorities found that three other banks had misused funds they raised on Vietnam’s fledging bond market.
Hanoi is trying a workaround through a sort of virtual offshore economic zone called the Vietnam International Financial Center, run by U.S. native and McKinsey & Company veteran Rich McClellan. “The VIFC is designed to give global institutions the regulations, dispute resolution, and clear operating rules they expect,” he explains.
Founded last year, that is also a work in progress. “For the next 12 to 18 months, the story is institutions and regulations,” McClellan says. “Trust takes time to earn.”
With Vietnamese stocks off 9% this year, partly because Lâm’s infrastructure push is constraining liquidity, many of these hurdles are looking priced in, T. Rowe’s Loefstrand argues. For investors worried about nosebleed-priced artificial-intelligence stocks, Vietnam offers old-fashioned names linked to 8% macro growth, from banks to retailers to steel. “These shares could appreciate 20% a year without rerating,” he says.
If only investors across the globe could buy them. Vietnam is working on it.