Experts predict that 2025 will be a breakout year for the stock market, with the benchmark VN-Index potentially reaching or even surpassing the 1,500-point mark.

A local investor at a securities company in Hanoi. Photo: Khanh Linh/The Hanoi Times

VN-Index rises over 12% in 2024

Vietnam's stock market had a strong start in 2024, with the VN-Index up 13.6% in the first quarter compared to the end of 2023. However,   exchange rate concerns and foreign investor sell-offs caused the index to lose momentum and fail to break through the 1,300-point resistance level. By the final trading session of 2024, the VN-Index closed at 1,266.78 points, marking a 12.1% gain year-over-year.

The market's growth was supported by sound fundamentals, particularly economic recovery, and measures to address structural bottlenecks, such as advancing market upgrades. One notable initiative was the issuance of Circular 68/2024/TT-BTC by the Ministry of Finance, which amended the regulations on securities trading, clearing, and settlement.

Key contributors to the market's performance included transportation, technology, and, most notably, banking stocks. Banks benefited from credit growth, which was sluggish in the first half of the year but picked up in the third and fourth quarters. Additionally, legacy non-performing loans were largely resolved. Many banks embraced technological innovations to cut costs and improve operational efficiency, leading to stronger business outcomes.

Market liquidity surged in the first half of 2024 but moderated to approximately $600 million per trading session from October to December. For the year, the average daily trading value on the Ho Chi Minh City Stock Exchange reached about $850 million, reflecting a nearly 20% increase compared to 2023.

On the downside, there was significant net selling by foreign investors, totaling approximately $3.8 billion, driven by exchange rate pressures. This trend led to capital outflows from emerging and frontier markets to the U.S. and Europe. This phenomenon was not unique to Vietnam but was observed in other markets as well. Nevertheless, strong domestic inflows helped offset the impact of foreign sell-offs, preventing a steep market decline.

Positive year for stock market?

Nguyen The Minh, Director of Analysis at Yuanta Vietnam Securities, predicts that 2025 will be a year of market acceleration, supported by several key factors. Externally, historical data suggests that the first year of a new US presidential term typically sees strong economic growth and robust stock market performance, particularly in emerging and frontier markets, including Vietnam.

Meanwhile, the Vietnam Government aims for 8% economic growth in 2025. In 2024, despite limited contributions from the real estate sector, the economy grew by over 7%. “With real estate expected to rebound, achieving 8% growth in 2025 seems feasible,” said Minh in a report.

Another catalyst for the market is the anticipated market upgrade. FTSE is expected to officially upgrade Vietnam's market status by September 2025. Additionally, the KRX system (an IT trading management platform developed under an agreement between the Ho Chi Minh Stock Exchange and the Korea Exchange) will go live in 2025. This launch is expected to trigger a wave of stock transitions from the Upcom board to the Ho Chi Minh Stock Exchange, alongside new listings and accelerated privatization and listing of enterprises, he continued.

Experts from Vietcombank Securities (VCBS) project that under the baseline scenario, the VN-Index could reach 1,555 points in 2025. In a more optimistic scenario, it may hit 1,663 points. Global monetary easing trends and domestic fiscal easing capacity are expected to provide favorable conditions for growth.

Meanwhile, analysts at MB Securities (MBS)  point out that stable macroeconomic fundamental, ongoing institutional reforms, and favorable monetary policies will be positive for corporate earnings. Market profits are forecast to grow by 18% in 2025 and 19% in 2026, with significant contributions from the banking, construction materials, residential real estate, retail, and industrial property sectors.

Lower interest rates, reduced input costs, and moderate wage increases are expected to significantly improve gross profit margins across various industries. Furthermore, Vietnam is moving closer to being included in the group of emerging stock markets.

However, MBS experts also caution about potential risks, such as exchange rate pressures amid a weaker VND and a slower-than-expected recovery in the residential real estate market, which could weigh on banks' collateral assets. Balancing these opportunities and challenges, MBS forecasts the VN-Index to range between 1,400 and 1,420 points in 2025.