We would like to present you our monthly Macroeconomic & Stock Market Highlights for Vietnam alongside with the monthly performance update of the TIM Vietnam Actively Managed Certificate for December 2024.

Vietnam’s Update – Economy

Vietnam closed 2024 on a strong note, achieving a remarkable GDP growth of 7.1%, signaling a return to pre-pandemic momentum. The country launched Ho Chi Minh City’s first metro line, set records in FDI disbursements and international tourism, and strengthened diplomatic ties with France, Australia, and Malaysia. The year also marked a leadership transition with the appointment of General Secretary To Lam.

2024 Economic Growth: Agricultural and Industrials took the Lead. Those sectors make up half of the GDP. Agriculture expanded by 3.3%, while industrials surged by 8.3%, driven by restocking in key export markets such as the U.S. and Europe. The service sector also posted a strong 7.4% growth, boosted by a record 17.6 million international tourists. However, domestic consumption showed signs of softness, with inflation-adjusted retail sales growing “only” by 5.9%, down from 6.8% in 2023.

Building Momentum for an Infrastructure Boom. The State Bank of Vietnam (SBV) pursued an accommodative monetary policy throughout 2024 to support economic growth. In contrast, fiscal policy saw a modest increase of just 2% year-on-year in public spending. Despite the slow fiscal pace, the government is gearing up for transformative changes, focusing on streamlining administrative structures and cutting recurring expenses to redirect savings toward growth-focused investments. These efforts will lay the groundwork for ambitious projects such as the $67 billion North-South High Speed Railway. For further details, please refer to our Doi Moi 2.0 analysis

2025F GDP Growth is projected at 7.4%, powered by an expansionary fiscal policy focused on infrastructure investment. The National Assembly has approved a state budget for 2025 with development-related spending projected at VND790.7 trillion (USD 31.4 billion), a new record (+ 16.7% compared to 2024). Monetary policy, however, may tighten slightly, given foreign exchange rate pressures and rising credit demand.

Low inflation creates room for fiscal expansion. Vietnam kept inflation well in check, with the CPI ending 2024 at a low level of 2.9%, thanks to decelerating food prices and lower gasoline prices, offsetting rising electricity costs. While inflation is expected to rise somewhat in 2025 due to significantly increased infrastructure spending, the current low inflation environment provides a stable foundation for fiscal stimuli.

Potential Risk from Trump is likely overconcerned. Vietnam’s total trade grew by 14.6% in 2024, resulting in a trade surplus of $24.8 billion. While the return of Donald Trump to the U.S. presidency and a $100-billion trade surplus between Vietnam and the U.S. raises concerns about potential tariffs, the risks may appear overstated. Since Trump’s first term, bilateral relations have strengthened, culminating in the recent agreement of a Comprehensive Strategic Partnership. Vietnam’s strategic importance in the South China Sea, coupled with its role in the supply chains of not only the U.S., but also of Japan and South Korea, adds another layer of protection. Furthermore, ongoing negotiations for aircrafts and LNG purchases from the U.S. demonstrate Vietnam’s commitment to balancing trade relations. Overall, although there are challenges under Trump 2.0, we think that Vietnam may be able to navigate successfully through eventually upcoming turbulence.

FDI Boom: High-Tech Giants bet big on Vietnam. FDI disbursement reached $25.3 billion with giants in the high-tech industry such as Samsung, LG and Amkor accounting for most of this amount. However, the most notable event of FDI investment in 2024 was “the birth of Nvidia Vietnam”. With the upcoming second Trump presidency, FDI firms may at first apply a “wait and see” tactic in the early months of 2025. However, potential tariffs of 60% on China are with no doubt significant enough to trigger another wave of supply chain relocation. Hence, Vietnam with its strategic location, neutral diplomacy, and low manufacturing costs remains a top contender for investment.

Short-term Pressure for the Vietnamese Dong should ease gradually. The USD appreciated by 5% against the VND in 2024. Trump’s recent communications suggest that the USD is likely to remain strong. We expect some pressure for the VND in the first few months of 2025, given Vietnam’s limited foreign reserves, which were at around 2.6 months of imports by end of 2024. However, we think the pressure will ease at some point as the Federal Reserve is expected to cut interest rates, which will typically exert downward pressure on the USD. Investors’ rising concern on the U.S. government debt may eventually also revert the trend of the USD, meaning less pressure for the Vietnam Dong.

Vietnam’s Update – Stock Market

The VN-Index Closed 2024 with positive Momentum. In December, the VN-Index continued its upward trajectory, posting a 0.9% increase, bringing the total gain for 2024 to 8.8%. The year started very well with the index surging some 15% in the first quarter. However, subsequent quarters encountered challenges such as the appreciation of the USD/VND, escalating global geopolitical tensions, and uncertainties surrounding the U.S. elections. These factors have triggered substantial foreign outflows amounting to $3.7 billion. But domestic investors absorbed the selling pressure, maintaining an average daily trading volume of $844 million, up by 21.1% y/y. Despite this resilience, foreign investor sell-offs, particularly in stocks like MSN and Vingroup-related equities, dragged the FTSE Vietnam Index down by 8.9% in all 2024. Moving ahead, the return of foreign investors may be one of the supporting factors for the general market in 2025.

Sector Highlights: Financials and Technology led the upturn, while Real Estate struggled. Financials emerged as the key driver for the VN-Index in 2024, advancing by 14.6%, fueled by robust domestic economic momentum and by a strong 15% credit growth. Technology followed closely, with FPT leading the charge, benefiting from renewed interest in digital transformation, AI, and semiconductors. Industrials (+6.5%) and materials (+10.5%) also recorded solid gains, reflecting Vietnam’s strengthened manufacturing and trade activities. Conversely, the real estate sector faced a 10.0% decline as late-year regulatory reforms failed to offset challenges from earlier in the year.

2025 Outlook: Opportunities amid global Uncertainties. As we approach 2025, the global market landscape remains unpredictable, with capital flows predominantly concentrated in the U.S. market. This scenario creates opportunities for diversification, positioning Vietnam’s stock market as an appealing alternative. Investors can leverage Vietnam’s robust economic growth at attractive valuations. While short-term volatility is anticipated as the Trump presidency begins in only couple of weeks, it could present a good entry point for acquiring high-quality companies at reasonable prices. A potential upgrade to a FTSE Emerging Market status in September 2025 could further catalyze market growth and encourage foreign investor inflows.

Investment Themes for 2025: Infrastructure, Banking, and Healthcare in Focus. We favor companies in the materials and industrials sectors, which are well-positioned to benefit from the government’s infrastructure development initiatives. The banking sector also offers compelling opportunities, underpinned by robust credit demand and sustained economic growth. Enhanced risk management, governance and appealing valuations compared to regional peers further bolster its attractiveness. Additionally, the healthcare sector is well-positioned to benefit from long-term growth in drivers such as a rising middle-income population and increasing consumer focus on health and wellness. By offering more incentives, the government is also enhancing its efforts to support private and domestic firms, including both pharmaceutical producers and hospital operators. This strategic push aims to alleviate the financial burden on the government from subsidizing healthcare service fees, promoting a more sustainable healthcare ecosystem.

At the end of December 2024, Vietnam’s Top 100 stocks have an expected 2025F EPS growth of 18.1%. According to Bloomberg, the VN-Index’s 2025F P/E of 10.9x remains competitive compared to regional peers such as Thailand (16.3x), Indonesia (15.1x), Malaysia (14.2x), and the Philippines (12.7x), presenting attractive opportunities for value-oriented investors.

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Please download the December 2024 Factsheet for our TIM Vietnam Actively Managed Certificate. We are also offering investment advisory mandates and research services for the Vietnamese stock market. Furthermore, we offer our clients Discretionary and Investment Advisory Mandates for the purpose of investing in listed Vietnamese equities.

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