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 January 2025.

Vietnam’s Update – Economy

Please recall that Vietnam had a long public holiday for Lunar New Year in January 2025. In 2024, this holiday occurred in February. Hence, the year-over-year comparison of some macro indicators such as retail sales, FDI disbursement, and trade activities are not like-for-like. By the end of February, we will make a fair comparison with the combined Jan-Feb measures.

Inflation remained manageable despite holiday-driven pressure. The CPI increased by 3.6% y/y in January, reflecting a softer inflationary environment. The primary drivers were food and foodstuff prices, which rose by 4.4% y/y, and healthcare costs, which surged by 14.1% y/y following the Ministry of Health’s pricing adjustments and seasonal flu. Higher demand for fresh products and meat ahead of Tet contributed to food inflation. However, decelerated growth in transportation costs helped to contain price pressures.

Retail sales maintained strong momentum, fueled by tourism and holiday spending. Total retail sales grew by 9.5% y/y, supported by robust domestic demand and by a continued rebound in international arrivals. Vietnam welcomed 2.1 million foreign visitors, which is a 37% y/y increase, with Chinese tourists accounting for more than half of the total. Domestic travel activity also picked up, as reflected in the 12% y/y rise in domestic air passengers to 1.14 million during the holiday season. The increase in domestic travel highlights the recovery of household consumption, further supporting economic momentum.

FDI inflows had a good start. Total FDI registrations reached $4.3 billion in January (+48.6% y/y), with actual disbursement at $1.5 billion (+2.0% y/y). The manufacturing sector remained the primary driver, absorbing 73.7% of total inflows, as Vietnam continued to attract investment from multinational corporations seeking to diversify their supply chains.

Public investment expanded as infrastructure projects moved forward. State investment rose by 9.6% y/y, driven by ongoing infrastructure developments. Despite the holiday period, construction activity remained active in key projects, including the North-South Expressway, the Long Thanh International Airport, and the Tan Son Nhat Terminal 3. A major policy milestone in January was the approval of the Can Gio International Transshipment Port, a $2-billion investment expected to generate annual revenue of USD1.6 billion upon completion by 2045, creating thousand jobs and boosting long-term GDP growth.

Manufacturing softened in line with regional trends. The PMI declined to 48.9, down from 49.8 in the prior month, mirroring a broader slowdown across Asia. Manufacturers scaled back output and new orders, citing caution over the U.S. presidential transition. This cautious sentiment, coupled with the Tet holiday, contributed to a 4.3% y/y decline in exports and 2.6% y/y lower imports. Nevertheless, Vietnam maintained a trade surplus of $3 billion in January.

Vietnam remains proactive in navigating U.S. trade policy risks. With Vietnam’s trade surplus with the U.S. reaching $104 billion in 2024, the risk of potential tariffs under a Trump administration has increased. In a recent statement, U.S. Secretary of State Marco Rubio urged Vietnam to address trade imbalances. In response, Prime Minister Pham Minh Chinh, speaking at the World Economic Forum in Davos, reaffirmed Vietnam’s commitment to expanding imports from the U.S., including the purchase of Boeing aircraft and other high-tech goods. Given Vietnam’s historical ability to negotiate trade terms with the U.S., the likelihood of immediate tariffs remains low. Meanwhile, the government continues to accelerate infrastructure investment as a buffer against external risks, with GDP growth projected at 7.4% in 2025.

Government restructuring is progressing. The proposal to close four ministries and two National Assembly committees is waiting for the National Assembly’s approval next month. This restructuring effort aims to eliminate bureaucratic inefficiencies, to enhance governance effectiveness, and to accelerate policy execution.

The Vietnamese dong strengthened in January. The USD/VND exchange rate declined by 1.5%, supported by a lower U.S. Dollar Index (DXY), seasonal remittance inflows, and higher interbank interest rates. However, Trump’s imposition of new tariffs on key trading partners in early February has triggered a depreciation across Asian currencies, putting potential pressure on the VND. That said, Vietnam’s interest rate differential with the U.S. turned positive in November 2024, with the 1-month spread at 0.6%, offering a cushion against external volatility. With the Federal Reserve already in an easing cycle and U.S. fiscal challenges mounting, we are not pessimistic about Vietnam’s currency outlook. On a side note, Trump believes that “U.S.’s interest rates are far too high”.

Vietnam’s Update – Stock Market

The VN-Index ended the first month of 2025 with a total return of 1.5%. Despite strong Q4/2024 macroeconomic data, the index faced downward pressure in the first two weeks as investors rebalanced portfolios ahead of the long holiday and remained cautious about the U.S. leadership transition. However, market sentiment improved in the latter half of the month, supported by strong corporate earnings across major sectors.

Trading activity remained subdued due to the early Lunar New Year. The average daily trading volume reached $512 million, falling below December’s levels, a seasonal trend typical ahead of the long holiday. Foreign investors continued to be net sellers, recording $266 million in outflows. However, a notable exception was the $192 million private placement of BIDV, Vietnam’s largest bank by total assets, in which two thirds was purchased by foreign investors. This transaction underscores Vietnam’s ongoing attractiveness as an investment destination despite short-term capital outflows.

Corporate earnings for FY2024 reflect broad-based strength across key sectors. Listed companies started to release their full-year results, and some sectors reported encouraging growth. The banking sector recorded a 17.4% increase in net earnings, supported by robust credit expansion. Meanwhile, consumer staples and industrials posted a solid growth of 23.7% and of 41.6% y/y, respectively.

Looking ahead, market volatility may rise due to global uncertainties, but Vietnam’s position remains favorable. Potential tariff risks and retaliatory trade measures under Trump’s second term could introduce uncertainty, but the likelihood of Vietnam becoming a direct target remains rather low in our view. Instead, the country continues to emerge as a compelling diversification opportunity for global investors, particularly as global equities remain heavily concentrated in the U.S. and artificial intelligence themes.

We think key catalysts supporting Vietnam’s stock market include:

• Projected GDP growth of 7.4% in 2025, reinforcing Vietnam’s robust economic trajectory.
• Earnings growth expectations for Vietnam’s Top 100 stocks at 18.2% for 2025, which puts the VN-Index’s forward P/E at 10.2x, remaining attractive compared to Thailand (14.5x) and Malaysia (13.6x).
• A potential upgrade to a FTSE Emerging Market status in September 2025, which could attract significant foreign capital inflows.

• Opportunities from the State’s divestment of assets to finance ambitious public spending plans, supporting economic expansion and infrastructure development.

Invest with us:

Please download the January 2025 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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