The investment opportunities in Vietnam

There’s a huge growth story going on in Vietnam that investors would be well-advised to pay heed to.

Its economy grew by 8% last year, making it the 13th-fastest growing in the world according to World Bank.

While much of the rest of Southeast Asia’s stock markets are heavily dominated by artificial intelligence (AI) hardware makers, Vietnam’s has a much more broad-based composition, including a relatively high weighting towards more ‘traditional’ industries, meaning it can offer genuine diversification.

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“The combination of economic growth, reform and attractive valuations creates a compelling long-term environment for active investors,” said Tung Dang, chief economist at Dragon Capital – an asset manager that specialises in investing in Vietnam.

It isn’t yet an emerging market – but its reclassification has been confirmed, and is only weeks away. The redesignation will immediately add substantial amounts of passive fund flows into the country’s stock market, and over the following years this could be followed by billions of additional capital from active managers, adding to the many reasons why, of all the regions to invest in, Vietnam is well worth consideration at the present time.

Government reforms are driving growth

Strong growth is one of the most compelling reasons to invest in Vietnam, and government policies are underpinning the story.

Craig Martin, co-chairman of Dynam Capital, says that Vietnam is one of the few markets in the world that offers investors the combination of structural economic growth, political stability and attractive valuations.

“Over the past three decades, Vietnam has transformed itself into one of Asia’s most dynamic manufacturing and export economies,” he said. “Today it is moving into a new phase of development, driven not only by exports but increasingly by domestic consumption, rising household wealth, financial deepening and technology adoption. This is being driven by government reforms.”

These reforms are explicitly focused on empowering Vietnam’s private sector, for example by boosting R&D spending and foreign investment. Entrepreneurship is also at the core, with Resolution 68 describing entrepreneurs as “new warriors on the economic front”.

The 65-storey Lotte Center Hanoi, one of the tallest buildings in Vietnam — *Consumption, urbanisation and economic reforms are at the heart of Vietnam’s growth story.*

“The government has now set an ambitious target of 10% annual growth over the next decade and has rolled out a new wave of domestic reforms – dubbed Doi Moi 2.0 – to help get there,” said Khanh Vu, lead portfolio manager of Vinacapital Vietnam Opportunity Fund.

“The original Doi Moi reforms in the late 1980s lifted Vietnam from poverty to middle-income status,” Vu added. “This second wave aims for a similar step-change to a high-income economy, similar in the path to what we have seen in other developed Asian economies.”

As with many emerging markets, there is also a strong demographic trend underpinning this – including a young, expanding and consumption-driven middle class, alongside rapid urbanisation and rising productivity.

Vietnam’s stock market

The Vietnamese market, as characterised by the MSCI Vietnam Index, is dominated by the real estate and financials sectors, which account for 44.4% and 24.6% of the market respectively (as of 30 June).

This is slightly skewed because two real estate stocks – Vingroup and its former subsidiary Vinhomes – account for more than 38% of the index between them.

But this dominance of real estate and finance is to be expected in an emerging economy, says Vu.

“Banks remain the primary source of funding and the backbone of economic growth, while real estate developers play a key role in driving urbanisation — a rate that stands at only ~40% in Vietnam, compared to 67% in China, 63% in Thailand, and 75% in Malaysia,” he said.

Vu also highlighted the importance of hard asset-linked sectors (industrials, construction materials, energy and utilities) within the Vietnam market and picked out Hoa Phat, the country’s largest steel producer, as a key beneficiary of urbanisation and infrastructure spending.

“Consumer businesses are another important theme, benefiting from rising incomes, urbanisation and an expanding middle class,” said Martin. “Retailers, food producers and consumer services continue to enjoy long-term structural growth.”

Vietnam is also conspicuous among emerging markets for the relative lack of state-owned enterprises in its largest stocks. “Many of the leading companies were started by entrepreneurs,” Martin points out. There is some state investment in the financial sector, but this tends to happen alongside specialist foreign investors.

Vietnam’s emerging market status confirmed

In April 2026, FTSE Russell confirmed that it will reclassify Vietnam from a frontier market to an emerging market, a process that will begin on 21 September and be implemented in four tranches over the following 12 months.

This could potentially mark a step-change from recent years during which, as Vu points out, foreign investors have been net sellers of Vietnamese stocks.

“The higher interest rate environment in the US and the AI-related frenzy [have been] pulling capital elsewhere,” he said.

Emerging market classification could reverse this trend, because the market will be accessible to a wider pool of institutional investors and passive funds whose mandates currently prevent them from investing in Vietnam.

“The most immediate effect will be passive investment from funds that track emerging-market indices,” said Dragon Capital’s Dang.

But the impact is unlikely to happen overnight – especially as most of the anticipated new capital is likely to come from active investors.

“While passive inflows receive most of the attention, I think the bigger story is that an upgrade raises Vietnam’s visibility among global investors,” said Martin. “Once institutions begin researching the market, many active managers also become interested, creating more durable sources of capital.”

Dang quantifies the potential passive tracker inflows at around $1.5-2 billion once inclusion completes (expected to be September 2027). Active allocations following after this are expected to raise total foreign inflows to $5-10 billion.

Finding value in Vietnam

For one reason or another, Vietnam’s market – despite impressive growth rates – is often overlooked, and this means that it offers remarkable value.

“Currently, the market trades at around 13x forward P/E — and if we exclude some anomalies, closer to below 10x,” said Vinacapital’s Vu. “That’s a valuation typically associated with a period of economic stress, not an economy growing at one of the fastest rates in Asia.”

Dang argues that valuations for Vietnamese stocks remain attractive compared to historical levels despite rising earnings and the country’s strong economic growth.

“We expect profit growth across the larger companies to remain robust, yet the market continues to trade at a discount to many regional peers and below its own historical valuation ranges,” he said. “Earnings expectations have also held up well despite geopolitical uncertainty, higher oil prices and tighter global financial conditions.”

Vietnam can also offer diversification for the typical portfolio, which is frequently dominated by a handful of large-cap US technology companies.

“Investing in Vietnam means investing in the ‘traditional’ sectors but experiencing tremendous growth potentials, following the same pattern as developed markets experienced 20-30 years ago,” said Vu.

How to invest in Vietnam

Given its small size, lack of investment coverage and the outsize weighting of the index’s two largest stocks, passive investment isn’t generally seen as the best way to invest in Vietnam.

“Vietnam is not simply an index story,” said Martin. “There are very significant differences in quality, governance and capital allocation between companies. Stock selection remains critical.”

There aren’t many passive funds available to UK-based investors tracking Vietnam’s market either. It is also difficult to buy the country’s stocks directly, but fortunately there are a handful of investment trusts focusing on the country.

The largest of these by market capitalisation is Vietnam Enterprise Investments (LON:VEIL), managed by Dragon Capital. This targets Vietnamese companies with attractive growth and value potential, good corporate governance and an alignment with the country’s underlying economic growth drivers. Vingroup is the top holding as of 30 June (though VEIL is significantly underweight compared to the index), followed by state-owned bank BIDV and consumer retail chain Mobile World.

Vinacapital Vietnam Opportunity Fund (LON:VOF) invests in privately-held Vietnamese companies as well as publicly-listed ones, and is sector-agnostic. As well as Vinhomes and Mobile World, top holdings (as of 30 June) include real estate development firm Khang Dien House, commercial bank (and Vietnamese Ministry of National Defence subsidiary) MB Bank, and port operation and logistics firm Gemadept.

Finally, Vietnam Holding Ltd (LON:VNH), managed by Dynam Capital, focuses on high-growth companies in Vietnam particularly in domestic consumption, industrialisation and urbanisation.