Foreign investors have accelerated the sale of Vietnamese stocks in recent weeks due to rising trade risks for the export-dependent nation, despite expectations of a potential market upgrade later this year.
Vietnam, a key exporter in Southeast Asia, recorded a significant trade surplus with the United States in 2024. This has raised concerns about potential U.S. tariffs as part of efforts to address trade imbalances. The country also faces higher duties on its imports, further amplifying trade risks.
According to market data, foreign investors reduced their holdings of Vietnamese stocks by approximately 6.4 trillion dong ($251.18 million) last month, nearly triple the amount recorded in December. While this outflow was larger than in Indonesia’s stock market, it remained smaller than outflows seen in larger Asian markets like India and South Korea.
The selling trend picked up speed in February, with net sales reaching 4.2 trillion dong in just the first week. Foreign investors continued selling shares of steelmakers after the U.S. announced 25% tariffs on steel imports, with Vietnam being a major supplier.
Despite the possibility of Vietnam being upgraded from frontier to emerging market status by FTSE Russell, this prospect has not been enough to counterbalance the ongoing sell-off. FTSE Russell began monitoring Vietnam for a potential upgrade in 2018, and recent reforms in the country have improved the chances of a reclassification. These include the removal of full prefunding requirements for foreign equity transactions in November 2024, a significant step toward the upgrade.
An interim report from FTSE on monitored markets is expected in March, with a decision on Vietnam’s potential upgrade anticipated in September. The World Bank estimates that an upgrade by FTSE or MSCI could bring an additional $5 billion in investment to Vietnam’s stock market. However, significant inflows have yet to materialize, as foreign investor sentiment remains cautious due to global market trends and trade uncertainties.
In November, foreign net selling of Vietnamese stocks reached a high of 12 trillion dong, marking the largest outflow since June.
($1 = 25,270.00 dong)
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