Despite rising nearly 100 points this year, Vietnam’s VN-Index rally is far from broad-based. A closer look reveals that just four stocks — all tied to the VinGroup ecosystem — account for nearly 90 percent of gains. In a challenging global economic environment, this concentration raises questions about the sustainability of the rally and highlights the need for careful scrutiny before jumping in.
Vietnam’s VN-Index has surged almost 100 points this year, from 1,269.71 at the start of the year to 1,366.71 at close of business Wednesday.
This is remarkable growth, particularly in the current global economic climate.
That is to say, a reworking of global trade in the vision of US President Donald Trump, higher fuel prices on account of conflict in the Middle East, and China’s persistent property sector struggles, are all weighing heavily on global growth.
As a result, the IMF adjusted its forecast in its April World Economic Outlook down from 3.3 percent to 2.8 percent this year.
Moreover, heavily exposed to international trade, Vietnam’s economy stands much more vulnerable to these challenges, US tariffs in particular.
For Vietnam, the IMF lowered its forecast in April from 6.1 percent to 5.2 percent for this year, and then just 4 percent in 2026.
This has all put pressure on the local currency which has weakened since the start of the year and looks set to continue to do so for a while longer as consumers with means move their savings offshore or into safe-haven assets like gold.
The point being that the economic picture is far from rosy, and in this context, the current rally looks a lot like a bright spot.
However, whereas at first glance this might seem like a positive sign, dig a little deeper and the limits of this rally and by extension the opportunities therein become clear.
With this in mind, this article looks at what is driving the current rally and the challenges foreign traders face trying to buy into it.
So, what is driving this rally?
The short answer: just a handful of stocks.
VinGroup (VIC), VinHomes (VHM), TechcomBank (TCB), and Vincom Retail (VRE) combined account for about 90 percent of the gains the VN30 Index (used here as a more manageable proxy for the VN-Index) has made since January 2.
This is a significant concentration.
What stands out more, however, is that all of these companies are intricately linked — VinGroup being the parent of VinHomes and a major stakeholder in Vincom Retail, TechcomBank being one of VinGroup’s biggest creditors.
Moreover, the VinGroup ecosystem has been struggling under the weight of its electric vehicle subsidiary, VinFast, which continues to incur losses in the hundreds of millions of dollars.
Most recently, it posted a net loss of US$712.4 million in the first quarter of this year.
This has impacted the firm to the extent that Fitch Ratings gave bonds of its core business, VinHomes, a ‘-BB’ rating or junk bond status, based on the risks the car maker presents to the larger organisation.
Foreign trader response
It’s also worth considering who is buying into these firms, and it does not look to be foreign traders, at least they are not driving the rally.
In fact, they’ve pulled back from the market on the whole to the tune of just over US$1.5 billion since the start of the year.
As far as specific stocks go, they’ve been selling down their holdings in VinGroup.
About 62 million shares have been shed, with foreign ownership falling from about 10.76 percent in June of 2024 to 8.45 percent yesterday.
It’s a similar story for Vincom Retail, which has seen its foreign ownership fall from 24.19 percent to 17.3 percent, and VinHomes, which has gone from 14.3 percent to 8.62 percent, according to Vietstock data.
It’s only Techcombank, out of the four, that has managed to hold on to its foreign investors, with its 23 percent capped maxed out.
That said, with no foreign room left, as far as foreign investors buying into the rally goes, this rules the bank out.
As for VinGroup, Vincom Retail, and VinHomes, they all have relatively small free floats: 27 percent, 39 percent (this is probably not so bad), and 19 percent, respectively.
This restricts liquidity, making shares both hard to buy and hard to sell.
More to the point of this article, a small free float often leads to a situation where even small share purchases can drive prices up significantly.
Incidentally, it was VinFast’s limited free float when it IPO’d in the US that was partially attributed to the firm’s ability to, at least on paper, become one of the most valuable electric vehicle makers in the world.
So, what does all this mean?
The current macroeconomic environment bears risks – tariff uncertainties and geopolitical conflict – that are seeing investors globally seek safer assets.
In this context, the rally that has seen the VN-Index gain 100 points this year looks somewhat out of place.
Looking a little closer, it becomes clear that it is only really being driven by just a handful of stocks, all connected to each other and all facing significant challenges as a result of these connections.
There are also limited free floats on these rallying stocks, alongside foreign ownership caps, that make it difficult for foreign traders to enter and exit the market even if they wanted to.
That said, the real takeaway should be that Vietnam’s stock market is not a big market and that small movements in just a few stocks can have a big impact on key indices.
That’s not to say there aren’t opportunities, but just that the current market rally is not exactly what it seems and that a little bit of due diligence can go a long way.