Move to China. Vietnam appears to be stealing some of the shine from Asia’s biggest market. Stock market growth, domestic reforms, and trade developments have made Vietnam a huge favorite in 2025, with the VanEck Vietnam ETF (VNM) soaring around 62%. The iShares MSCI China ETF (MCHI) lagged behind, rising nearly 31%. Vietnamese stocks have outperformed emerging market economies more broadly. VNM’s year-to-date gain is more than double the nearly 30% gain recorded by the iShares MSCI Emerging Markets ETF (EEM), a fund that tracks large- and mid-cap emerging market stocks. Vietnam’s domestic benchmark VN index has soared a whopping 38% since the beginning of the year. “Vietnam is really operating on its own,” Change Global managing director Thea Jamison said in an interview with CNBC. “There’s more to emerging markets than China,” she continued, identifying Vietnam as a “shining up-and-coming superstar.” VNM YTD Mountain VNM, year-to-date recovery market Vietnam has regained its footing after suffering heavy losses in 2022 and is now trading well above pre-pandemic levels. The stock market, driven primarily by domestic retail investors (which is “still super, super cheap compared to the U.S.”), has become more liquid, with average daily trading value at times reaching $2 billion this year, Jamison said. “Foreigners have completely missed out (on this rally),” she said. “This market is becoming less dependent on fickle foreign capital inflows. It’s really growing on the unique benefits of its own investor base.” Sentiment strengthened in October when FTSE Russell announced it would upgrade Vietnam from frontier market status to secondary emerging market status, effective September 21, 2026. The move came as a result of a number of reforms undertaken by the Southeast Asian country, including the removal of up-front funding requirements for foreign investors. Thu Nguyen, managing director and head of investments at Vina Capital, predicts that the upgrade could lead to an additional $5 billion to $6 billion in capital inflows into the country. “We have considerable confidence that the Vietnamese authorities will effectively address the remaining issues and that Vietnam’s upgrade will proceed as planned in September 2026,” he said. “Achieving a position in an emerging market is a remarkable milestone for Vietnam. However, the more important challenge lies in securing and strengthening this position in the long term.” To maintain that position, Nguyen believes it is necessary to undertake more comprehensive reforms to “deepen, modernize and strengthen the resilience of the capital market.” This includes increased accessibility and sector diversification for foreign investors, as well as higher quality initial public offerings. Vietnam’s domestic index has already been a top performer this year, but its gains are “narrow”, with the real estate sector mainly fueling the gains, Nguyen said. Nguyen said excluding Vingroup, Vinhomes and Vincom Retail, the VN index’s year-to-date increase would shrink to about 10%. Nguyen said 2026 should bring a “more stable” environment to the market. He predicts that corporate profits could rise by about 15%, which could translate into stock market returns of 15% to 20%. “Market valuations remain reasonable and suggest further upside from the realization of profit growth,” he added. “The crane is moving” It’s not just the stock market that is experiencing growth. Aiming to create a more business-friendly environment, the Vietnamese government has recently implemented a number of structural reforms to significantly promote economic development. At the heart of this agenda is Resolution 68. The policy, enacted by the country’s ruling Communist Party in May, focuses on strengthening the private sector by giving companies incentives such as lower bureaucratic hurdles and better access to capital and other resources. In addition, the government is working on amending the country’s land law, which will come into effect in 2024, to streamline land acquisition for investors and ultimately expedite real estate and infrastructure projects, especially those that may have stalled. However, this is not the first time Vietnam has embarked on ambitious economic reforms. Dan Kritenbrink, partner at Asia Group and former US ambassador to Vietnam, emphasized that the company’s growth story actually began several years before these new reforms, specifically with the groundbreaking Doi Moi policy that began in 1986. Full-scale action began in the mid-1990s, with the US trade embargo against Vietnam lifted in 1994, and trade relations between the US and Vietnam normalized in 1995. The past few years have marked “major” changes in economic opening up, not to mention Vietnam’s accession to the World Trade Organization in 2007. “Vietnam’s economic development over the past 20, 30, 40 years has been truly miraculous and truly one of the best stories in Southeast Asia,” Krittenbrink said. “Right now they are at a new stage of development, and I think[Vietnamese Communist Party General Secretary Tho Lam]has come up with a program to try to take them to the next level.” Foreign investors are pouring money into Vietnam, and it appears to be working. Vietnam’s National Bureau of Statistics reported that foreign direct investment carried out in the first 10 months of this year was $21.3 billion, the highest level recorded by the country in the past five years for the period from January to October. “The crane is moving,” Change Global’s Jamison said. “This economy is on fire.” All of this would not be possible without the strength of Vietnam’s workforce, which gives it an advantage compared to other emerging markets, Dang Thanh Tung, chief economist at Dragon Capital, told CNBC. He highlighted that the country has a “large and still relatively young working-age population, a high labor force participation rate and a low official unemployment rate” and a work culture centered around characteristics such as “a strong desire to work in manufacturing and services” and “the ability to adapt to new technologies and processes”. Mr. Tung said these characteristics are key factors that enable the country’s rapid integration into global production networks in various industries, including clothing and electronics. He added: “Authorities are focused on increasing human capital through continued investment in education, digital skills and vocational training, and improving labor market institutions.” “If these efforts continue, Vietnam should continue to differentiate itself from many of its peers through a combination of demographics, skill development and work culture, and remain a key driver of Vietnam’s growth and attractiveness for foreign investors.” Alongside stock market and economic progress, Vietnam is also focused on trade, especially following President Donald Trump’s “reciprocal” tariff rates first announced on April 2. The country, one of the world’s most export-dependent economies, with the United States as its largest export market, is focused on securing trade deals with other countries while entering into trade deals with the United States as a way to further diversify global trade relations. “Vietnam is actively pursuing new and improved trade agreements with other partners, including in Asia, Europe and the Middle East, to reduce dependence on the single market,” Tung said. “A new framework for a more balanced, rules-based trade relationship with the United States, if effectively implemented, could in time restore business confidence and support higher quality investment flows.” Vietnam was one of the first countries to reach an agreement with the United States, which was signed in July. The agreement includes a 20% tariff on imports from Vietnam, lower than the original 46% tariff announced by President Trump in early April. The US also said that some products from Vietnam could be subject to zero tariffs. Jamison believes the estimated average U.S. tariffs on products from Vietnam are “pretty good compared to our neighbors and competitors.” “The current trade deal actually increases the competitiveness of both countries relative to their immediate competition. To do that, we need to look not just at tariffs, but also at the underlying wage, land and power costs,” she said. “They are very attractive.” Even if the deal is implemented quickly, other trade-related factors could still hamper bullish sentiment on Vietnam. “Investor sentiment is likely to be cautious due to geopolitical tensions, particularly U.S.-China relations, continued overseas outflows, and currency devaluation pressures,” said Vina Capital’s Nguyen. There are not many ways for US investors to gain exposure to the Vietnamese market. However, you can get it through VNM. It charges a fee of 0.68% and has over $580 million in assets.
