Foreign Investor Dynamics in Vietnam’s Stock Market: A Closer Look
Date: Friday, September 26, 2025 | 12:11 PM GMT+7
By: Ta Phu, Thai Ha
In recent months, the Vietnamese stock market has experienced notable fluctuations, with foreign investors transitioning from net purchasing to substantial net selling. This pivot is particularly noteworthy given the country’s impending market status upgrade, a milestone that has been years in the making.
The Shift in Investor Behavior
Foreign investors significantly contributed to Vietnam’s stock market earlier this year, net buying nearly VND 8 trillion (approximately $303 million) in July. However, this enthusiasm took a turn in August and September, with foreign sales soaring to over VND 30 trillion and VND 23 trillion, respectively. In total, the first nine months of 2025 saw them offloading more than VND 86 trillion (around $3.26 billion) in equities.
This abrupt change raises questions about the motivations behind these net sell-offs, especially as the FTSE Russell’s market classification review looms on October 8.
Insights from Market Experts
Truong Hien Phuong, a senior director at KIS Vietnam Securities, explained that the increased selling pressure may be tied to the dynamics of funds tracking frontier markets. They are likely pulling back in anticipation of the official upgrade to emerging market status. Phuong emphasized that once this upgrade is confirmed, significant inflows from emerging market-tracking funds could follow, with potential investments much larger than those currently associated with frontier markets.
Despite the promising outlook, concerns regarding exchange rate volatility remain prevalent among investors. These cautious sentiments are tempered by the expectation that existing investors, such as Dragon Capital and VinaCapital, will sustain their high exposure to equities.
Predictions for the Future
On a related note, Nguyen The Minh, director of individual clients research and development at Yuanta Vietnam Securities, warns that the foreign selling trend might extend beyond the upgrade. He speculates that a sharp increase in net selling could herald the conclusion of Q3, driven by portfolio rebalancing and profit-taking after notable VN-Index rallies. Additional pressure from the USD/VND exchange rate and variations in interest rates expected throughout Q4 could further complicate the landscape.
Minh remains optimistic about the potential for foreign capital inflows improving in Q4, especially considering anticipated easing of foreign exchange pressures and a projected reduction in Fed rates later in the year. He highlights that the upgrade’s psychological effects may impact investor sentiment more than lead to immediate surges in foreign net buying.
Reforms Aiming for Upgrades
Vietnam has been aggressively pursuing upgrades in its market status following a series of regulatory reforms from 2024 to 2025. Notable changes include the Ministry of Finance’s Circulars 68/2024/TT-BTC and 18/2025/TT-BTC, which facilitate foreign institutional investors’ participation by removing the 100% fund pre-deposit requirement.
Additionally, the launch of the KRX information technology system marks a significant advancement in integrating Vietnam’s stock exchanges and securities depository. This system is crucial for implementing the central counterparty mechanism—a vital solution for easing margin issues for foreign investors.
Moreover, Decree 245/2025/ND-CP accentuates transparency and investor protection, further attracting foreign capital while paving the way for adherence to international practices.
Enhancing Facilitation for Foreign Investors
The State Bank of Vietnam (SBV) also introduced Circulars 03/2025 and 25/2025, streamlining the process for foreign investors to open or expand indirect investment accounts in Vietnam. Recent modifications have eliminated bureaucratic hurdles, allowing for quicker account setups and reducing documentation requirements.
The SBV has enforced rapid implementation of these reforms by commercial banks, ensuring that foreign investors face minimal delays. Additionally, the removal of consular legalization requirements for payment account applications represents a significant reduction in procedural burdens.
Vision for the Road Ahead
Vietnam’s authorities recognize that achieving upgraded market status is merely a stepping stone toward building a modern, transparent, and globally integrated capital market. The roadmap laid out sets ambitious short-term objectives to secure FTSE Russell’s secondary emerging market status by 2025, with the long-term vision aiming for MSCI emerging market criteria and a potential move toward advanced emerging market status by 2030.
As the landscape evolves, stock market participants must navigate varying influences, including global financial conditions, domestic regulatory frameworks, and investor sentiment—each of which plays a crucial role in shaping the future of Vietnam’s market dynamics.
While the Vietnamese stock market continues to evolve, it remains essential for investors—both domestic and foreign—to stay informed and adaptive to these significant shifts.