Vietnamese Stock Market Plunge: A Deep Dive into the Crisis

Hanoi, Vietnam – October 20, 2025 – The Vietnamese stock market faced a dramatic decline today, with the VN-Index dropping 5.5%—its sharpest single-day fall in six months. This upheaval followed a shocking report from the Government Inspectorate of Vietnam that unveiled extensive violations in the corporate bond market. The findings have reignited fears of a credit squeeze, particularly affecting the already strained real estate sector, and have cast a pall over Vietnam’s ambitions for a more prominent position in emerging markets.

Immediate Market Reactions

The immediate consequences of the report are stark. Investor sentiment has seen a sharp deterioration, raising concerns over forced selling—particularly among retail investors who had leveraged their positions during a recent market rally. Major companies like Vingroup, its real estate subsidiary Vinhomes, and the state-owned Bank for Foreign Trade of Vietnam suffered significant losses, becoming key contributors to the VN-Index’s downward trajectory. This renewed credit anxiety is a considerable setback for Vietnam, which had recently celebrated its upgrade to secondary emerging-market status by FTSE Russell—a milestone anticipated to attract significant foreign investment.

Detailed Coverage: A Deep Dive into the Credit Crisis

On October 17, 2025, the Government Inspectorate disclosed alarming irregularities among 67 bond issuers, including several prominent banks. These violations highlighted a troubling pattern of misconduct that threatens market integrity:

• Misuse of Bond Proceeds: Many issuers were found to have diverted bond funds for purposes not disclosed to investors.
• Inadequate Disclosures: Key financial details were often omitted or poorly communicated, leaving investors in the dark.
• Delays in Payments: Several issuers have not honored principal and interest payments on their corporate bonds.

Notably, major banks such as Asia Commercial Bank (ACB) and Military Bank (MB) were implicated for repurposing medium- and long-term credit funds for short-term loans—essentially blurring the lines of their operational mandates.

Timeline of the Crisis

A series of warning signs led to this market shock. Early 2025 saw increasing fears of corporate bond defaults, predominantly affecting the real estate and tourism sectors. By June, the situation worsened; four bonds defaulted amidst a surge in new issuances, hinting at deeper liquidity problems. The State Bank of Vietnam (SBV) attempted to stabilize conditions through Circular 23/2025/TT-NHNN introduced in August but failed to stem the tide of apprehension.

September brought heightened tension when CTCP Chứng khoán EVS, a major brokerage, alerted regulators to a probable bond default involving Công ty TNHH Đầu tư Cam Lâm. The situation intensified with the arrest of high-profile figures such as Nguyen Hoa Binh (“Shark Binh”), chairman of NextTech Group, on fraud charges. Most critically, Novaland failed to pay interest on over $335 million in convertible bonds just before the Government Inspectorate’s grim revelations on October 17, setting the stage for today’s market downfall.

Key Players in the Crisis

Several stakeholders are involved in this unfolding disaster:

• Government Inspectorate of Vietnam: Conducts the inspections leading to the current crisis.
• State Bank of Vietnam (SBV): Faces pressure to employ its new powers to stabilize distressed banks.
• Corporate Bond Issuers: Entities like Novaland and Công ty TNHH Đầu tư Cam Lâm are grappling with default issues.
• Commercial Banks: Banks, including ACB, MB, and Bank for Foreign Trade of Vietnam (VCB), are under scrutiny for misusing bond proceeds.
• Securities Firms: Firms like CTCP Chứng khoán EVS are at the forefront of reporting defaults.
• Individual Investors: Many retail investors face significant losses and are awaiting compensation from previous scams, like the Truong My Lan case involving Saigon Commercial Bank.

Market Downturn: The Immediate Effects

Today’s plunge of the VN-Index underscores deep-seated investor anxiety. High-profile companies such as Vingroup, Vinhomes, and VCB experienced significant stock declines, resulting in a broader market slump. Analysts predict it may take several sessions for the market to regain stability, with the critical technical support level set at 1,600 points. The re-emergence of credit concerns serves as a stark reminder of the risks inherent in frontier markets, overshadowing Vietnam’s recent progress on the global economic stage.

Companies Affected: Winners and Losers

The credit market crisis has severely impacted highly leveraged real estate developers while showcasing the resilience of well-managed financial institutions.

Real Estate Developers: The Primary Losers

The real estate sector has been particularly hard hit, primarily due to its dependence on credit. Key players facing significant challenges include:

• Novaland Investment Group: Currently in dire straits with liquidity problems, Novaland has been wrestling with a stock price drop that prompted “limit down” trading. Its heavy inventory (VND142 trillion, or 59% of total assets as of H1 2024) and mounting debt create immense refinancing pressure.

• Vingroup: This diversified conglomerate is facing financial instability, primarily due to substantial losses in its electric vehicle division (VinFast) and a staggering $31 billion in liabilities.

• Vinhomes: As Vietnam’s largest real estate developer, it too has seen its stock decline sharply, mirroring vulnerabilities tied to both the market and its parent, Vingroup.

Banking Sector: A Tightrope Walk

Vietnamese banks face significant exposure to the real estate sector, with real estate credit accounting for 18.5% of total loans. Some banks appear to be navigating this storm effectively:

• Asia Commercial Bank (ACB): Notable for its prudent risk management and a low Non-Performing Loan (NPL) ratio (1.49% in Q3 2024), ACB is in a strong position to weather this turmoil.

• Military Bank (MB): MB exhibits strong adaptability, reporting a remarkable 30.2% profit increase in the first three quarters of 2024, suggesting resilience amid adversity.

• Bank for Foreign Trade of Vietnam (VCB): This state’s “Big 4” bank, while affected by stock declines, retains a strong market position bolstered by government backing.

Broader Implications: A Systemic Challenge

The ongoing credit market crisis, highlighted by significant fraud cases and bond violations, poses a critical challenge to Vietnam’s financial system.

Over-Reliance on Real Estate

This turmoil exposes Vietnam’s excessive dependence on real estate and speculative investments. Vulnerabilities within the banking sector are tied to speculative bubbles created by developers who promised luxury living spaces without substantial backing. The fallout has resulted in residential sales plunging by more than 60%, leaving construction sites abandoned.

Regulatory Gaps in Bond Markets

In the absence of proper regulations, a “shadow bond market” has flourished, allowing developers to issue over $70 billion in private corporate bonds, with a worrying 40% nearing or in default. This raises the stakes for banks and increases credit risk while elevating non-performing loans (NPLs).

Impact on Public Confidence

Locally, public confidence is dwindling as many lose savings, leading to liquidity issues and credit stagnation, particularly affecting small and medium-sized enterprises (SMEs). Regionally, while Vietnam has limited foreign debt exposure, the interconnectedness of the ASEAN+3 market means an upheaval in one economy can reverberate in another.

Government Response: Steps to Recovery

In response to the crisis, the Vietnamese government is implementing significant regulatory and policy changes.

• The SBV has injected $24 billion into Saigon Commercial Bank (SCB) and has received permission to provide special, unsecured loans to distressed banks.

• Revisions in the law grant banks the authority to liquidate collateral for non-performing loans, thus accelerating the crisis response.

• Enhanced transparency in the corporate bond market is anticipated as a means of regaining investor trust.

Market Outlook: Recovery and Growth Path

Despite the recent turmoil in both credit and stock markets, the outlook is cautiously optimistic.

Short-term Perspective

In the short term, improvements in the credit market are expected as government initiatives kick in. Accommodative monetary policies and a focus on boosting corporate cash flows should gradually decrease corporate bond default rates.

Long-term Vision

Looking further ahead, the Vietnamese financial sector is anticipated to strengthen through ongoing reforms. Financial institutions will likely seek opportunities beyond real estate, and stock market growth remains possible as Vietnam aims for MSCI Emerging Market status by 2030.

Strategic Considerations

In this changing landscape, both investors and financial institutions will need to adapt. Financial entities must pivot towards quality-driven strategies, while businesses should resolve legal hurdles and prepare for evolving trade policies.

For individual investors, adopting a long-term view and being cautious with credit market assessments appears wise as the landscape stabilizes.

Market opportunities lie ahead, particularly in the banking sector, improving construction spending, and potential recoveries in the real estate market. However, ongoing challenges require vigilance, including monitoring interest rates, corporate bond dynamics, and the regulatory environment.

As Vietnam navigates this turbulent chapter, the path forward will be one of resilience and reform, with the potential to emerge stronger from its trials.