The Current Landscape of Foreign Investment in Vietnam’s Stock Market
Author Insight
By Hoa Khoa, Quang Nguyen
Mon, February 9, 2026 | 12:31 pm GMT+7
As Vietnam’s stock market continues to evolve, recent trends reveal a concerning outlook for foreign investment. Nguyen The Minh, head of research and development at Yuanta Securities Vietnam, forecasts that foreign investors are unlikely to change their net selling behavior in the near term. This analysis sheds light on several underlying factors impacting capital flows.
Net Outflows and Historical Trends
The persistent trend of foreign net selling has been evident, with the VN-Index witnessing significant withdrawals for over a month. In the first trading week of February 2026, foreign investors sold a staggering net VND6 trillion ($231.33 million) across major exchanges like HoSE, HNX, and UPCoM. This follows a worrying pattern observed over the past three years, where foreign outflows have sharply escalated, reaching nearly VND121 trillion ($4.67 billion) in 2025.
High Capital Costs: A Detrimental Factor
One of the primary drivers of this trend is the high cost of capital in Vietnam, estimated to be over 15%. This figure places Vietnam significantly above many regional markets, thereby diminishing the attractiveness of equity investments. Rising interbank rates have contributed to escalating borrowing costs, further complicating the investment landscape. This situation is exacerbated by the government’s initiative to raise funds for infrastructure and public spending, which has increased government bond yields—the benchmark for setting capital costs.
Implications on Valuation
From a valuation standpoint, elevated capital costs undermine corporate valuations, particularly through discounted cash flow (DCF) models. Higher discount rates equate to lower present values, making stocks less appealing. Consequently, potential returns on investments diminish, deterring foreign capital inflows.
Global Dynamics and Market Pressure
The global financial environment also factors significantly into the current predicament. Investors are closely monitoring rising yields on Japanese government bonds, aware that these fluctuations could adversely affect capital costs worldwide. Estimates from Goldman Sachs indicate that every 10 basis point increase in Japanese yields could ripple through, pushing U.S. Treasury yields higher by 2-3 basis points. This chain reaction further complicates the outlook for emerging markets, including Vietnam.
Minh notes that the historical trend of borrowing in yen to invest in higher-yielding markets is being reversed as Japanese interest rates rise. This shift prompts capital to retreat from various emerging and frontier markets towards developed economies like the U.S. and Japan.
Conditions for a Turnaround
For foreign investment to regain its footing in Vietnam, several critical factors must align. Among the most crucial is a more aggressive easing cycle from the Federal Reserve. In a bullish scenario where interest rates are reduced by at least two times in 2026, there may be an influx of capital back into emerging and frontier markets.
Lower U.S. rates could make dollar-based assets less appealing, creating opportunities for Vietnam to adopt a more accommodative monetary policy. Additionally, the trajectory of Japanese interest rates will play a pivotal role. If rates stabilize around 2-2.5%, there is a chance for foreign capital to return; however, rates approaching 3% would likely deter inflows.
The Role of Domestic Policy
Domestic policies will also be fundamental to restoring investor confidence. Effective management of the exchange rate is crucial in instilling trust among foreign portfolio and direct investors. Regulatory measures, such as Circular No. 08, are designed to mitigate existing barriers and are anticipated to enhance foreign inflows significantly.
Future Market Catalysts
The prospect of upgrading Vietnam’s market status could serve as an immediate catalyst for change. To attract substantial global funds, Vietnam must enhance its sovereign credit rating, thereby lowering capital costs and expanding international capital access. Additionally, accelerating the listing of high-quality assets and easing foreign ownership limitations will be essential in creating a more attractive investment environment.
In navigating these complex dynamics, it becomes clear that Vietnam’s stock market stands at a crossroads, where foreign investment hinges on both domestic and international influences. Understanding these multifaceted interactions is key for stakeholders as they plan for the future.