Vietnam Stock Market Soars... Is It Okay to Invest More?

[Asia Economy Reporter Minji Lee] As the Vietnamese stock market, which had been soaring, takes a breather, investors are facing increasing concerns. The VN Index, the representative index of the Vietnamese stock market, has been breaking record highs day after day but is now undergoing a correction just before reaching the 1400 level.

According to the financial investment industry on the 15th, the VN Index closed at 1361.72 the previous day. On the 4th, the VN Index recorded a closing price of 1374.05, threatening the 1400 level, but has since shown a sideways movement. Six months ago, the VN Index was hovering around the 1100 level but then surged vertically to the high 1300s. This significant rise in the index was driven by the recovery in manufacturing based on economic recovery along with COVID-19 vaccinations.

Thanks to the rise in the Vietnamese stock market, related funds also posted strong performances. While domestic equity funds rose about 10% this year, Vietnamese funds increased by an average of about 26%. According to financial information provider FnGuide, the ‘KINDEX Vietnam VN30 Leverage Exchange Traded Fund (ETF)’, which seeks twice the index performance, and the ‘NH-Amundi Vietnam Leverage Securities Investment Trust’, which aims for 1.5 times the return, recorded year-to-date returns of 60% and 57%, respectively.

Domestic investors appear to be using the rise in the Vietnamese stock market as an opportunity to realize profits. Since the beginning of the year, 404 billion KRW has been withdrawn from Vietnamese funds. As the market reached an all-time high, the demand to realize profits has increased.

The fact that the past ‘Vietnam investment boom’ ended with losses for investors who invested in related funds also seems to have increased the desire to realize profits. Domestic investors actively invested in the Vietnamese stock market in 2008 and 2018 based on rosy prospects, but the market then plunged about 20% from its peak due to the financial crisis, the US-China trade war, and the rise in the dollar’s value.

In the securities industry, it is believed that investing in funds or related stocks with high proportions of essential consumer goods, materials, and real estate sectors can improve returns. So-yeon Lee, a researcher at Korea Investment & Securities, advised, "As fiscal policy shifts growth from export-led manufacturing in the first half to domestic demand-centered growth, selective investment is necessary."