Vietnam's market slips amid weak sentiment, tight liquidity, political uncertainty

Vietnam’s benchmark VN-Index lost momentum this month, slipping 2.61% as weak sentiment, tight liquidity and political uncertainty ahead of a key party congress weighed on prices, LSEG data and analysts said on Monday.

Vietnam's benchmark VN-Index lost momentum this month, slipping 2.61% as weak sentiment, tight liquidity and political uncertainty ahead of a key party congress weighed on prices, LSEG data and analysts said on Monday. After gaining 30% this year, the best performance among Southeast Asian markets, the index fell over 5% last week and closed flat on Monday afternoon, LSEG data showed.

"The decline stemmed largely from fragile confidence rather than changes in economic or corporate fundamentals," said Nguyen The Minh, head of research and development at Yuanta Securities Vietnam. Minh cited tight liquidity driven by elevated interbank interest rates, margin-related selling and noise ahead of Vietnam's five-yearly national party congress as key factors behind recent volatility.

Investor sentiment has also proved highly sensitive to rumours. "An unverified rumour can have impacts on investors and trigger sell-offs in a market where sentiment is already low," said Hoang Huy, equity strategist at Maybank Securities Vietnam.

Foreign investors have net sold nearly 139 trillion dong ($5.3 billion) on the main bourse Ho Chi Minh Stock Exchange so far this year, exceeding last year's total outflows of 96 trillion dong, according to data from the bourse. Although the pace of selling has eased, it has yet to stabilise the market amid volatile domestic trading. Analysts expect the market to enter a rebalancing phase this week as valuations become more attractive, but cautioned against expecting a swift rebound.

"Rebalancing does not mean the market will rebound straight away," Minh said. "Volatility will persist until sentiment improves and liquidity conditions ease." The VN-Index briefly touched an all-time high earlier this year after FTSE Russell announced Vietnam was on track for an upgrade to emerging market status, with the formal reclassification expected next year.

Huy said market liquidity could improve in the second half of next year as foreign investors return following the upgrade. ($1 = 26,310.0000 dong)

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