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In Q1 2025, we believe Vietnam’s stock market will revolve around the following key themes:

(1) Trump’s Policies in His First 100 Days. While Canada, Mexico, and China have already been identified as primary targets for new tariffs, Vietnam is not currently a top priority in the U.S. tariff agenda. We attribute this to Vietnam’s trade deficit with the U.S. being the main issue, rather than posing any direct threat to national security or America’s global superpower status. Additionally, Vietnam’s neutral foreign policy stance could provide an advantage in the initial phase of the new tariff regime.

(2) Market Reform Efforts Expected to Deliver Results. Vietnam is likely to meet the criteria for an FTSE market upgrade in the March review. At the same time, developments surrounding the launch of the new KRX trading system are expected to add further positive momentum in the next three months.

(3) Corporate Earnings and Business Plans to Shape Market Sentiment in the Latter Half of Q1. From mid-quarter onwards, updates on 2025 business plans and Q1 earnings reports from listed companies will likely provide positive sentiment for the market. For Q1, we estimate net profit growth for the VN-Index at 7% year-over-year. However, this growth rate is expected to moderate as the low-base effect fades. The non-financial sector may see a slight slowdown due to margin normalization, while financial services could face pressure from slower asset turnover, as market liquidity remains lower compared to the same period last year.

Key Risk to Watch: Escalation in US-China Trade War 2.0A critical risk for investors is the potential escalation of tensions in the second phase of the US-China trade war. China’s response to Trump’s tariff plans has been notably different from that of Mexico and Canada, signaling that Beijing has been preparing for this scenario. If upcoming negotiations fail and tensions rise, global markets could face significant risks, as expectations for inflation, growth, and monetary policy may shift toward a more negative outlook. A period of heightened volatility similar to 2018—when tariffs were extensively used—could emerge, indirectly impacting Vietnam’s stock market.

Vietnam’s Stock Market Valuation Remains Attractive. Despite these risks, Vietnam’s stock market remains appealing following strong Q4 2024 earnings results. The trailing P/E ratio of the VN-Index has declined to 12.4x, placing it in the 26th percentile of its five-year trading history. Combined with a positive earnings outlook for Q1 2025, downside risks appear limited compared to Vietnam’s medium- to long-term growth potential. While cautious sentiment continues to weigh on the market, we believe levels below 1,250 present a favorable accumulation opportunity for investors.

2025 Market Outlook: Valuation and Key Factors to Watch. For the full year 2025, we maintain our view that a fair valuation range for the VN-Index is a P/E of 13.3x–14.4x, translating to an index level of 1,339–1,446, assuming no major shifts in interest rate expectations. Inflation and exchange rate fluctuations remain key factors to monitor closely.