Vietnam enters H2 with strong growth, market at record highs

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Monthly Insights: Vietnam market enters H2 with strong growth, market at record highs

Vietnam’s economy maintained strong growth momentum in July, extending its solid H1 performance. The government increased its 2025 GDP growth target to 8.3–8.5%, signalling confidence in its economic outlook. Manufacturing momentum strengthened, with the Purchasing Managers’ Index (PMI) rising to 52.4, the highest in almost a year, driven by new orders and output growth, although export orders remained subdued. Credit disbursement rose 10.2% YTD by end-July, the strongest seven-month performance in over a decade.

The State Bank of Vietnam (SBV) maintained an accommodative monetary policy stance, injecting record liquidity through open market operations to keep interest rates low amid rising credit demand. Inflation was well maintained despite such strong growth, with CPI up 3.1% YoY in July, while public investment disbursements increased 25.5% YoY in 7M25. Foreign direct investment (FDI) disbursement reached $13.6bn in 7M25, up 8.3% YoY, highlighting sustained investor interest both at home and abroad.

The equity market rallied strongly in July, with the Vietnam Index (VNI) surging 8.9% MoM in USD terms to a three-year high, closing the month at 1,502 points. Liquidity was exceptionally high, with average daily trading value surpassing $2.1bn and a single-day record of over $3.0bn in early August. Mid-caps outperformed, supported by aggressive retail participation as margin lending reached record levels.

By early August, 97% of VNI-listed companies had reported 2Q25 earnings, with market-wide profit after tax up 34.1% YoY, marking the strongest quarterly growth since 1Q22. Among Dragon’s Top 80 coverage, 39% beat and 40% met our quarterly profit forecasts, producing one of the highest beat-to-miss ratios in three years. By sector, Financials posted a 16.9% profit increase, led by banks benefiting from credit growth and improved asset quality, and brokerages from strong margin lending and proprietary trading income. Most notably, real estate earnings rose 69.0%, supported by earnings recoveries and asset revaluations among residential developers, and strong results from leading industrial property players.

Manufacturing and services each recorded net profit growth above 45% YoY. While profit growth was broad-based, 36% of Q2 earnings came from non-recurring income, and revenue growth was more modest at 6.1% YoY. Strong H1 results prompted an upgrade to our FY25 float-adjusted Top 80 net profit growth forecast from 13.8% to 20.1%, with 52% of the revision from core earnings and the remainder from one-off recovery income and project transfers in banking and real estate.

Regulatory reforms continued at pace. The SBV issued Circular 14/2025, setting out the phased removal of credit growth quotas and bringing capital adequacy requirements in line with Basel III standards. Concurrently, proposed revisions to the Land Law would roll back several 2024 amendments, improving conditions for developers. These include setting land prices by the state rather than the market, which could lower land-use costs, and introducing greater flexibility around project approvals, land reclamation, and land-use rights payments. Furthermore, the proposed real estate tax has been deferred for further review.

Overall, the broader outlook remains positive. Despite external challenges like the US tariffs, Vietnam’s resilience is underscored by steady credit expansion, stable inflation, strong public investment, and FDI inflows. Investor sentiment will likely stay upbeat, especially if macro conditions and corporate earnings continue on their trajectory. Nonetheless, given that the market has witnessed one of the sharpest increases over the last three years, it could become sensitive to negative geopolitical news and any surprise developments surrounding the global trade outlook.