News and Insights

IN BRIEF
• Vietnam's GDP grew 7.96% YoY in 2Q25—driven by strong industrial, construction, and services activity—bringing 1H25 growth to 7.52% YoY, the highest in two decades and keeping the economy on track to meet the 8% annual target. 
• External factors such as exports and FDI data remained resilient, indicating little concern over reciprocal tariff uncertainty. 
• The VN-Index rose 2.1% MoM in June, extending its YTD gain to 8.6%. The performance was supported by (i) optimism surrounding US-Vietnam trade negotiations, (ii) accelerating institutional and regulatory reforms, and (iii) continued, albeit modest, foreign net buying of USD 23 million during the month.
 

Vietnam’s economy posted stronger-than-expected growth in 2Q25, with GDP expanding by 7.96% YoY, close to the government's 8.2% target. The robust performance was driven by a sharp 8.97% YoY increase in the industrial and construction sectors and 8.46% YoY growth in services. For 1H25, GDP rose 7.52% YoY, marking the fastest first-half growth in two decades. On the expenditure side, gross capital formation grew 7.95% YoY, underpinning the overall momentum. With growth on track to meet the full-year 8% target, a modest pickup in domestic consumption would further support this trajectory.

The manufacturing sector continued its strong performance in June, supported by robust growth in the Index of Industrial Production (IIP). The IIP surged by 10.8% YoY in June, bringing 1H25 growth to 9.2% YoY (1H24: 8% YoY), of which manufacturing posted robust growth of 11.1% YoY. Notably, automobile, leather and related products, rubber and plastic production rose 31.5% YoY, 17.1% YoY and 17% YoY, respectively. Exports remained resilient, growing 16.3% YoY in June and 14.4% YoY in 1H25, contributing to a trade surplus of USD 2.8bn in June and USD 7.63bn YTD (1H24: USD 12.15bn). Specifically, we noted significant growth in major products such as electronics and laptops (+40% YoY), machinery and equipment (+15.4% YoY) and textile and garment (+12.3% YoY), reflecting some final front-running of orders before the reciprocal tariff pause deadline by July 9th. Indeed, exports to the US reached USD 70.9bn, contributing 32.3% of total exports and up +28.2% YoY in 1H25.

 

Total social investments strengthened by 10.5% YoY in 2Q25, or 9.8% in the first half, driven by increased public and foreign investments. Public investments rose by 14.1% YoY, while foreign investments surged by 10.6% in Q2 2024. Credit demand was robust, with credit growth reaching 8.3% YTD as of June 26, 2025, up from 18.9% in the same period last year. Foreign direct investment (FDI) disbursement hit a record high of USD 11.72 billion in the first half of 2025 (+8.1% YoY), with total newly registered and additional FDI rising by approximately 33% YoY to USD 21.5 billion, focusing on the manufacturing and real estate sectors. We have seen little reciprocal tariff concern in the FDI data YTD. Public investment continued to accelerate in June and disbursement reached USD 10.1bn in 1H25 or 32.06% of the full year plan, with May-June contributing 8.16% and 7.96%, respectively. State budget revenue grew 28.3% YoY in 1H25, reaching 67.7% of the annual plan, indicating improved economic activity.

Inflation remained moderate in June (+3.57% YoY) and contained at 3.27% YoY on average in 1H25. Inflation in June (+0.48% MoM) was driven mainly by higher transportation costs (+1.66%
MoM) following temporary global oil prices increase due to geopolitical conflicts. Accommodation and construction materials also increased +1.42% MoM due to material supply constraints and increased electricity prices. Core inflation reached 3.16% YoY in 1H25, supporting confidence that the government can achieve its inflation target of 4.0-4.5% YoY for the year.

 

Domestic consumption held firm, despite a slower pace of growth in June compared to May. Retail sales and consumer services revenue rose 9.3% YoY in 1H25, or 7.2% YoY if excluding price factor. International tourism surged, welcoming 10.7 million visitors, a 20.7% YoY increase YTD. 

In June, the Vietnamese Dong continued to diverge from the trend of other Asian currencies, depreciated 0.3% MoM and 2.5% YTD. The country recorded a balance of payments (BoP) deficit of USD 1.68 billion in the first quarter of 2025, adding to the depreciation pressure on the local currency. Throughout the first three weeks of June, VND liquidity in the banking system remained ample, with the overnight interbank rate hovering around 1.7%—well below the usual 4% level. This surplus liquidity has further weighed on the exchange rate. Additionally, seasonal factors such as quarter-end demand for USD to settle obligations or repatriate profits have likely contributed to currency pressures. In response, the State Bank of Vietnam resumed its bill issuance on June 24th, following a hiatus of more than three months. This move signals the central bank’s intent to absorb excess VND liquidity and stabilize the exchange rate. Consequently, the overnight rate has returned to the 4% level on average on the last week of June, before a temporary uptick to 6.5% by the end of the quarter, driven by accelerated credit disbursement and matured State Treasury deposits but not renewed. In parallel, the SBV continued to provide liquidity support through lending operations, reflecting SBV’s accommodative policy approach and focus on FX stability.

 

The VN-Index rose 3.3% MoM in June, extending its YTD gain to 8.6%. The performance was supported by (i) optimism surrounding US-Vietnam trade negotiations, (ii) accelerating institutional and regulatory reforms, and (iii) continued, albeit modest, foreign net buying of USD 23 million during the month. However, for the first half of 2025, foreign investors remained net sellers, with cumulative net outflows reaching VND 40.6 trillion (USD 1.6 billion). Major divestments were seen in stocks such as VIC, VHM, STB, and FPT, driven by strong profit-taking activity, while HPG, VND, DGW, and MSN attracted the most foreign inflows. Retail investors continued to provide key support to the market in the low-interest-rate environment. Average daily trading value stood at approximately USD 893 million, down 3% MoM, mainly driven by dipping liquidity during the final week of June. 

Most sectors posted positive returns in June, led by a strong rebound in consumer staples. In contrast, healthcare and real estate saw negative returns, largely driven by profit-taking. The outperformance of the consumer staples sector was primarily supported by a sharp rally in MSN (+21.3%). The VN-Index is currently trading at a trailing P/E ratio of 14.1x, slightly below its threeyear average of 14.6x. Looking ahead, investor attention is expected to focus on companies with robust second-quarter earnings and strong prospects for the remainder of the year, alongside clarifications regarding U.S. tariff decisions on Vietnam and progress toward a potential FTSE market upgrade. We remain constructive on Vietnam’s equity market outlook for the rest of 2025, underpinned by resilient economic fundamentals, driven by government spending and structural reforms.