News and Insights

The manufacturing sector outperformed expectations in May and was the main driver of economic growth. The Index of Industrial Production (IIP) showed a significant increase of 9.4% year-on-year (YoY) in May and 8.8% YoY for the first five months of 2025 with manufacturing up 10.8% YoY (2024: 7.3% YoY). This growth was primarily fueled by robust performance in sectors such as automobiles (+34.3% YoY), leather products (+16.8%), rubber and plastic products (+16.1%). The Manufacturing Purchasing Managers' Index (PMI) posted below the no-change mark for the second consecutive month in May but rose to 49.8 from 45.6 to signal a near-stabilization. Output returned to growth as thanks to easing trade tensions. Exports continued to grow at a solid pace of 17% YoY in May’25 and 14% YoY in 5M25, mainly attributable to front-loading activities. Computers and electrical devices exports soared +39.7% YoY while textile and garments also grew +12% YoY in 5M25. Notably, the trade deficit recorded in the first half of May was reversed in the second half, resulting in an estimated trade surplus of nearly USD 3 billion for the latter period. This brings the year-to-date trade surplus to USD 4.67 bn.

Retail sales also saw an upward trend in May, largely fueled by resilient consumer spending. Retail sales surged by 10.2% YoY for the month, sustaining the double-digit growth seen in April and contributing to an 9.7% YoY growth for the first five months of 2025. Real retail sales grew 7.4% YoY in 5M25. Data from the Ministry of Finance revealed a 55% YoY increase in tax revenue from e-commerce and other digital economic activities in the first five months of 2025, totaling VND 74.4 tn (approximately USD 2.86 bn). This surge reflects not only strong consumption but also enhanced government efforts in tax collection. International arrivals rose 21.3% YoY to 9.2 mn in 5M25 (126.1% of the pre-pandemic level), of which China tourists recovered 47.2% YoY.

Investment momentum strengthens further. FDI disbursements rose by 9.8% YoY in May, reaching USD 2.16 bn for the month and USD 8.9 billion in the first five months of 2025, an increase of 7.9% compared to the same period last year. Total FDI commitment soaring by around 154% YoY in May to USD 4.57 bn and USD 18.39 bn YTD (+55.1% YoY). While some of this growth reflects large-scale property investments recorded during the month, the broader trend underscores sustained investor confidence in Vietnam, even amid the global environment of reciprocal tariffs and trade tensions. On the public investment side, disbursements continued to accelerate in May (USD 7.7 bn YTD, +38.8% YoY) reaffirming the government’s strong political commitment to fully executing its ambitious public investment agenda for 2025.

Inflation remained subdued in May, with headline inflation increasing by 0.16% month-on-month (MoM) or 3.21% YoY. Food and foodstuff prices slightly increased +0.03% MoM driven by out-of-home consumption +0.28% MoM, while accommodation and construction materials continued to increase +0.73% MoM due to higher material prices (+1.2%), higher rent (+0.64%) and electricity prices (+0.84%). However, gasoline (-1.2%) and diesel prices (-2.33% MoM) experienced declines, thus dragging the transportation sub-index to decline -0.42% MoM. Core inflation increased +0.33% MoM to reach 3.33% YoY in May, instilling confidence that the government can maintain inflation within the target range of 4.0% to 4.5% YoY for the year.

The Vietnamese Dong (VND) remained under pressure during the month, posting a depreciation of 0.1% MoM and 2.2% YTD, despite the DXY declining 8.4% YTD. The USDVND exchange rate continued to diverge from regional currency trends amid uncertainty surrounding tariff policy. Additionally, the State Treasury registered purchases of USD 250 million during the month. We believe that a favorable outcome in ongoing trade negotiations, coupled with a weakening USD following the recent downgrade of U.S. credit ratings, may support the stability of the VND. In May 2025, the State Bank of Vietnam (SBV) conducted net withdrawals totaling 21.4 trillion VND through open market operations (OMO). The overnight VND lending rate on the interbank market remained relatively stable, averaging 3.9% per annum within a narrow trading range.

The VN-Index rebounded strongly in May, gaining 8.6% MoM and 5.2% YTD, largely driven by the rallies of Vingroup-related stocks (VIC +28.7pts, VHM +19.5pts and VPL +9.1pts) and easing US-China trade tensions. Throughout the month, foreign investors returned to the market as net buyers, totaling approximately USD 37mn in net purchase, reducing the YTD net outflows to USD 1.6bn. Both retail and institutional investors appear largely cautious, remaining on the sidelines despite the index’s upward drift by the Vingroup stocks due to unpredictability of Trump’s trade policies. Liquidity dipped 7.5% MoM to VND 21.7tn or USD 855mn.

In May, most sectors recorded positive returns, with the exception of the consumer staples sector, which posted a slight decline of 0.1%. The real estate sector notably performed the best, surging by 28.9%, followed by industrials (+10.8%) and consumer discretionary (+7.9%).

The VN-Index is currently trading with a trailing P/E ratio of 12.3x, much lower than its average P/E ratio over the past three years, which stands at 14.6x. We maintain a positive outlook on Vietnam's stock market for the remainder of the year, supported by (i) positive development in trade negotiation, (ii) the government’s strong commitment to reforms and achieving targeted growth of 8% and (iii) ongoing progress in stock market upgrade. In the near term, investors may pay close attention to the upcoming US-Vietnam trade discussion in June after having reported positive progress in the second round. The General Secretary emphasized tasks centered around four Politburo resolutions – No. 57, 59, 66, 68. These resolutions focus on completing a coherent legal and institutional framework, breakthroughs in science and technology, accelerating comprehensive international integration and developing the private sector to be one of the important driving forces of the economy. In light of Vietnam’s ongoing market upgrade developments, the successful implementation of the new KRX core trading system and the streamlined account opening process mark significant milestones.