Vietnam’s Market Crossroads: Navigating Volatility Amid Economic Strength

The VanEck Vietnam ETF finds itself at a critical juncture, experiencing significant turbulence after a remarkable performance run. Having delivered impressive gains exceeding 50% year-to-date, the fund has recently encountered substantial headwinds, shedding 6% in just the past week. While FTSE Russell's landmark decision to upgrade Vietnam to emerging market status provides long-term optimism, short-term selling pressure currently dominates market sentiment.

Vietnam's underlying economy continues to demonstrate remarkable strength, creating a stark contrast with recent stock market performance. Third-quarter GDP expanded at a breathtaking 8.23% pace, while foreign direct investment has surged dramatically. Hanoi alone recorded a 2.4-fold increase in FDI during the first ten months of 2025, reaching $3.91 billion.

Key economic indicators reinforce this positive narrative:
* Manufacturing PMI jumped to 54.5 points
* Corporate earnings are outperforming regional competitors
* Trade volumes have reached historic peaks

Despite these robust fundamentals, foreign investors turned net sellers in October, withdrawing billions from the market and contributing to the current correction.

The FTSE Russell Catalyst: Delayed Impact

In a groundbreaking development, FTSE Russell will reclassify Vietnam as a Secondary Emerging Market starting September 2026. This historic recognition follows years of economic reforms and the removal of market barriers, including pre-funding requirements.

Market reaction to this news has been counterintuitive, with the VN-Index declining nearly 10% from its October peak and approaching the 1,600-point threshold. Market strategists anticipate substantial capital inflows once global fund managers adjust their allocations, potentially bringing billions in passive investment into Vietnamese markets, though the timing remains uncertain.

Should investors sell immediately? Or is it worth buying VanEck Vietnam ETF?

Portfolio Concentration: A Double-Edged Sword

The VanEck Vietnam ETF maintains a focused portfolio of just 55 holdings, with significant concentration in its top positions. The fund's ten largest holdings comprise over 55% of its assets, heavily weighted toward real estate and financial sectors:

• Vingroup leads at 10.04%, followed by Vinhomes at 7.61%
• Vinhomes has delivered an extraordinary 139% gain over twelve months
• Hoa Phat Group advanced 19.11%
• Financial holdings like VIX Securities and SSI Securities maintain substantial weightings

This concentrated approach amplifies both upside potential and volatility during market downturns.

Performance Analysis: From Peak to Correction

Recent performance data illustrates the dramatic shift from rally to retreat:

• 3-month performance: +29.51% (NAV)
• Year-to-date performance: +54.12% (NAV)
• 1-week performance: -6.00% (price)
• 1-month performance: -1.55% (NAV)

The ETF recently traded at a slight 0.73% discount to its net asset value, reflecting cautious investor sentiment. Trading volumes, which reached record levels during the summer, have since moderated to lower levels.

The central question facing investors is whether Vietnam stands at an inflection point or whether the current weakness represents a buying opportunity. While economic fundamentals remain strong, technical indicators suggest continued near-term pressure.