Move over, China. Vietnam appears to be taking some of the shine away from Asia’s largest market. Propelled by stock market growth, domestic reforms and trade developments, Vietnam has garnered massive popularity in 2025, with the VanEck Vietnam ETF (VNM) surging around 62%. The iShares MSCI China ETF (MCHI) has lagged behind that, climbing almost 31%. Vietnamese stocks have even outpaced emerging market countries more broadly. VNM’s year-to-date gain is more than double the approximately 30% jump posted by the iShares MSCI Emerging Markets ETF (EEM) – a fund that tracks large- and mid-cap emerging market equities. Vietnam’s domestic benchmark, the VN Index, has soared a whopping 38% year to date. “Vietnam is truly moving on its own,” Thea Jamison, managing director at Change Global, said in an interview with CNBC. “There’s so much more in emerging markets than China,” she continued, deeming Vietnam a “shining, up-and-coming superstar.” VNM YTD mountain VNM, year-to-date A recovering market Vietnam regained its footing after suffering big losses in 2022 and now trades well above pre-pandemic levels. Driven largely by domestic retail investors, the stock market – which is “still super, super cheap” relative to the U.S. – has seen increasing liquidity, so much so that its average daily trading value has reached $2 billion at times this year, Jamison noted. “Foreigners have completely missed out (on) this rally,” she said. “This market is becoming less dependent on fickle foreign flows. It’s really growing on its own merit by its own investor base.” Sentiment was strengthened after FTSE Russell announced in October that it will upgrade Vietnam to a secondary emerging market from frontier market status, effective Sept. 21, 2026. The move came as a result of a number of reforms made by the Southeast Asian nation, including removing the prefunding requirement for foreign investors. Thu Nguyen, managing director and head of investments at VinaCapital, projects the upgrade could bring an additional $5 billion to $6 billion in capital inflows to the country. “We are reasonably confident that Vietnamese authorities will be able to effectively address remaining issues and Vietnam’s upgrade will proceed as planned in September 2026,” she said. “Achieving emerging market status is a notable milestone for Vietnam. The more critical challenge, however, lies in securing and consolidating this position over the long term.” To maintain that status, Nguyen thinks more comprehensive reforms must be made to “further deepen, modernize, and enhance the resilience of the capital markets.” That includes improving accessibility for foreign investors and sector diversification as well as seeing more high-quality initial public offerings. Although Vietnam’s domestic index performance this year already makes it a top performer, its run-up has been “narrow,” Nguyen said, as it has been spurred mostly by the real estate sector. When excluding Vingroup, Vinhomes and Vincom Retail, the VN Index’s year-to-date gains would be reduced to roughly 10%, according to Nguyen. 2026 should bring a “more stable” environment for the market, Nguyen said. She anticipates that corporate earnings could grow by around 15%, which could mean between 15% and 20% in stock market returns. “The market valuation is still reasonable, suggesting further upside from earnings growth realization,” she added. ‘The cranes are working’ The stock market isn’t the only thing that has been seeing growth. Seeking to create a more business-friendly environment, the Vietnamese government has recently implemented a number of structural reforms to significantly boost economic development. A centerpiece of this agenda is Resolution 68. Enacted by the country’s ruling Communist Party in May, the policy focuses on bolstering the private sector by providing incentives to companies such as reduced bureaucratic hurdles and better access to things like capital. On top of that, the government is working on amending the country’s Land Law — which went into effect in 2024 — to streamline land acquisition for investors and ultimately facilitate real estate and infrastructure projects, especially those that may have stalled. But this isn’t the first time Vietnam has launched ambitious economic reforms. Dan Kritenbrink, partner at The Asia Group and former U.S. ambassador to Vietnam, underscored that its growth story actually begins years before these new reforms, specifically with the landmark “doi moi” policies initiated in 1986 . From there, it really took off in the mid-1990s, with the U.S. trade embargo on Vietnam being lifted in 1994 and the normalizing of U.S.-Vietnam trade relations in 1995. Those years, not to mention the country joining the World Trade Organization in 2007, marked a “huge” shift in its economic opening. “Vietnam’s economic development over the last two, three, four decades has really been miraculous, just one of the best stories in Southeast Asia,” Kritenbrink said. “Now, they’re at this new stage in their development, and I think (Vietnam’s Communist Party general secretary, To Lam) has laid out a program to try to take them to the next level.” That seems to be paying off, as foreign investors have been pouring money into Vietnam. Disbursed foreign direct investment during the first 10 months of the year was $21.3 billion, the highest level the country has recorded for the January-October period in the last five years, Vietnam’s National Statistics Office reported. “The cranes are working,” Change Global’s Jamison said. “This economy is on fire.” This all wouldn’t be without the strength of Vietnam’s labor force, which gives it an advantage over other emerging markets, Dragon Capital’s chief economist, Dang Thanh Tung, told CNBC. In terms of standout characteristics, he emphasized that the country has “a large and still relatively young working‑age population, high labor force participation and low open unemployment” with a work culture that centers around traits like a “strong willingness to work in manufacturing and services” as well as an “adaptability to new technologies and processes.” Tung cited those characteristics as crucial enablers of the nation’s swift integration into global production networks in various industries, including garments and electronics. “The authorities are focusing on upgrading human capital through continued investment in education, digital skills and vocational training, and on improving labor market institutions,” he also said. “If these efforts are sustained, Vietnam’s combination of demographic profile, skill development and work culture should continue to differentiate it from many peers and remain an important driver of the country’s growth and attractiveness for foreign investors.” Hammering away Along with progress in its stock market and economy, trade has been a focal point for Vietnam, especially in the wake of President Donald Trump ‘s “reciprocal” tariff rates that he first announced on April 2. As one of the most export dependent economies in the world and with the U.S. being its largest export market, the nation has made it a point to secure trade deals with other nations while it works on one with the U.S. as a way to further diversify its global trade relationships. “Vietnam is actively pursuing new and upgraded trade agreements with other partners, including in Asia, Europe and the Middle East, to reduce dependence on any single market,” Tung said. “The emerging framework for a more balanced and rules‑based trade relationship with the U.S., if implemented effectively, could in time help rebuild business confidence and support higher‑quality investment flows.” Vietnam was one of the first countries to reach a deal with the U.S. , doing so in July. The agreement includes a 20% tariff rate on Vietnamese imports, which is down from the initial 46% rate Trump announced in early April. The U.S. has also said that some goods from Vietnam might receive zero tariffs . Jamison thinks the estimated U.S. average tariff rate on goods from Vietnam “fares quite well with immediate neighbors and competitors.” “With the current trade deal, their competitive edge actually widens relative to their immediate competition. For that, you want to look at not just the tariffs but also the underlying wages, the cost of land, the cost of power,” she said. “Those are very attractive.” Even if the deal is implemented soon, other factors related to trade may still stymie bullish sentiment toward Vietnam. “Geopolitical tensions — particularly those involving U.S.-China relations, persistent foreign outflows, currency devaluation pressures — are likely to keep investor sentiment cautious,” VinaCapital’s Nguyen said. There aren’t many ways for U.S. investors to gain exposure to the Vietnamese market. However, they can obtain that through the VNM. It charges 0.68% in fees and has more than $580 million in assets.
