[The Charm of Vietnam] A thorough explanation of the current situation in Vietnam, how much growth potential is there? | Monex On Demand | Manekuri Investment information and media useful for money by Monex Securities

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## The Impact and Response of Trump’s Tariff PolicyOn April 2, President Trump announced a reciprocal tariff against Vietnam of 46%, which caused the Vietnamese stock market to drop by about 14% at its peak. Currently, with the announcement of a 90-day grace period for implementation, it has recovered about half of the decline.- Vietnam's exports to the United States account for about 30% of the total, with a trade surplus of approximately $130 billion (about 19 trillion yen). The main export items are electronic products (such as iPhones, smartphones, and home appliances) that have shifted from China since 2018.[Figure 1] Trade Situation between Vietnam and the United States![](https://img.gateio.im/social/moments-d74d8d53cd03192a3d9d532ac1c0513f)Source: Left pie chart: Created by Daiwa Asset Management from UN Comtrade(*) The total may not equal 100% due to rounding of values beyond the second decimal place.Source: Right chart: Created by Daiwa Asset Management from UN Comtrade, WTO(※) The average import tariff is a simple calculation, and the import and export amounts as well as the import and export products are as of 2024.*No content in this document suggests or guarantees future results.The Vietnamese government is showing a proactive stance, indicating its willingness to reduce tariffs on the US to 0%. It has also expressed an intention to strengthen regulations regarding circumvention exports from China, which the US is concerned about. They are responding from various angles, such as purchasing Boeing aircraft and attracting Trump family businesses, and it is believed that the likelihood of the final 46% tariff being implemented as is is low.## Vietnam's Economic Growth and PotentialVietnam currently has free trade agreements (FTAs) with about 30 countries and regions, providing the advantage of access to a market of approximately 3 billion people worldwide at low tariff rates. Even excluding the United States, it is possible to export at low tariff rates to a market of over 2.5 billion people.The Vietnamese government has announced an ambitious policy aiming for over 8% economic growth by 2025. The plan is to accelerate infrastructure investment through large-scale fiscal spending, with various projects such as highways, metro systems, and power generation being planned. Additionally, the government debt is relatively low, providing significant room to increase fiscal spending.As confirmed by local surveys, urbanization is progressing in Vietnam, with people gathering from rural areas and the middle class expanding. There is a growing trend towards premium consumption, evidenced by the increase in high-end shopping malls and the proliferation of automobiles.## Expansion of the Middle Class and Stages of Economic Development- Vietnam's per capita GDP is currently about $4,300, which is equivalent to Japan's level in the early 1970s. Generally, when per capita GDP exceeds $3,000, disposable income increases, allowing for consumption beyond food and basic necessities.・Vietnam's middle-class population is expected to increase significantly in the future, with 23 million people, or about one-quarter of the population, expected to join the middle class in the 10 years from 2020 to 2030. Urbanization is also progressing rapidly, and the demand for real estate is expected to remain high due to the demographic dividend period.Looking at the changes in the top stocks of the stock market, in 2012, companies in the consumer staples sector ranked highly, but currently, they are not in the top 10, indicating a trend towards premiumization and upgrading of consumption.[Figure 2] Focus on the Development of Vietnamese Enterprises![](https://img.gateio.im/social/moments-bfcb75b743cb0200fedf487347348c5f)Source: Created by Daiwa Asset Management from Bloomberg*The contents of this document do not suggest or guarantee any future results.## Major Companies and Industrial Structure in Vietnam- In the Vietnamese stock market, there is an increasing number of companies expanding their operations globally. Notably, FPT Corporation is the largest IT service provider in Vietnam, with overseas sales accounting for about half of its revenue, and it employs around 3,000 people in Japan. Recently, it was announced that Sumitomo Corporation and SBI Holdings will invest in FPT Corporation to enter the data center business for AI development.• The VIN Group is the largest conglomerate in Vietnam, involved in various industries related to everyday life. In the real estate sector (VINHomes), it is developing large-scale residential area projects with luxury resorts and artificial lakes. The emerging EV manufacturer VINFast is set to become the number one in domestic automobile sales in Vietnam in 2024, surpassing Toyota, and is also actively developing EV charging infrastructure.・The financial (especially banking) sector accounts for about half of the industry composition of the Vietnamese stock market. Against the backdrop of high economic growth, banks are highly profitable due to the relatively high interest rate environment, with strong demand for private housing and automobile loans, as well as corporate capital investment and working capital.## Outlook of the Vietnamese Stock MarketThe Vietnamese stock market has been on an upward trend along with the economic recovery in 2023, reaching a high not seen in about three years in March 2025. In the past downturns, sentiment was negatively affected by the US-China friction and the tightening of regulations in the domestic real estate market in Vietnam. However, currently, the regulations on the real estate market have eased, leading to a recovery trend.Regarding valuation, there is a possibility that performance forecasts may fluctuate due to the impact of Trump's tariff policy; however, at this time, it is below the 5-year average level, and the risk of catching a high price is considered relatively low.The Vietnamese stock market is currently classified as a "frontier market" by the MSCI and FTSE indices, but there is a possibility that FTSE will upgrade Vietnam to "emerging market" status as early as early October 2025. If this upgrade occurs, foreign investors may be able to invest without barriers, leading to an expected influx of capital.## Political System and Investment Environment of Vietnam- Vietnam has the Communist Party of Vietnam as the only legal party, but unlike China, a collective leadership system is functioning. Politics is managed by a four-person system consisting of the General Secretary of the Communist Party, the Prime Minister, the President, and others, with leadership roles in the party and government rotating every five years. A smooth generational transition occurred in 2024.One major difference from China is that members of parliament are elected by direct vote from the public, and information control is more relaxed, allowing access to overseas media (services such as LINE, WhatsApp, and Facebook, which are banned in China, are available), resulting in a more open system.The government has positioned economic development as its top priority and is showing a strong stance to develop the economy in a top-down manner. Political risk is a factor that investors should consider, but at this point, the stability of politics is a contributing factor to economic growth.## Risk FactorsThe immediate risk factor is the U.S. tariff policy, and stock prices may fluctuate depending on the progress of trade negotiations between Vietnam and the U.S. government. If implemented, the impact on GDP is expected to be around 2-3%, but it is believed that a growth rate of about 6% can be maintained due to government fiscal spending support.As an indirect effect, concerns over a U.S. recession and high inflation may deepen the global stock market decline, and Vietnamese stocks are also susceptible to the deterioration of the external environment.• The Vietnamese currency (Dong) operates under a managed floating exchange rate system against the US dollar, with the government controlling it within 5% up or down. However, if the external environment deteriorates rapidly and foreign investors withdraw their funds, there is a possibility that the Dong will depreciate further. Essentially, the exchange rate of Dong against Yen is largely determined by the USD/JPY rate.## Size of the Vietnamese Stock Market- The scale of the Vietnamese stock market is currently around 35 to 40 trillion yen, which accounts for about 5% of the scale compared to India, but it is expected that the market capitalization of the stock market will expand along with economic growth.• While investment regulations for foreign investors still exist, there is a gradual policy of relaxation. Currently, about 40% of the stock market is open to foreign investors, and approximately 60% of that allocation is still available, suggesting there is room for around 10 trillion yen in investments in the future.This content is an automatically generated summary of the videos posted on the YouTube channel "Monex On Demand" operated by Monex Securities, created by AI. Please note that this summary may contain typos and inaccuracies, so for accurate information, please click on the following guide and watch the videos on the displayed web page.