The weeks following Donald Trump’s election victory have brought an unwelcomed wave of selling in emerging markets. This marks the third consecutive week of outflows. The strengthened U.S. dollar has drawn money from markets like Asia to the U.S., while the threat of import tariffs by Trump has made emerging market investors uncertain about the extent to which such tariffs could slow global trade of growing emerging economies. Furthermore, the expectation of accelerating inflation due to tariff policies has dampened hopes of interest rate cuts, weakening Asian currencies relative to the dollar.
For a fast-growing economy like Vietnam, uncertainty is a threat. However, even more significant positive developments are simultaneously occurring in Vietnam’s domestic economy, and the Vietnamese stock market is dominated specifically by companies driven by domestic demand in Vietnam.
Key changes were made in Vietnam’s political leadership last summer, and it is now evident that the new regime and the government are ramping up efforts to boost Vietnam’s economic growth. The current leadership is even more focused on economic reforms than its predecessor, and decisions are being made accordingly.
Potential Trump tariffs could hinder the growth of several foreign-owned (FDI) export companies operating in Vietnam. However, these companies are not listed on Vietnam’s stock exchange. A slowdown in export growth could reduce Vietnam’s economic growth by 0.5–1.0% in the coming years, but at the same time, domestic market demand is accelerating strength, allowing Vietnam’s GDP growth to remain in the 6–7% range for 2025. Notably, these export companies’ sources or funding are not related to Vietnamese banks, and the strengthening domestic demand is set to lead Vietnamese banks into a strong performance in 2025.
Vietnam’s equity market does also cover some export-oriented companies, such as VHC, which is in PYN Elite’s portfolio. VHC’s main market is the U.S., where it exports pangasius fish fillets. China competes in the same market with tilapia fish fillets. If Trump’s threatened tariffs are implemented as proposed, Chinese products would face a 60% tariff, while products from other countries would only face a 10% tariff. This would provide VHC with a significant boost in its U.S. exports as Chinese products become less competitive.
Vietnamese listed companies’ earnings growth is expected to be around 20% in 2024, with similar growth anticipated in 2025. The stock market was moderately valued even before the recent pullback, with a 2025 (F) P/E of 10. The situation is not in any way alarming, although the recent pullback is disappointing. Recent market conditions have allowed us to take action for portfolio reallocations to take advantage of the occurred market fluctuations.