FPI: Why Foreign Investors Keep Selling Vietnamese Stocks, Even as the VN-Index Hit an All-Time High of 1,937 in May 2026
What's really driving the multi-year foreign exodus, from a strong dollar and high US rates to the AI boom, why the VN-Index still climbed to record highs, and the risks the bulls gloss over.
For four straight years, from 2023 into 2026, foreign investors have been net sellers of Vietnamese stocks. They pulled out a record ~$4.6 billion in 2025, on top of heavy selling in 2023–2024, and the exodus has carried into 2026 with another ~$1 billion out in the first quarter. The selling spanned everything: banks, retailers, exporters, tech, real estate. No sector was spared. As of June 2026, foreigners still own roughly $50 billion (15% of the market against a HOSE capitalization near $330 billion), their smallest share in over a decade.
And yet the market kept climbing. The VN-Index rose 41% in 2025 to close near 1,785 points, one of the best-performing markets in the world, and the pattern carried into 2026: even with foreigners still selling, it set an all-time high of 1,937 on May 15, 2026, before easing back toward 1,880 by late June.
The sellers matter less than you think
At 15%, foreign ownership in Vietnam is far below its peers. In other emerging markets (EM), foreigners typically own a much larger slice of the market: 20–40% in Indonesia, Malaysia, the Philippines, and South Korea.
When foreigners own so little, their selling sets the mood, not the price. By 2024–2025, domestic retail investors were driving more than 80% of all HOSE trading value and the country crossed 10.2 million brokerage accounts by mid-2025, roughly one in ten Vietnamese. With deposit rates low and property and gold cooling, local savings rotated into stocks. Powered by an economy growing over 8% and a margin-lending boom, the local bid simply overwhelmed the foreign offer.
Why the foreigners left (mostly not about Vietnam)
From 2022 through 2024, the US Federal Reserve pushed interest rates above 5%, while the State Bank of Vietnam went the other way, cutting toward 4.5% to support growth. That gap flipped the math for global money: why hold a risky frontier currency yielding less when the world’s safest asset, US Treasuries, paid ~5% with (higher risk adjusted return)? Capital did what capital always does and flowed out of emerging markets and back into the dollar, not just Vietnam but the entire EM complex at once. Major Wall Street strategists spent 2025 describing EM equities as “out of favor.”
*Worth noting how much that backdrop has shifted: by mid-2026 the Fed has cut to 3.50–3.75% and paused, while the SBV holds around 4.5%. The rate gap that drove the original exodus has largely closed
The second magnet was AI, which soaked up the global risk budget that might once have reached EM markets like Vietnam. In 2025 four US hyperscalers (Microsoft, Amazon, Google, and Meta) committed roughly $320 billion to AI, part of an estimated $550 billion across the sector, while the “Magnificent 7” swelled to over 31% of the S&P 500 and drove 55% of its total return from 2023-2025. For a global fund whose benchmark is being carried by seven American names, a small frontier market is an easy thing to skip.
The currency made it worse
Foreign returns in Vietnam have two moving parts: how the stocks do, and how the dong does against the dollar. In 2025 the dong slid 3–4%. So even a flat stock became a loss once converted back to USD, which prompted more selling, which created more dollar demand, which pushed the dong lower still.
The State Bank had limited ammunition. Reserves stood near $83.6 billion at the end of 2025, only about 2.4 months of imports, below the IMF’s recommended 3-month buffer. To defend the dong, the SBV sold roughly $9.4 billion in 2024 and another ~$4.4 billion in forwards from August 2025. Thin reserves mean the central bank can’t fight forever, a real constraint and another reason cautious foreign money headed for the door.
So was Vietnam “expensive”? Not really
The headline looks full: a trailing P/E around 15.8, roughly 16% above its own three-year average. But that number is inflated by a few mega-cap conglomerate stocks, chiefly the Vingroup complex. Strip them out and the market’s P/E drops to about 13.5.
On a forward basis, Vietnam trades around 11–13x earnings, compared to Indonesia (~11x) and well below India, the region’s priciest major market at ~22x. Consensus expects Vietnamese corporate earnings to rise roughly 15–20% in 2026, among the faster rates in Asia, so on a growth-adjusted basis the multiple looks more in line with earnings than stretched.
Vietnam keeps improving
While foreigners sold, Vietnam was steadily fixing the very barriers that kept big institutional money out:
Pre-funding is gone (Nov 2024). Foreign institutions no longer have to park 100% of cash before trading, a rule that literally barred many passive funds from participating.
A new KRX trading system went live (May 2025), replacing creaky infrastructure that once froze under heavy volume, and laying the groundwork for modern settlement.
FTSE Russell confirmed Vietnam’s upgrade (April 2026) from Frontier to Secondary Emerging Market, effective September 21, 2026 and phased in through 2027.
The upgrade will pull in fresh money, though it pays to be precise about how much. At roughly 0.5% of the FTSE Emerging index, the strictly mechanical passive buying is modest, on the order of $0.5–1.5 billion. The larger figures you’ll see, the World Bank’s ~$5 billion near-term (up to $25 billion by 2030) and HSBC’s $3.4–10.4 billion, mostly assume active managers follow. And the real economy never stopped pulling capital in: registered FDI rose 34.9% in the first five months of 2026.
The takeaway
The multi-year foreign exodus from Vietnam was mostly about things happening outside Vietnam: a strong dollar, high US rates, and a once-in-a-generation pull from American AI. But the rate gap that triggered the selling has narrowed, the structural barriers are coming down, and the FTSE upgrade lands in September.
Figures drawn from Vietnamese exchange and FiinTrade data, the US Federal Reserve, USTR and Bloomberg Economics (tariffs), the World Bank, IMF, FTSE Russell/LSEG, HSBC Global Research, and VanEck, 2025–2026.