What is VNIndex? A comprehensive guide to the Vietnamese stock index

Understanding the VNIndex from the Basics

The VNIndex is a measure reflecting the overall health of the Vietnamese stock market. Managed by the State Securities Commission, it is the most important index at Ho Chi Minh Stock Exchange (HOSE) - the oldest and largest stock exchange among Vietnam’s three exchanges.

Unlike other indices such as the HNX Index or Upcom Index, which measure only parts of the market, the VNIndex includes all listed stocks on HOSE. Its calculation is based on market capitalization – the total value of all traded companies.

Practical Significance of the VNIndex

What does a VNIndex figure mean? For example, on 26/4/2024, the VNIndex stands at 1203.03 points. This number indicates that the total market capitalization of all stocks on HOSE has increased by 12.0303 times compared to the market opening date on 28/7/2000.

Through the VNIndex, investors can:

Assess Market Sentiment: When the VNIndex rises, it reflects investor optimism and positivity, with funds ready to flow in. Conversely, a decline indicates concern and capital withdrawal.

Sense Economic Momentum: This index indirectly reflects the health of the economy through investor expectations about policies, corporate growth, and inflation.

Monitor Performance: Comparing the VNIndex over the years helps investors understand whether the market is developing or weakening.

How the VNIndex is Calculated

The VNIndex is calculated using the Paasche price index method, where:

• The current stock volume multiplied by the current price
• Divided by the initial period’s stock volume multiplied by the initial price

This creates a comparative figure showing how much the market has changed.

The 24-Year Journey of Vietnam’s Stock Market via the VNIndex

Golden Period (2006-2007): When Vietnam joined WTO, the stock market exploded. 2007 was a peak with numerous IPOs of state-owned enterprises, and the VNIndex nearly quadrupled compared to 2006.

Global Crisis (2008-2009): The worldwide economic downturn hit hard, but from 2009, government stimulus policies helped the VNIndex begin to recover.

Covid-19 Shock (2020): The VNIndex dropped 31%, with foreign investors withdrawing heavily. However, with interest rate cuts and effective pandemic control, the market quickly rebounded.

Boom and Correction (2021-2022): The VNIndex set a new high of 1536 points in Q4/2021 with trading volume exceeding 40 trillion VND. Then, from late 2021 to mid-2023, the market entered a downward trend due to Fed rate hikes. In 2023, the VNIndex recovered with a 15.78% increase.

Comparing the VNIndex with Global Indices

When compared to major indices like Dow Jones, S&P 500, or Nasdaq 100, the differences are clear. In absolute terms, US indices are much higher. This is because the Vietnamese stock market is still young, with trading mechanisms like (T+2) and foreign capital controls (T+2 and foreign capital controls), and different levels of economic development.

However, in terms of growth rate, the VNIndex is much more impressive. With a 550% increase over the past 12 years (from 2009, starting from the bottom of the crisis), approximately 45% annually, Vietnam’s stock market is one of the fastest-growing markets in the region. This is why domestic and foreign investors are paying close attention to the potential of the VNIndex.

VNIndex vs. VN30 - Key Difference

Common Area: Both indices significantly influence investor trading decisions and reflect market sentiment.

Major Difference:

The VNIndex measures the entire market (all stocks on HOSE), based on market capitalization without considering free float (free float). This means large stocks dominate the index excessively.

The VN30 includes only the 30 largest companies but is calculated more precisely, considering free float factors. The VN30 group accounts for over 80% of total market capitalization, making it a more accurate indicator of overall trends.

For this reason, the VN30 is used as a basis for creating new investment products and funds.

Top 10 “pillar” companies of the market

The Vietnamese stock market is currently led by financial and real estate conglomerates. Vietcombank (VCB) leads with a market cap of 500.22 trillion VND, followed by BIDV (BID) with 281.57 trillion VND and Vietinbank (CTG) with 174.80 trillion VND.

This group also includes Vinhomes (VHM), PV Gas (GAS), Hòa Phát Group (HPG), Techcombank (TCB), Vingroup (VIC), FPT (FPT), and VPBank VPB. The dominance of these large companies explains why the VNIndex is often heavily influenced by a few leading stocks.

How the Vietnamese stock market has developed

Since its launch in 2000, the Vietnamese stock market has experienced 24 years of fluctuations. In 2019, despite impacts from the US-China trade war, the market remained stable and attracted foreign investors, especially as Vietnam was ranked among the top 20 countries contributing most to global GDP growth.

The severe decline in early 2020 due to Covid-19 was the second-largest fall after the 2008 crisis, placing Vietnam among the top 10 markets with the sharpest declines worldwide at that time.

However, the recovery from Q2/2020 to Q4/2021 demonstrated the market’s resilience. It not only surpassed the previous peak of 1,211 points but also reached a new high of 1,536 points.

The current market: Hidden opportunities

2022 was a year of prolonged correction, with the VNIndex falling from the peak to 960-980 points, declining for 9 consecutive months. However, analysts believe this period offers opportunities for investors to buy quality stocks at reasonable prices, rather than waiting for hot growth phases like 2020-2021.

Summary: VNIndex - A young but promising market

The VNIndex is not just a number on a screen. It represents the vitality of Vietnam’s economy, investor sentiment, and the growth pace of listed companies.

Although the Vietnamese stock market remains small, underdeveloped, and limited compared to long-established markets, its 550% growth over 12 years makes it an attractive destination for investors.

After 24 years since its inception, if the world considers the US stock market the safest and most reliable playground, Vietnam’s stock market is the one with the highest growth potential. That’s why the VNIndex remains a key indicator for all investors worldwide to watch.