What is the VN Index? A Comprehensive Guide to the Vietnamese Stock Market Index

Basic Concepts of VN Index

VN Index (commonly called VNindex) is a stock index representing the overall performance of the Vietnamese stock market. Unlike international indices such as Dow Jones or S&P 500, VN Index is calculated based on the total market capitalization of all listed companies on the HOSE (Ho Chi Minh City Stock Exchange).

To make it easier to understand, VN Index is a “measure” that helps investors grasp the general trend of the entire Vietnamese stock market over different periods. When looking at the VN Index figure, you can tell whether the market is “hot” or “cold,” meaning whether investors are optimistic or pessimistic about the economic situation.

Formation and Development History

In 2000, the Ho Chi Minh City Stock Exchange officially came into operation on July 28, marking the beginning of the modern stock market in Vietnam. VN Index was also established from this point with a base value of 100 points.

The period 2006-2007 was a “boom” time for the market. When Vietnam joined WTO in 2006, economic liberalization brought a wave of foreign investment, causing VN Index to quadruple compared to 2005. 2007 was also a golden year for the stock market as state-owned enterprises launched numerous IPOs, and lending rates were lowered, providing abundant capital for investors.

However, 2008 brought costly lessons. The global financial crisis originating from the US spread to Vietnam, causing VN Index to plummet. Since then, the Vietnamese government implemented stimulus measures, steering the market into a stable growth trajectory from 2009 onwards.

In 2019 and early 2020, the US-China trade war negatively impacted many global markets, but the Vietnamese stock market remained stable. This was thanks to supportive government policies and relatively favorable macroeconomic conditions in Vietnam.

2020 was a “nightmare” as the Covid-19 pandemic broke out. VN Index dropped by up to 31% in the early months, leading to continuous net foreign selling. However, thanks to continuous interest rate cuts and effective domestic pandemic control, the market recovered quickly. From Q2/2020 to the end of Q4/2021, VN Index surged, reaching a new peak of 1,536 points—higher than the previous peak of 1,211 points, with trading volume exceeding 40,000 billion VND.

2022 was a decline year as the Fed began a rate hike cycle to combat inflation, forcing investors to shift away from emerging markets. VN Index experienced a prolonged downward trend from late March 2022 until the end of July 2023. But after the Fed paused rate hikes, the Vietnamese market revived. By the end of 2023, VN Index recorded a 15.78% increase, far surpassing Dow Jones (13.36%).

Calculation Method of VN Index

Calculation formula:

VN Index is calculated using the Paasche Index method, where:

• Numerator: (Current Price × Circulating Shares at Base Period)
• Denominator: (Base Price × Circulating Shares at Base Period)

This means that VN Index reflects the price changes of the stocks in the standard basket, compared to the base value set on July 28, 2000 (which is defined as 100 points).

For example: If VN Index is at 1,203 points (as of April 26, 2024), it means the market capitalization has increased 12.03 times compared to the initial issuance date. The State Securities Commission is the authority that manages and publishes the VN Index data daily.

Practical Significance of VN Index

1. Reflects Investor Sentiment

When VN Index rises, it indicates that investors are optimistic and willing to pour money into stocks. Conversely, when this index declines, it reflects market pessimism and fear. Strong or weak cash flow on the Vietnamese stock exchange can be clearly read through VN Index fluctuations.

2. Assessing Economic Health

The stock market is considered a “mirror” of the economy. VN Index not only reflects stock prices but also investor expectations for the future economy. When companies have good prospects, profits increase, and government support policies improve, VN Index tends to rise.

3. Performance Comparison Tool

Investors can use VN Index to compare the performance of the Vietnamese stock market across different years and periods. This helps them evaluate whether the market performed better this year than last, or whether to continue investing or withdraw capital.

VN Index vs VN30: Key Differences

Similarities: Both VN Index and VN30 influence investor sentiment in the Vietnamese stock market. Their fluctuations drive or restrict capital flow into the market.

Differences:

VN Index covers all listed stocks on HOSE, while VN30 measures only the 30 largest-cap companies. VN Index is calculated based on total market capitalization without excluding “illiquid” stocks (not considering free float). In contrast, VN30 is constructed with a more rigorous methodology, with mechanisms to control the over-dominance of large stocks.

Currently, the 30 companies in the VN30 basket account for over 80% of the total market capitalization. Therefore, VN30 is often used to develop new investment products, ETFs, or other derivatives.

Comparison of VN Index with International Indices

Absolute Value:

Compared to absolute figures, VN Index (currently around 1,200 points) is much lower than US indices like S&P 500 (above 5,800), Dow Jones (above 43,000), or Nasdaq (above 19,000). However, such comparisons are unfair because these indices use different calculation methods and release times.

Growth Rate:

This is where VN Index “shines.” Over the past 12 years (from 2009 to 2021), VN Index increased by over 550%, averaging about 45% annually. This growth rate far exceeds many international indices, reflecting Vietnam’s growth potential.

Safety and Stability:

The US stock market is still considered the “safest” due to its long history (over 100 years), large scale, and strict regulations. Vietnam’s market, although dynamic, is still young (less than 20 years), with less flexible mechanisms (T+2 settlement system limits foreign trading), and political and policy risks still exist.

Investment Opportunities in the Current Period

Since the beginning of 2024, VN Index has fluctuated around 1,200 - 1,250 points. Many analysts assess that the Vietnamese market is at a “reasonable price zone” where long-term investors can accumulate quality stocks.

Supporting factors for a positive outlook of VN Index include:

• Vietnam ranked among the top 20 fastest-growing economies in the world
• Production shift from China to Vietnam (“China Plus One” scenario)
• Attractive dividend yields of many large stocks (5-8% annually)

Leading Companies in the Market

According to updated data, the 10 largest-cap companies currently include:

The Financial sector dominates with Vietcombank (market cap 500 billion VND), BIDV, Vietinbank, Techcombank, VPBank. Real estate is also a pillar with Vinhomes, Vingroup. Additionally, PV Gas (energy), Hòa Phát Group (mining), FPT (technology) are major names.

Conclusion

VN Index has become a symbol of Vietnam’s economic development. Although the Vietnamese market still has many limitations, its growth rate suggests it is a promising destination for investors.

Monitoring VN Index not only helps investors understand the Vietnamese stock market but also enables them to seize long-term investment opportunities. With sustainable economic development and market reforms, VN Index is expected to continue being an important index to watch in the coming years.