Forceful sales lead VN-Index to close at a lower level
The Vietnamese stock market, as represented by the VN-Index, has recently experienced a correction after a significant upward trend. The following factors have contributed to this adjustment:
**Profit-Taking After a Sustained Rally**
The VN-Index had risen nearly 33% since its low in April, reaching close to the critical threshold of 1,500 points. Such a rapid and prolonged rally led to valuation levels that many investors found less attractive, prompting widespread profit-taking. This selling pressure is a natural market reaction after a strong bull run, as investors lock in gains and reassess risk.
**High Market Volatility and Herd Mentality**
Vietnam's stock market is characterised by high volatility, with a beta of 1.45 compared to 1.0 in developed markets, and frequent trading sessions with moves above 3%. Additionally, individual investors dominate the market, accounting for over 85% of transactions, which can amplify herd behaviour and lead to sharper corrections when sentiment shifts.
**Technical and Psychological Factors**
Technical analysts from major securities firms view the correction as necessary to solidify the market's medium- to long-term upward trajectory. The market psychology, influenced by technical indicators and previous forecasts, played a role in triggering the sell-off as the VN-Index approached key resistance levels.
**Shifts in Leading Stock Performance**
Previously, large-cap stocks like Vingroup (VIC) and Vinhomes (VHM) were major drivers of the index's rise. Recently, however, these stocks contributed negatively to market performance, further pressuring the index downward. Conversely, some stocks (e.g., Gelex Electricity JSC (GEE), GEX, LPB, SSI, OCB) provided support, but not enough to offset the broader decline.
**Foreign Investor Activity**
Despite domestic selling, foreign investors increased their buying activity, with net purchases exceeding VNĐ1 trillion in a single session. This suggests that while local investors were taking profits, foreign capital continued to flow in, potentially cushioning the downside.
**Underlying Economic and Policy Factors**
While not directly cited as immediate triggers for the correction, broader economic conditions—such as Vietnam's 7.52% GDP growth in the first half of 2025 and controlled inflation—provide a mixed backdrop. The market's high correlation with credit policy (correlation coefficient 0.83 with credit growth) means that shifts in monetary policy or credit availability can also influence market movements, though this was not highlighted as a direct cause of the recent correction.
**Structural Market Characteristics**
Challenges such as information lag (financial results reported 45–60 days after quarter-end) and limited minority investor protection (investor protection index 3.5/10) may contribute to general market uncertainty and volatility, though these are ongoing issues rather than specific triggers for the recent correction.
## Summary Table: Key Contributing Factors
| Factor | Description | |-------------------------------|-----------------------------------------------------------------------------| | Profit-taking | Natural reaction after a 33% rally since April[3] | | High volatility & herd effect | Individual investors dominate; high beta amplifies swings[1] | | Technical resistance | Correction as VN-Index neared 1,500; technical analysis reinforced selling[3]| | Shift in large-cap performance| VIC, VHM turned from drivers to drags on the index[3] | | Foreign inflows | Continued foreign buying, but not enough to offset domestic sales[3] | | Economic/policy backdrop | Strong growth, controlled inflation, but policy sensitivity remains[1][4] | | Structural issues | Information lag, weak investor protection add to volatility[1] |
## Conclusion
The recent correction in the VN-Index is primarily a result of profit-taking after a steep rally, exacerbated by the market's inherent volatility and dominant retail investor base. Technical factors and shifts in leading stock performance further contributed, while foreign buying provided some offset. Structural and policy-related issues remain underlying risks that can influence market stability over the longer term[1][3].
- The VN-Index had seen a consecutive rise over seven sessions, leading to significant profit-taking pressure. - The VN30-Index also finished lower at 1,593.84 points. - The VN-Index's closing was at 1,460.65 points, ending a streak of seven days of rally.
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