VN Index Market: From the Beginning to Present – Everything You Need to Know

If you are an investor or a follower of the Vietnamese stock market, you have certainly heard of the VN Index. But what exactly is this index? How does it operate? And why is it important for your investment decisions? The following article will answer all those questions.

The Development Journey of VN Index Through Different Phases

To better understand VN Index, we need to look back at its history. The Ho Chi Minh City Stock Exchange officially opened on 07/28/2000, marking the beginning of the modern Vietnamese stock market. Since then, VN Index has gone through many cycles of fluctuation, reflecting major economic events.

The period 2006-2007 was the “golden” era of the market. After Vietnam joined WTO in 2006, the Vietnamese stock market experienced a strong growth wave. 2007 was particularly notable when policies reducing tax incentives and numerous IPOs of state-owned enterprises caused VN Index to increase nearly 4 times compared to the previous year.

However, 2008 brought challenges. The global economic recession heavily impacted the local market. But quickly, from early 2009, this index started to accelerate thanks to government stimulus measures.

What Is VN Index? Basic Definition

VN Index (also called VNindex) is Vietnam’s main stock index, representing the overall performance of the Vietnamese stock market. It is calculated based on the market capitalization of all listed companies on the HOSE (Ho Chi Minh Stock Exchange) – the largest trading floor in Vietnam.

Besides VN Index, the Vietnamese stock market also has other indices such as HNX Index (sàn Hà Nội) or Upcom Index. However, VN Index is considered the most important and influential index, similar to the role of Dow Jones in the US market.

To understand better, let’s take a specific example: on 04/26/2024, VN Index stood at 1203.03 points. This means that the market capitalization value of all stocks on HOSE has increased by a factor of 12.0303 compared to the base value on 07/28/2000.

How Is VN Index Calculated?

VN Index is calculated using the Paasche price index method, managed by the State Securities Commission. The basic formula includes:

• Number of outstanding shares at the current time
• Current stock prices
• Number of shares at the base period (07/28/2000)
• Stock prices at the base period

This method allows for a direct comparison of market fluctuations over the years with a fixed base point.

What Does VN Index Tell Us?

By observing the fluctuations of VN Index, investors can derive three important pieces of information:

Market sentiment: The rise and fall of VN Index reflect investor optimism or pessimism. When the index increases, it signals that capital flows are improving and investors feel positive about market prospects. Conversely, a decline indicates caution and capital withdrawal.

Economic health: VN Index acts as a “microscope” to observe the economic situation. It reflects investor expectations regarding macro factors such as government policies, business development, and inflation pressures.

Market performance: Through VN Index, we can evaluate the profitability of the Vietnamese stock market compared to different periods.

Major Fluctuations of VN Index

In 2019, the market faced pressures from the US-China trade war, but the Vietnamese stock market wisely “avoided” the worst risks and ended the year with decent growth. This recovery was supported by Vietnam being ranked among the top 20 economies with the highest GDP growth rates in the world.

But 2020 brought a sharp shock. The Covid-19 pandemic caused VN Index to plummet 31% in the early months, with foreign investors continuously withdrawing capital. However, thanks to government interest rate cuts and better pandemic control compared to other countries, from Q2/2020 onwards, the green color returned.

The 2020-2021 period was the “golden era” of the market. Trading volume exceeded 40,000 billion VND, VN Index broke the old record of 1,211 points and reached a new peak at 1,536 points. However, starting from late 2021, the Fed began a cycle of interest rate hikes, causing VN Index to decline continuously for 9 months and fall into the range of 960-980 points in 2022.

Nevertheless, forward-looking investors often see market downturns as opportunities to buy quality stocks at reasonable prices rather than expecting profits from the hot growth phase.

Comparing VN Index with International Indices

When comparing VN Index with major indices like S&P 500, Dow Jones, or Nasdaq 100, the differences are quite clear. VN Index is still smaller in absolute value, which is understandable since the Vietnamese stock market is relatively young, with nearly 25 years of operation.

Vietnam’s stock market also faces limitations such as:

• T+2 settlement mechanism limiting flexibility and off-market trading volume
• Modest foreign capital inflows due to risk concerns
• High concentration (large companies dominate the market)

However, in terms of growth rate, VN Index is one of the most “stellar” indices. From the bottom of the 2009 crisis to now, VN Index has increased over 550% with an average annual growth of about 45% – a remarkable figure compared to developed markets. In 2023, VN Index increased by 15.78%, while Dow Jones only rose by 13.36%.

VN Index and VN30: Key Differences

Many people confuse VN Index and VN30. Both influence investor psychology, but they are entirely different.

In scope: VN Index includes all stocks listed on HOSE, while VN30 tracks only the 30 largest market capitalization companies.

In calculation method: VN Index is based entirely on market capitalization without considering “free float” (the freely tradable shares), which can lead to distortion by stocks with high weights. VN30 addresses this better by focusing only on the top stocks, accounting for over 80% of total market capitalization. Therefore, VN30 often more accurately reflects overall market fluctuations and is used as a basis for developing new investment products.

Top 10 Leading Companies in the Market

Currently, the leading companies in the Vietnamese stock market are led by financial and real estate conglomerates:

Vietcombank (VCB) with a market cap of 500.22 billion VND and a stock price of 92.4 thousand VND ranks first. Followed by BIDV (BID), Vietinbank (CTG), Vinhomes (VHM), and PV Gas (GAS). Other top 10 companies include Hòa Phát Group (HPG), Techcombank (TCB), Vingroup (VIC), FPT (FPT), and VPBank (VPB).

Current and Future of VN Index

In over 25 years of operation, the Vietnamese stock market has demonstrated resilience and recovery capability. From the initial 100 points at launch, VN Index has developed into a noteworthy index in the Asia region.

Although there are still certain limitations regarding market maturity and trading mechanisms, with impressive growth rates, the Vietnamese stock market has become an attractive destination for both domestic and international investors.

VN Index is not just a statistical indicator, but an important tool to understand Vietnam’s economic development and to make smart investment decisions. Whether you are a seasoned investor or just starting out, tracking VN Index will help you grasp the market’s pulse.