Brian Jeffrey
On October 8, China’s stock market saw a remarkable surge, kicking off just after the National Day holiday (October 1-7). The CSI 300 index rose over 10% at the market’s opening, following a strong performance in prior sessions.
Favorable data regarding home sales and consumer expenditure fueled this upward movement, enhancing the market’s existing positive trajectory. This sector has demonstrated significant gains after the implementation of Beijing’s notable economic stimulus measures.
Over a brief period, Chinese stock markets have rallied approximately 30%, marking the largest leap since 2015. Prior to this surge, the market had notably dropped, losing over 45% from its summit in 2021 until mid-September 2024.
Conversely, U.S. stock markets faced difficulties on October 7 (the morning of October 8 in Vietnam), where the Dow Jones Industrial Average plummeted by around 400 points.
The turnaround in China’s stock market began in late September when the government introduced various supportive actions, including interest rate cuts and easing reserve requirements for banks, alongside measures to enhance liquidity in the market. Additionally, local governments in several major cities launched initiatives to stimulate the housing sector.
These financial and economic policies quickly attracted Wall Street’s attention. Major entities like Goldman Sachs, HSBC, and BlackRock have revised their perspectives on what was once viewed as a significantly undervalued market.
A press conference is scheduled for October 9, where China is expected to elaborate on its approach to stimulate economic growth. This announcement is anticipated to be critical for maintaining the stock market’s positive momentum.
Significant investments have swiftly flowed into the Chinese stock market from large funds such as BlackRock, Man Group, and Appaloosa Management. An Appaloosa representative even indicated on CNBC their active strategy of “buying everything related to China.”
The impressive rise in China’s stock market has instilled confidence, with expectations of sustained growth given how previously undervalued the stocks were compared to developed markets. Trading volumes on the Shanghai and Shenzhen exchanges have notably increased.
Nevertheless, experts caution that this rally may not last long. BlackRock has indicated a willingness to approach the situation cautiously in light of “China’s structural challenges.”
Trade and geopolitical tensions also pose significant concerns. Ongoing U.S.-China conflicts and regional geopolitical issues could emerge as potential setbacks. Some analysts remain skeptical about investing in Chinese stocks, despite the new positive economic initiatives.
Fears also exist that China’s stock market might experience a scenario akin to Japan’s “lost decade,” following the burst of its economic bubble three decades ago, which led to a prolonged recovery. China’s current geopolitical relations add a layer of risk that may compound those challenges.
There are indications that capital is shifting towards China’s stock market while being withdrawn from the U.S. In Vietnam, there has been a halt in foreign investors’ net selling activities (which had reached billions of USD earlier this year), with recent sessions showing substantial net buying worth hundreds of billions of VND.
The nature of foreign investments now exhibits greater volatility, moving away from the stable long-term holdings typical of earlier times. The recent spike in China’s stock market and the rapid engagement of Western funds illustrate this shift.
Many analysts believe the future trajectory of China’s stock market hinges on forthcoming economic support measures. Should the Chinese market show signs of weakening, some of this capital might migrate to Vietnam, albeit in limited amounts.
In September, foreign investors made notable net purchases, excluding a substantial divestment of nearly VND 2.7 trillion at VIB.
Currently, Vietnam’s stock market is still interpreted as a frontier market, lacking robust appeal. The issues confronting major companies, alongside the economic ramifications of Typhoon Yagi and other fluctuations, continue to render foreign investors cautious.
Mirae Asset Securities highlights that several factors may impact Vietnam’s stock market in October, such as Q3 business performance against a backdrop of low growth in the previous year; potential market upgrades and FTSE reviews (anticipated for September 2025); and legislative approvals during the 8th National Assembly session commencing October 21 for laws like the Public Investment Law and modifications to the Value Added Tax Law.
Positive trends in foreign direct investment (FDI), government initiatives to boost public investment, anticipated capital inflow through bank lending to achieve a 15% credit growth target, and declining loan rates may further favorably impact the stock market.
However, current capital inflows into the stock market remain modest, with liquidity decreasing in recent sessions. As of the morning of October 8, the VN-Index slipped slightly by 0.57 points to 1,269.36, with liquidity barely reaching VND 7.5 trillion on HoSE. The critical threshold of 1,300 points proves difficult to breach.
Globally, capital movements show no definitive direction, with both gold and U.S. equities nearing record levels, while government bonds lose attractiveness as interest rates decrease. The influx into China’s stock market appears partial, with projections suggesting it may be temporary. Recent trends indicate a shift towards the U.S. dollar as a secure asset, which has led to its appreciation.
There remains a possibility for the return of capital to U.S. equities as policy rates decline and the U.S. economy is expected to navigate a soft landing, circumventing recession.
Despite challenges, Vietnam continues to draw stable FDI flows. Growth in indirect investment (FII) is anticipated in 2025 following the expected upgrade of the stock market.
