Maybank Spotlights Vietnam's Sovereign Upgrade Journey at VIR Workshop
Vietnam's Ambitious Roadmap for Economic Growth
At the recent "The Allure of Asset Classes" workshop held by VIR on November 13, Vu Viet Linh, vice president of institutional research at Maybank Investment Bank, highlighted Vietnam’s ambitious economic plan for the period 2026-2030. According to Linh, the country aims to achieve an annual GDP growth rate of 10% and attract $1.4 trillion in investment. To meet these targets, Vietnam must raise funds both internally and externally, which requires significant developments in its capital markets.
One of the key areas identified by Linh is the need to deepen the capital markets. This involves developing the bond market and upgrading the stock market to emerging market status as recognized by FTSE and MSCI. Additionally, the establishment of an International Finance Centre and an upgrade of Vietnam’s sovereign rating to "investment grade" by S&P or Fitch are essential steps in this journey.
Linh emphasized that these developments could significantly enhance access to global capital markets for Vietnam’s government, banks, and corporations. By reducing the cost of funds, these measures could attract more foreign inflows into the country, leading to a robust performance in Vietnam’s stock market. He noted that this could result in a more substantial and stable market performance compared to previous emerging market upgrade events.
Improving Sovereign Ratings and Economic Impact
Over the past decade, Vietnam’s sovereign rating has shown improvement. A potential upgrade to investment grade would signal stronger macroeconomic fundamentals, thereby reducing both country and corporate risk premiums. This improved risk profile could attract external capital, support currency stability, and enhance equity market performance.
Historical case studies from Maybank reinforce this thesis, showing that sovereign upgrades often lead to meaningful economic gains. Equity investors, in particular, benefit when positioned from two years before to two years after the upgrade.
However, according to ratings agencies such as Fitch, S&P, and Moody’s, Vietnam still needs to address several challenges. These include institutional weaknesses, elevated risks within the banking sector, and declining external buffers.
Addressing Institutional and Banking Sector Challenges
Linh pointed out that Resolution 68 and ongoing administrative restructuring are crucial starting points for improving regulatory quality and accountability. These reforms aim to strengthen institutional frameworks, which are vital for long-term economic stability.
Regarding the banking sector, which is large relative to GDP and faces persistent undercapitalization, Linh believes that more effective investments and stronger GDP growth in the coming years will help address these vulnerabilities. He also mentioned that state-owned banks are already planning to recapitalize, which could further stabilize the sector.
Enhancing External Buffers and Attracting Capital
For external buffers, positive developments such as the Federal Reserve’s rate cuts (projected to reach 3% by the end of 2026) and Vietnam’s improving business environment are expected to attract USD flows back to the country. This influx of capital could help the central bank restrengthen its foreign reserves.
Despite uneven progress and lingering challenges, Vietnam continues to push forward with reforms aimed at overcoming key bottlenecks on its path to achieving an investment-grade sovereign rating. Linh expressed confidence that if Vietnam successfully delivers on its ambitious 2026-2030 economic plan, a sovereign upgrade to investment grade will be achievable.
