Retail Crowd Dump Vietnam Stocks for Near 10% Bank-Deposit Rates

(Bloomberg) -- Vietnam’s retail investors are dumping equities and buying high-yielding notes from banks to capture interest rates nearing 10%, as locals and foreigners fall out of favor with the poor-performing stock market.

Banks lifted deposit rates in recent months to compete for funding, sucking in a swathe of the country’s 14 million retail investors to a financial product long considered out of fashion. The move came as the roughly $392 billion equity market dropped about 3% in 2026, on course for its first annual loss in four years.

Vietnam’s economy is growing at the fastest pace since the global pandemic as an expansion in credit buffers profitability at the largest banks. Still, persistent selling of equities by oversees money managers and local individual investors preferring the safety of high returning bank notes has left the benchmark stock index about 24% below its price-earnings multiple of the past five years.

For now, that’s not cheap enough to tempt back investors who’ve been stung by the falls, like Trung Nguyen, a 47-year-old Hanoi resident.

“This market is truly terrifying,” he said, after shifting his remaining savings into bank deposits following a year of losses. The more he traded, he said, the more money he lost. “With a few hundred million dong left, for now, I’m just putting it in a bank to earn interest while waiting for the market to recover before jumping back in.”

Turnover on the Ho Chi Minh City Stock Exchange, Vietnam’s main bourse, fell to $568 million in October, its lowest monthly level since August 2020, according to data compiled by Bloomberg.

Cash held in Vietnamese investors’ securities accounts dropped to about 64.9 trillion dong ($2.5 billion) at the end of the third quarter, down 49% from a year earlier and the lowest level since the fourth quarter of 2024, according to data compiled by VnDirect Securities JSC.

Banks deposit rates at Vietnamese lenders increased for 11 consecutive months before the central bank ordered commercial banks to cut interest rates in late October, seeking to rein in funding costs and limit competition for deposits. Still, some banks are offering rates as high as 7% at the counter, while others are negotiating even higher rates, according to market observers.

For Thuy Linh, a 48-year-old Hanoi resident, the search for the best rate has become an investment exercise in itself. With 1.5 billion dong to put away, she has approached several banks and secured offers as high as 9.1%, primarily from smaller and medium-sized lenders.

“The deposit rates are still very attractive now,” she said.

The change in mood comes as Vietnam has been working to make its stock market more accessible to international investors. The country has conducted a series of reforms to improve market accessibility and has secured a long-awaited emerging-market upgrade from FTSE Russell, a milestone expected to attract billions of dollars into its equity market.

But those reforms have yet to translate into a return of foreign capital. Overseas investors have sold a net $4.6 billion of Vietnamese shares so far this year, nearly matching last year’s record outflow of $4.8 billion for the full year, according to data compiled by Bloomberg.

“Right now bank deposit rates are attractive,” said Chris Hunt, chief investment officer at Kenno Asset Management Pte. in Singapore “Liquidity is tight and banks are competing for funds while demand for loans remains high, which makes this a good time for the risk adverse.”

“Foreigners may need a little time to find their mojo again,” he added, suggesting possible catalysts may be the continued phased inclusion of the FTSE Russell Index next year. He remains optimistic that international investors will eventually return, arguing that Vietnam’s 10-year outlook remains “very compelling.”

For now, the immediate competition for investors’ money is coming from banks rather than overseas fund managers. For individual investors such as Quang Le, a 50-year-old Hanoi resident, the choice is less about Vietnam’s long-term economic prospects than what his money can earn today.

Analysts expect funding pressures to persist as credit growth outpaces deposit growth, potentially forcing lenders to keep rates elevated to attract the capital needed to support lending. Household bank deposits reached a record 11.43 quadrillion dong at the end of August, according to the State Bank of Vietnam, underscoring the growing pool of money flowing into the banking system.

“With gold prices stagnant, the real estate market frozen and the stock market lackluster, while bank interest rates are highly attractive, the best and safest course of action is to keep your money in the bank,” Quang said. He had deposited about 2 billion dong at a bank, securing an interest rate of more than 9%. “Where else can you get such a high return without having to worry about it every day?”

More stories like this are available on bloomberg.com

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