Is Vietnamese Dong a Good Investment?

The Vietnamese Dong (VND) presents an interesting case for foreign investors. Understanding the currency involves recognizing its unique characteristics and the economic forces that shape its value. While direct investment in the VND can be complex, various avenues allow for exposure to Vietnam’s growing economy.

Understanding the Vietnamese Dong

The Vietnamese Dong (VND) serves as the official currency of Vietnam, issued and managed by the State Bank of Vietnam (SBV). Unlike many major global currencies, the VND is not freely convertible, meaning there are restrictions on its exchange and movement across borders.

The SBV actively manages the exchange rate, often adjusting it to reflect market supply and demand while aiming for macroeconomic stability. The SBV uses various tools, including setting daily interbank reference rates and intervening in the foreign exchange market, to stabilize the VND. These interventions are designed to control inflation, support exports, and maintain financial market stability.

Economic Drivers of VND Value

Several macroeconomic indicators and policy decisions significantly influence the Vietnamese Dong’s value. Vietnam’s economy has demonstrated consistent growth, with its Gross Domestic Product (GDP) expanding by 7.96% in the second quarter of 2025. The country’s GDP growth averaged 6.27% from 2000 until 2025, reflecting a dynamic and expanding economy.

Inflation rates are carefully managed by the SBV to maintain price stability. The annual inflation rate in Vietnam decreased to 3.19% in July 2025, down from 3.57% in June 2025, generally remaining within the government’s target. The SBV actively manages interest rates, urging commercial banks to lower lending rates to support economic recovery.

Vietnam consistently maintains a positive trade balance, indicating that its exports generally exceed its imports. In the first seven months of 2025, Vietnam posted a trade surplus of $10.18 billion, with exports reaching $262.44 billion and imports at $252.26 billion. This trade surplus contributes positively to the VND’s stability by increasing demand for the currency. Foreign Direct Investment (FDI) inflows are another substantial driver, with Vietnam attracting $24.09 billion in FDI in the first seven months of 2025, a 27.3% increase year-on-year, primarily flowing into manufacturing and processing.

Tourism also plays a role in generating foreign exchange and supporting the VND. Vietnam’s tourism sector is projected to significantly contribute to the economy, with international arrivals increasing by 24.3% in Q2 2025 compared to Q2 2024. These strong economic fundamentals, coupled with the SBV’s active exchange rate management, influence the VND’s stability and potential for appreciation.

Approaches to Investing in VND

Foreign investors interested in gaining exposure to the Vietnamese Dong have specific avenues, given the currency’s non-freely convertible status. Direct foreign exchange (forex) transactions involving the VND are generally restricted for retail investors. While foreign investors can contribute capital in foreign currency to a Vietnamese entity, direct conversion and trading of VND for speculative purposes are limited.

A more accessible approach for many foreign investors is through Vietnam-focused Exchange-Traded Funds (ETFs). These funds invest in a basket of Vietnamese equities, providing indirect exposure to the country’s economy and, by extension, the VND. Examples include the VanEck Vietnam ETF (VNM) and the Global X MSCI Vietnam ETF (VNAM), which track indices of publicly traded Vietnamese companies. These ETFs offer diversification and are traded on international exchanges, simplifying access for foreign investors.

Investing in Vietnamese government bonds is another possibility, as foreign individuals and organizations are permitted to purchase them. However, foreign investors must obtain a Securities Trading Code from the Vietnam Securities Depository to participate. While foreign investors can buy bonds, direct participation by foreign investors and mutual funds in the Vietnamese government bond market has historically been low.

Considerations for Potential Investors

Before making any investment decisions related to the Vietnamese Dong, potential investors should carefully consider several factors. Capital controls and the currency’s non-freely convertible status affect liquidity and the repatriation of funds. Supporting documentation is required to prove all financial obligations, including corporate income tax, have been met when converting and repatriating earnings or investment capital. New regulations (Circular No. 03/2025/TT-NHNN) provide clearer guidance on opening and using Vietnamese Dong accounts for foreign indirect investment activities, allowing more transactions via Indirect Investment Accounts.

Inflation differentials between Vietnam and an investor’s home country are also important. While Vietnam’s inflation has been relatively stable, differences in inflation rates can impact the real return on VND-denominated investments. A higher inflation rate in Vietnam compared to a foreign investor’s home country could erode purchasing power over time.

The political and regulatory environment in Vietnam influences investment security. Vietnam has a legal framework, including the Law on Investment and Law on Enterprises, designed to facilitate foreign investment. Foreign ownership limits (FOLs) exist in various sectors, though many sectors allow 100% foreign ownership. The government periodically reviews and adjusts these limits, and some public companies have opted to set their own lower foreign holding caps. Investors should also note that Vietnam’s laws recognize and protect foreign investors’ ownership rights, with provisions for compensation in cases of expropriation. Diversification of investment portfolios and aligning any potential VND investment with personal financial goals and risk tolerance remain prudent practices.