Investment Capital Flows: when expectations matter more than news

EXPECTATIONS ARE THE STARTING POINT OF CAPITAL FLOWS

On the stock market, investors often joke: “Buy the rumor, sell the news.” Behind that seemingly emotional saying lies a very basic principle: asset prices do not reflect the past but rather expectations about the future. That is why a company can announce positive results while its share price stays flat, or even falls – the information had already been forecast by the market and priced in weeks, or even months, earlier.

What drives capital flows is not the information itself, but its ability to change the market’s expectations.

Vietnam’s experience in recent years clearly illustrates this: in 2025, expectations of high economic growth, accelerated public investment and, in particular, the stock market’s upgrade to emerging-market status pushed the VN-Index up more than 40% over the full year, while real GDP grew only 8.02%.

This divergence is not a new phenomenon. In 2022, GDP grew 8.12% — the highest in more than a decade — yet the VN-Index fell nearly 33%. At that time the market was not pricing current economic results but rather global interest-rate risk, liquidity pressures and corporate-bond volatility. A strongly growing economy is not enough to sustain share prices if expectations are deteriorating.

Table 1. Correlation between the VN-Index and Vietnam’s GDP over the years (2020–2025)

Source: HOSE (FiinPro), General Statistics Office. (*) Figures calculated from actual trading data.

Figure 1. VN-Index YoY% and Vietnam GDP growth (2020–2025)

Source: HOSE (FiinPro), General Statistics Office. The chart illustrates the divergence between the market and the real economy.

In most cases, the market tends to lead the economy by two to four quarters. When investors expect lower interest rates, improving profits or the rollout of supportive policies, capital moves before those factors appear in the statistics. Merely following news or already-published results often leaves investors “behind the market.”
The important question, therefore, is not “is the news good or bad,” but what the market is expecting and how far that expectation has already been reflected in asset prices. That is the first link in the chain of capital-flow movement. However, expectations are only a necessary condition — no matter how compelling a growth story is, it can hardly become a trend unless confirmed by capital flows.

LIQUIDITY: WHEN EXPECTATIONS ARE CONFIRMED BY CAPITAL FLOWS

Liquidity is the most important test of expectations. Only when investors are willing to commit capital do expectations translate into market movements. That is why many fund managers spend more time observing capital flows than reading every news bulletin — news can change within hours, but the movement of capital reflects a genuine view of the coming cycle.
The 2024–2025 period is a telling example. Foreign investors continuously net-sold on a large scale, yet domestic demand not only absorbed the entire volume of selling but became the main force helping the VN-Index establish new peaks.

Table 2. Structure of capital flows by investor group (2024–2025)

Source: HOSE, VSDC, VnEconomy. Net-selling figures are absolute values.

Figure 2. Foreign investor net trading on HOSE and the VN-Index (2020–2025)

Source: HOSE (FiinPro). Unit: billion shares (volume).

The chart shows that, although foreign investors maintained continuous net selling over 2023–2025, the VN-Index still held its uptrend and set new highs in 2025. This reflects the growing role of domestic capital in absorbing selling pressure and leading the market trend.

Another indicator that also shows a significant change in the structure of capital flows is the number of securities accounts. In 2024, domestic individual investors opened more than 2 million new accounts; by the end of 2025, the total number of accounts surpassed 11 million. Average liquidity per session rose nearly 40%, providing the foundation for the market to absorb record foreign net selling without breaking the uptrend. This is a sign that market strength is increasingly built on domestic capital — the ability to self-absorb and reallocate capital flows has improved markedly.

Beyond spot capital flows, margin lending balances at securities firms are also an important indicator of risk appetite. At the end of 2025, market-wide margin balances exceeded VND 300 trillion — the highest on record — reflecting investor confidence but also a factor to monitor closely. Margin amplifies both up- and downtrends: when expectations are positive, leverage boosts liquidity and the pace of price gains; when expectations weaken, forced-selling pressure can make volatility far exceed the initial impact of adverse news.
A trend supported by real capital flows generally has a more durable foundation than one that relies too heavily on financial leverage. Being able to distinguish the quality of capital flows — long-term institutions versus short-term retail investors using margin — allows for a more accurate assessment of how durable an uptrend is.

Notably, after peaking in January 2026, average trading value fell about 30% by May 2026. This does not necessarily reflect weakening expectations. In the early stage of a cycle, capital reacts strongly to policy and upgrade narratives, pushing liquidity up quickly. Once expectations have been priced in, the market enters a “verification” phase — capital becomes more selective rather than spreading broadly. Liquidity declines, but this is a filtering process, not the disappearance of expectations.
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CAPITAL FLOWS ARE UNEVEN: FROM MARKET EXPECTATIONS TO SECTOR AND COMPANY SELECTION

Once expectations are confirmed by liquidity, capital flows enter a selective phase. The market no longer rises uniformly but diverges sharply — some sector groups continuously attract capital while many others stand almost entirely outside the trend. The unchanging principle: capital always seeks where the highest expected return can be generated.

Growth expectations, policy shifts, and corporate outlooks are typically the key drivers of capital flows in the stock market.

For this reason, professional funds typically begin not with the question “which stock is worth buying” but with a larger one: where do the economy’s growth drivers lie? Accelerated public investment → priority to construction, materials and infrastructure. Credit recovery and low interest rates → banks and consumption. Market upgrade → ETF and international institutional flows concentrating on large-cap, highly liquid, well-governed names.

In 2025, real estate, tourism and chemicals were the groups leading the VN-Index’s advance. What they had in common was not that their business results had already outperformed, but that their growth stories were sufficiently convincing about future prospects. Capital flows do not stop at sector selection — they continue to filter each company based on execution capability. Companies with healthy balance sheets, transparent governance and the ability to convert opportunities into real profit will attract long-term capital. Companies that rely only on a story without improving efficiency will gradually lose their appeal once the market enters the verification phase. The result: after each strong rally, the profitability gap between stocks widens further.

In short, expectations can lead capital to a sector, but business results determine which company the capital stays with. The market may price expectations in the short term, but in the long run it always returns to fundamentals.

RISK MANAGEMENT: MANAGING THE GAP BETWEEN EXPECTATIONS AND REALITY

The essence of risk management is managing expectations. A company growing profit 15% can still see its share price fall if the market had expected a 30% increase. Conversely, a modest profit increase that beats forecasts can still produce positive returns. The market does not react to absolute numbers but to the gap between expectations and reality. That is why “good news” is sometimes accompanied by a down session.

Vietnam’s stock market is now entering a similar phase. After a strong rally driven by expectations of institutional reform, public investment and the market upgrade, investors’ question is no longer “will the policy be issued” but “how much real growth will the policy actually generate.” This is the phase in which the market shifts from pricing expectations to verifying expectations. Divergence tends to be strongest at this stage.

Investors therefore need to keep asking three questions:

• First, how far has this information already been priced in? A new policy or positive business result does not necessarily create an opportunity if the market has already fully priced it in.
• Second, does the information truly change the long-term outlook? Not every piece of news creates a new growth cycle — most only cause short-term volatility before the market returns to fundamentals.
• Third, is capital confirming the trend or merely a psychological reaction? A trend supported by stable liquidity and long-term capital is generally far more durable than a herd-driven rally.

SOME PERSPECTIVES FROM RISK MANAGEMENT

Understanding the chain of capital-flow movement is not about precisely forecasting short-term swings, but about helping investors detect shifts in expectations early and adjust portfolios proactively. Below are some signals worth watching:

• Capital flows narrow their breadth. Instead of being distributed broadly, capital concentrates in only a few leading groups while most of the market stays subdued — a sign that expectations are becoming selective and the market is entering a divergence phase.
• The pace of earnings growth fails to keep up with the expectations already priced in. When valuations rise faster than the ability to generate profit, the gap between expectations and reality widens, making the market more sensitive to adverse news.
• Divergence between the index and the majority of stocks. The index may keep rising thanks to a few large-cap stocks while the number of advancing stocks steadily narrows — a phenomenon that often appears late in a rally, reflecting the growing caution of capital flows.
• Liquidity and margin decline after a strong rally while price levels remain high. This may be a shift from “story-based valuation” to “verification by business results,” not necessarily a reversal signal. In this context, company selection matters far more than choosing the overall trend.
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These signals are not a basis for forecasting a reversal, but indicators that help assess the quality of capital flows and the sustainability of the expectations being priced in. Ultimately, risk management is not about trying to predict the future, but about continuously assessing how much expectation the current price already reflects and whether companies have the capacity to turn those expectations into real value.

CONCLUSION

Financial markets have never moved on news alone. News creates attention, but expectations determine the direction of capital flows. Liquidity confirms those expectations; capital selects the sectors and companies capable of realizing the outlook; and risk management helps identify the gap between what the market believes and what may actually happen.

As Vietnam’s stock market increasingly attracts institutional investors and long-term capital, this approach will become ever more important. Over the long run, capital always seeks where sustainable value can be created. And perhaps that is the most important lesson: success does not belong to those who know the most news, but to those who understand what the market is expecting, recognize when expectations begin to change, and are disciplined enough to manage risk before the market corrects itself.

Capital flows always begin with expectations. Liquidity confirms expectations. Sectors and companies determine where capital settles. And risk management is the continuous process of assessing the gap between expectations and reality.

Tác giả:

• Tran Minh Quang – Member of the Supervisory Board – Vietcombank Leasing Company (Vietcombank Leasing)
• Nguyen Thu Binh – Director of Risk Management – PVI Asset Management JSC (PVI AM)

Source: Dau tu Chung khoan