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Hanoi — A series of high-profile corporate arrests has triggered a $40bn wipeout for Vietnamese stocks and rattled investors’ confidence at a delicate moment for the fast-growing economy.

Beginning with the arrest of billionaire Trinh Van Quyet a month ago, top stockbrokers, property developers and even regulators have been ensnared as a years-long anticorruption campaign broadens from the bureaucracy to target business leaders.

Accusations of fraud, market manipulation and embezzlement have sent some of the country’s highest-flying firms in to free fall and slammed the brakes on what had been one of the most sparkling equity market rallies in the world.

After the benchmark index more than doubled in value from a trough in March 2020, the crackdown set off the market’s steepest one-day plunge since early days of the pandemic this week. It hit a nine-month low on Tuesday.

The equity market has now lost 11% in three weeks and bonds and the currency have also slipped.

Investors say that the crackdown has shaken at least short-term confidence in Vietnam’s outlook and risks scaring away capital just as pressure is also coming from fast-rising US rates and global nervousness about the Ukraine war and other geopolitical tensions.

“For people that might have been interested in investing in Vietnam as part of the reopening narrative ... [they] might be a little bit concerned,” Carlos Casanova, senior Asia economist at Union Bancaire Privée, said in a telephone interview from Singapore.

“The general environment is not conducive to attracting foreign investors.”

The arrests widen the ruling Communist Party's “blazing furnace” anti-corruption drive that General Secretary Nguyen Phu Trong has pushed since 2016.

Trong said on Wednesday that effort was aimed at improving confidence in “the Party, the state and the whole political system,” according to government statement issued after an anti-corruption committee meeting.

Markets stabilised on Wednesday on hopes that the fallout had been contained, but they have yet to bounce back convincingly. One test looms with the initial public offering of vehicle maker VinFast, planned for later in 2022.

“I think that's probably it now — message sent,” said Craig Martin, executive chair of Vietnam-focused fund manager Dynam Capital, who expects future scrutiny and caution on developers and property deals, but the country's growth to stay intact.


Vietnam is a manufacturing hub that has benefited as global firms diversify production outside China. The economy grew 5% in the first quarter.

Most foreign money flows directly into building plants and buying real estate, rather than into stocks where it ranks as a “frontier market”, according to index provider MSCI. Leveraged small-time traders account for most of the activity.

Nevertheless, the arrests have caught some off guard by striking at the heart of the country’s capital markets and a property sector that accounts for about a quarter of the index.

“Many of these retail investors are new to the market and unfamiliar with such market volatility,” said Deirdre Maher, head of frontier markets at Europe’s biggest asset manager Amundi.

“For these investors I believe the fallout from the corruption investigations will have dented sentiment. Nevertheless, for longer-term investors ... the recent correction does provide an interesting entry point.”

Besides Quyet, who is chair of property and leisure company FLC Group, police have arrested Do Anh Dung, chair of property firm Tan Hoang Minh Group, and Do Duc Nam, CEO of brokerage Tri Viet Securities .

Officials at the State Securities Commission and Hochiminh Stock Exchange have also been blamed for alleged market violations.

Dung didn't respond to a Reuters request for comment while FLC has said Quyet had been co-operating with authorities and that no result of the investigation has yet been publicised. Tri Viet Securities said that it is co-operating with investigators.

FLC shares fell about 20% in April and TVB shares nearly 40%.

A rebound from the corruption push may take some time. “Going through deep-rooted changes like combating corruption is usually not done in an afternoon,” said Erik Jonsson, a Ho Chi Minh City-based partner at global venture capital firm Antler.

“These types of crackdowns will likely be part of a long journey for Vietnam,” he said. “Each of these events may result in periodical adjustments but overall contribute to positive traction and growth.”



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