When watching the stock market, the most common habit for investors is checking the VN-Index, the benchmark index of the Ho Chi Minh City Stock Exchange (HOSE). Yet we have all seen this play out many times: the overall index surges impressively while personal portfolios stay "in the red". This is not unusual. It is a direct result of how the VN-Index is built.
Key takeaways
- The VN-Index is a market-capitalization-weighted index, so a handful of large-cap stocks can move it far more than the average stock.
- The VN-Index can rise while most stocks fall, opening a gap between the headline number and real portfolio performance.
- Segment indices (VN30, VNMidcap, VNSmallcap) and market breadth show where capital is actually flowing.
- Reading the VN-Index alongside breadth and capital-flow signals helps investors judge whether a rally is broad-based or fragile.
Why can the VN-Index rise while most stocks fall?
At first glance, the VN-Index appears to be a reliable barometer of the Vietnamese stock market. Yet there are times when the index rises while the majority of stocks fall. The reason lies in how the VN-Index is constructed.
As a market-capitalization-weighted index, the VN-Index gives far greater influence to large-cap companies than to smaller firms. A few giants in banking, real estate, and major conglomerates can move the index substantially even with relatively small price changes.
As a result, a rally in a handful of heavyweight stocks can push the VN-Index higher while most mid-cap and small-cap stocks continue to decline. This creates a gap between the market narrative suggested by the index and the reality experienced by many investors.
Which indices measure the market beyond the VN-Index?
To avoid being misled by the dominance of large-cap stocks, investors often monitor a broader set of market indices. Each index is a different lens for assessing the health of a specific segment of the market.
- VN30: the 30 largest and most liquid stocks listed on HOSE. The VN30 reflects Vietnam's leading blue-chip companies and is the segment that attracts most institutional capital and large-scale investment flows.
- VNMidcap: tracks medium-sized companies and is often seen as the "heart" of the market. It gives a clearer picture of the broader corporate landscape beyond the largest names.
- VNSmallcap: represents small-cap companies, tends to show higher volatility, and often acts as a barometer of investor risk appetite and speculative sentiment.
Watching these indices together gives investors deeper insight into where capital is actually flowing. For example, if the VN-Index is rising while VNSmallcap lags, the rally is likely concentrated in large caps rather than being broad-based.
What is market breadth and why does it matter?
To see beyond the headline movements of the VN-Index, professional investors often rely on a powerful tool called market breadth. Rather than measuring the size of a move, it measures how many stocks take part in it.
Instead of focusing only on whether the index is rising or falling, investors ask a more important question: is the gain being driven by broad-based buying, or by just a few heavyweight stocks?
Broad market participation
When the VN-Index rises and advancing stocks significantly outnumber declining ones, the market is generally considered healthy. Capital is flowing across multiple sectors, reflecting widespread confidence and broad participation in the rally.
Market divergence
Conversely, if the VN-Index advances while declining stocks outnumber advancing ones, the market is entering divergence. Here the index may be masking underlying weakness, because gains are driven by a small group of heavyweight stocks while most shares face selling pressure.
Such divergence is often an early warning sign, signaling that the rally lacks broad support and may be vulnerable to a correction. Monitoring market breadth helps investors judge whether an uptrend is genuinely sustainable or merely a technical illusion created by a handful of large-cap stocks.
What should investors take away from the VN-Index?
Based on the market-cap weighting mechanism, the broader index ecosystem, and market breadth indicators, it becomes clear that the VN-Index is fundamentally a technical measure of market performance rather than a perfect reflection of the health of every investor's portfolio. Letting the headline index dictate sentiment is one of the primary causes of emotionally driven, objectively flawed investment decisions.
To move from a passive participant to a proactive investor, it helps to adopt a portfolio-management mindset that clearly separates index movements from the intrinsic performance of individual holdings. Rather than relying on a single broad-market benchmark, investors should incorporate capitalization-based and segment-specific benchmarks, such as those tracked in DataCore's Vietnamese market data,, which give a more accurate view of the sustainable growth cycles of different groups of companies.
At the same time, combining market breadth with an assessment of capital-flow distribution helps investors spot early warning signs of weakening momentum. When an advance is supported by widespread participation and healthy capital allocation across sectors, the underlying trend is generally more robust than one driven by a narrow group of heavyweight stocks.
Ultimately, successful investing is not determined by the ability to predict the headline index, but by understanding the market structure beneath it.
How can investors apply these tools in practice?
Reading the VN-Index well is less about memorizing definitions and more about building a simple routine. The goal is to separate the headline number from what is actually happening across the market, so a green index does not lull you into complacency and a red one does not trigger panic selling.
Start with the index, then check breadth
Begin each session by noting the VN-Index move, then immediately look at the advance and decline count. If the index is up but declining stocks outnumber advancing ones, treat the gain with caution, because it is being carried by a few heavyweights. If breadth confirms the move, the trend stands on firmer footing.
Compare the segment indices
Next, scan VN30, VNMidcap, and VNSmallcap side by side. When all three rise together, participation is broad. When the VN30 rises but mid-cap and small-cap stocks lag, leadership is narrow and the rally may be fragile. This comparison takes only seconds and often tells a different story than the VN-Index alone.
Anchor decisions to your own portfolio
Finally, judge your holdings against the segment they belong to, not against the VN-Index. A small-cap portfolio should be measured against VNSmallcap, not a benchmark dominated by banks and conglomerates. Matching the right benchmark to the right holdings prevents the false signals that lead to emotional decisions, and it keeps your review process anchored to evidence rather than headlines.
Frequently asked questions
What is the VN-Index?
The VN-Index is the benchmark stock index of the Ho Chi Minh City Stock Exchange (HOSE). It is market-capitalization-weighted, so larger companies have a proportionally bigger impact on its value.
Why does the VN-Index rise when my portfolio falls?
Because the VN-Index is dominated by a few large-cap stocks, it can climb on the strength of those names even when most mid-cap and small-cap stocks decline. Your portfolio reflects the stocks you actually hold, not the index weighting.
What is market breadth?
Market breadth measures how many stocks take part in a move, usually by comparing advancing versus declining stocks. Broad participation signals a healthy rally; narrow participation signals divergence and possible fragility.
Which indices should I watch alongside the VN-Index?
VN30 for blue-chip large caps, VNMidcap for medium-sized companies, and VNSmallcap for small caps. Comparing them shows where capital is actually flowing across market segments.
Is the VN-Index the same as the VN30?
No. The VN-Index covers all eligible stocks listed on HOSE, while the VN30 tracks only the 30 largest and most liquid names. The VN30 is narrower and more concentrated in blue-chip companies.
Does a rising VN-Index always mean a bull market?
Not necessarily. If the rise is driven by a few large-cap stocks while most shares fall, market breadth is weak and the move can be a technical illusion rather than a broad-based bull market.
How often should I check market breadth?
Active investors can check advancers versus decliners daily to spot divergences early. Longer-term investors can review breadth weekly to confirm whether a trend is supported by broad participation across sectors.
What causes the gap between the VN-Index and my returns?
The gap comes from weighting. The VN-Index is dominated by a few large companies, so if those rise while your holdings do not, the index can climb even as your portfolio falls. The size and sector mix of your positions explain most of the difference between the headline index and your actual results.
Where can I track market breadth for the Vietnamese market?
Most professional trading platforms and Vietnamese market-data providers publish daily advance and decline figures, new highs and lows, and other breadth indicators. Pairing these with the VN-Index gives a far fuller view of market health than the headline number alone.
This article explains market structure for educational purposes. It is not investment advice or a recommendation to buy or sell any security. Figures and index methodology are subject to revision by the exchange.
Read this article in Vietnamese: VN-Index: Phản ánh chân thực thị trường hay chỉ là ảo ảnh thị giác?
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