As Vietnam continues to rank among Asia’s top destinations for foreign investment, we are committed to keeping our global audience informed about key developments through the Kenno Vietnam Pulse series.
In February, regulators completed the global broker model, effectively meeting the final requirement ahead of FTSE Russell’s March interim review to confirm Vietnam’s Emerging Market upgrade in September 2026. At the same time, the Government highlighted retail expansion as a key driver of this year’s economic agenda, reinforcing the outlook for domestic spending and supporting our consumer-focused holdings. Vietnam’s double-digit GDP growth target is also supported by strong tourism momentum, with international arrivals reaching record levels at the start of the year. During brief market pullbacks in the month, we increased exposure to several quality companies at attractive valuations, particularly in consumer retail, technology, and real estate, where we have good earnings visibility in 2026.
Stock Market Movement
February’s stock market was volatile (as it usually is before the Tet holiday), and we believe it was largely driven by liquidity rather than fundamentals. In the first week of the month, the market declined sharply as overnight interbank rates rose to as high as 17%, reflecting strong liquidity demand ahead of the Lunar New Year and speculation that several state-owned banks had already reached their first-quarter credit limits. However, after the State Bank of Vietnam (SBV) took active measures to inject liquidity into the banking system, interbank rates fell back to the 7–8% range and the market rebounded in the second week before closing for the holiday. After the break, domestic investors returned with improved sentiment, particularly toward companies that provided positive 2026 guidance following the January–February earnings season. This allowed the VN Index to extend its recovery into the month-end.
Although trading activity was seasonally quieter due to the holiday period, we noted an increase in foreign participation to around 14–17% of total trading value, compared with 10–13% last year. Foreign investors were net sellers overall, but flows were selective rather than broad-based. Top buys were Hoa Phat Group (HPG), MB Bank (MBB), and Binh Son Refining and Petrochemical (BSR), while top sells included FPT Corporation (FPT), Vietcombank (VCB), and Vingroup (VIC). Our holding FPT was one of the most sold stocks by foreign investors due to the global tech sell-off on concerns of AI’s impact on the IT service sector, as well as FPT’s rumored divestment of its 46% stake in FPT Telecom (FOX), which the company later denied.
The Emerging Market upgrade remains a major focus, particularly with FTSE Russell’s interim review drawing closer in March. Among numerous infrastructure and regulatory updates required to qualify Vietnam for index inclusion, we view the most significant development in February to be the completion of the global broker model, which allows foreign investors to trade via brokers instead of having to open local accounts. This reduces operational friction for international asset managers and addresses the final major technical condition required by FTSE Russell for its March assessment. If the index provider proceeds to effectively reclassify Vietnam to Secondary Emerging Market status on 21 September 2026, industry consensus estimates new passive inflows of around USD 1.2–1.5 billion to follow, concentrated in large-cap names.
Macroeconomic Developments
In February, Vietnam reiterated its ambition for above 10% GDP growth in 2026, with 8% targeted for the first quarter. Notably, stronger domestic consumption has been identified as a key pillar of this strategy, with retail sales expected to grow 13–15% this year compared with 9% growth in 2025. The Government also announced a compulsory 10% reduction in recurrent state spending to reallocate resources toward social welfare and development priorities, reflecting a targeted effort to strengthen the consumer economy. We expect these measures to directly support our portfolio companies through stronger revenue growth.
On the monetary front, the Vietnamese Dong (VND) is expected to remain relatively stable against the USD, with projected annual depreciation within a range of 2–3% in 2026 and 2027. We also see potential for rising demand for the VND driven by the country’s pilot framework for regulated crypto-asset trading platforms, which could encourage foreign currency currently invested in overseas digital asset exchanges to return to the domestic market.
More specifically, as of last month, the Government had received applications from seven companies for licenses to operate crypto-asset trading platforms under its pilot framework approved in September 2025. The Ministry of Finance has established a market management board, issued licensing procedures, and is drafting regulations on taxation, accounting, and administrative penalties for crypto assets – with applications under review in consultation with the Ministry of Public Security and the State Bank of Vietnam. In our opinion, once this project is finalized, it should help enforce the capital restrictions and support the local currency over time.
Sector Highlights
Vietnam’s tourism industry demonstrated a strong start to the year, welcoming nearly 2.5 million foreign visitors in January, up 21.4% month-over-month and 18.5% year-over-year, tracking the Government’s target of 25 million international arrivals in 2026, an increase of 18% compared with last year. As tourism contributes roughly 8% of the country’s GDP and drives spending across retail and hospitality services, higher consumer traffic provides a broad-based boost to domestic spending. We also observed this growth across Asia and Europe – supported by easier visa policies, improved air connectivity, and diversified travel offerings.
We also highlight two developments in consumer retail. In the gold market, a new policy effective 1 July 2026 will subject gold bar transactions to a 0.1% personal income tax. This measure should help reduce speculation and further formalize the gold market, reinforcing macro stability over the long term. Meanwhile, in ICT retail, manufacturers continue to report rising memory prices due to global demand linked to AI applications. As higher component costs increase prices for consumer electronics such as smartphones and laptops, we anticipate a temporary slowdown in this segment in the near term.
The property sector also saw meaningful progress. In our previous update, we noted that new real estate policies were being introduced to improve central management, market transparency, and housing affordability. Starting in March, Vietnam will assign unique identification codes to each property to facilitate verification of ownership and legal status, minimizing speculative transactions. This initiative also aligns with the country’s broader efforts to digitize its national database through state-owned systems such as VNeID, with the aim of reducing operational and administrative friction.
The Month at Kenno
During February’s temporary market corrections, we added to select positions at compelling valuations. These capital allocations focused on consumer retail, technology, and residential real estate, where we maintain strong confidence in earnings growth and revenue momentum in 2026.
We do not foresee a material economic impact from the crisis in the Middle East, unless elevated energy prices persist for an extended period. Even in that scenario, Vietnam’s exposure is partly mitigated by the fact that roughly 50% of crude oil is produced domestically, and onshore refineries can meet around 70% of total demand.
Stay in the know!
And that’s a wrap for this month’s edition of Kenno Vietnam Pulse. We hope you enjoyed reading and found valuable insights into Vietnam’s market landscape. Feel free to subscribe to our monthly newsletter for more timely, factual, and actionable updates. If you would like a closer look at investment opportunities in Vietnam, we invite you to connect with us for more information and tailored advice.
