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.
July pulled Vietnam's stock market and its economy in opposite directions, with the VN Index down 6.7% in USD, its weakest month this year, against GDP growth of 8.2% in the first half of 2026 (H1/2026) and a reporting season in which listed companies again delivered strong earnings growth. What is holding the market back is not how Vietnamese businesses are performing, but how much money is available to buy them. The government’s push for double-digit GDP growth has kept funding concentrated in large national infrastructure projects, banks’ rising deposit rates are drawing savings away from equities, and foreign investors continue to sell – emphasizing the need to stabilize the Vietnamese dong (VND) and control the amount that can be injected into the system. Recent declines in the stock market have brought its valuation level down to near a decade’s low, but with companies continuing to post strong earnings growth, we see this period as a window of opportunity for long-term investors.
Stock Market Movement
July's decline was the work of a stock market running short of cash rather than one reacting to any specific bad news, which is why both the selling and the final-week recovery were broad-based. Margin lending at brokerages had reached a record high by the end of the second quarter of 2026 (Q2/2026), so as prices fell, leveraged investors were forced to sell into a market with few buyers. Meanwhile, foreign investors extended the capital outflows that have run all year, as higher global bond yields and firmer oil prices reduced risk appetite for emerging markets including Vietnam. In the last week of July, the fall in short-term interbank rates to their lowest level of the year signaled that cash was no longer scarce in the system, which eased the funding pressure enough to bring buyers back to the market.
As a result of recent declines, Vietnamese equities are now trading at a valuation level as low as in late 2022, though there is one key difference between the two periods. In 2022, investors were pricing the risk that companies would not survive a corporate bond crisis and the fraud at Saigon Commercial Bank (the Van Thinh Phat scandal), so the fall in share prices reflected doubt about the businesses themselves. By contrast, by the end of July 2026, companies representing nearly 40% of market capitalization had reported second-quarter results showing combined after-tax profit up 25.6% year-over-year (YoY), with non-financial companies up 36.1%. Despite that earnings growth, the index now trades at around 10.5 times earnings excluding Vingroup-related stocks (The Investor). Unlike the bond-related decline of 2022, investors are now paying less for companies that are earning more, which is a repricing of liquidity rather than of business quality.
The recovery that started in the final days of July has carried into early August with improved sentiment and trading activity. The next dated event is August 21, 2026, when FTSE Russell publishes the official list of up to 30 Vietnamese stocks meeting its criteria for inclusion in the global index series (Vietnam News) – a step that helps shape the passive foreign capital that follows Vietnam's emerging market upgrade in September. For the more patient investors, like Kenno, July offered the chance to buy, at discounted prices, strong businesses that do the most work to drive our returns over the long run.
Macroeconomic Developments
Vietnam's near-term liquidity shortage, which has been driving the stock market down, is a by-product of its growth ambition rather than a sign of weakness in the economy. The government is pursuing growth of at least 10% this year, a target that under Resolution 168 requires 11.9% expansion in the second half of 2026 and depends largely on key infrastructure developments: metro lines, expressways, and power projects, which absorb credit at a pace the deposit base cannot match (The Investor). Banks have raised rates to compete for funding, with some certificates of deposit offered at up to 9% (VIR), which keeps household savings in the banking system instead of in equities, while the State Bank of Vietnam (SBV) has limited room to add liquidity across the economy without putting pressure on the Vietnamese dong. The underlying activity is there, with GDP up 8.2% in the first six months of 2026, retail sales and consumer services up 12.9%, and disbursed foreign direct investment (FDI) of USD 13.0 billion reaching its highest first-half level in five years (VietnamPlus). The constraint is not demand, but rather the quantity of capital available to fund both the state's program and the listed private sector at the same time.
The government's fiscal and regulatory measures announced in July show progress in pushing back the liquidity squeeze using the state's own cash. Resolution 168 allows the Ministry of Finance to place more temporarily idle State Treasury funds on term deposit at commercial banks. The SBV followed with Decision 1743, which, from August 1, 2026, lets banks count 50% of those deposits as mobilized funds when calculating their loan-to-deposit ratio, up from 20%. Close to VND 780 trillion (around USD 30 billion) of idle state money has already been channeled into the banking system (SGGP), raising lending capacity without cutting rates and without pressuring the currency. Over a longer horizon, Vietnam is building funding channels that do not compete with household deposits: Vietnam’s International Financial Center (covered in detail in our previous article) has gathered around USD 20 billion of commitments so far from global investors, and Hanoi is preparing around USD 6–8 billion of local government, project, and green bonds for 2027–2030 (VIR).
Vietnam also gained more clarity on its trade outlook, as the US closed its Section 301 investigation into forced labor at a modest cost to Vietnamese exporters. On July 23, 2026, the United States Trade Representative set a 12.5% tariff for economies that do not enforce a ban on imports made with forced labor, placing Vietnam alongside China and Thailand, against 10% for those that do (USTR). A day before that decision, Vietnam issued its own ban under Decree 292, effective September 5 (Government of Vietnam), which qualifies it for the lower rate at the next review. In the meantime, the increase of 2.5 percentage points over the previous 10% rate should be minor enough for trade volumes to hold up. The parallel investigation into intellectual property protection has yet to produce a final action, though Vietnam's own enforcement against counterfeit goods continues at pace, a direction that benefits well-established and compliant companies like the ones we own.
Sector Highlights
This month we focus on jewelry retail, where a diamond certification case tested Vietnam's two largest chains, including our holding Phu Nhuan Jewelry (PNJ), and showed how much reputation matters in the Vietnamese consumer market. Police in Thanh Hoa province charged 31 people in a transnational smuggling investigation, among them the former director of a certification laboratory owned by PNJ, and found that more than 3,400 smuggled stones worth around USD 19 million had entered the retail network of Saigon Jewelry Company (SJC) between 2022 and 2024 (VnExpress). PNJ has since issued an official statement attributing the conduct to an individual rather than to company practice, and confirmed that its diamonds are imported through official channels and that certified products remain traceable.
However, diamonds carry no publicly quoted price, so the grading certificate is effectively the product, and once its reliability was in doubt, customers moved to sell what they held. What followed created a cash flow problem for jewelry retailers with a buyback policy, including PNJ. Customers returned products faster than they bought them, several smaller shops closed, and the largest chains repurchased more than they sold. Non-diamond jewelry, which accounts for most of the sector's revenue, kept selling through the month, and a chain that meets every buyback under pressure ends up with a stronger claim on customer trust as buying behavior normalizes and the market becomes more transparent.
The case pushes forward a shift already underway across Vietnam's consumer market, where clear product origin is becoming a legal requirement rather than a competitive advantage for retailers. Precious metal and gemstone dealers already report under anti-money laundering rules, and traceability registration for high-risk goods began on July 1. In early August, the government asked the National Assembly to extend the same reporting regime to virtual asset service providers as part of meeting Financial Action Task Force (FATF) standards (Vietnam News). Each step raises the cost of operating without documentation, which is the argument behind much of our portfolio, where pharmacy, grocery, and consumer electronics chains keep taking share from an informal market that cannot meet the same requirements.
The Month at Kenno
Months like July are when an investment process earns its keep, because the questions they raise are about individual businesses rather than about prices. The diamond certification case was where that work went, where we retested our holding in PNJ under more conservative assumptions on near-term earnings and on the discount investors are likely to apply for governance risk. The business that emerges from this month still holds the largest branded jewelry network in Vietnam, a customer base that kept buying through the disruption, and a balance sheet that absorbed a wave of buybacks without outside help.
The second-quarter earnings season gave a clearer picture of how our companies are doing, and it was considerably better than share prices suggested. Vietnamese listed companies delivered one of their strongest earnings seasons in years, with growth spread across sectors rather than concentrated in banks or property. Our consumer holdings reported solid first-half net profit growth on stronger demand and wider margins, such as Mobile World Corporation (MWG), up 91% YoY, and Masan Group (MSN), up 120% YoY. Our portfolio remains anchored in domestic consumption and retail, where sales are growing 12.9% a year and where formalization keeps moving share toward listed, well-run operators.
July was not a pleasant month for many investors in Vietnam, nor were several before it, but we view the falling share prices as a reason to stay invested rather than to step back. Good companies with improving results are getting cheaper, at valuations reached only a few times in the past decade. The case for owning these businesses is unchanged, the constraint on the market is a funding problem the government has now started to address with specific measures, and the price paid in a month like this is what sets the return available later. While headlines debate whether July marked a short-term bottom for the VN Index, we track instead the distance between what a business earns and what the market charges for it, which has widened in favor of patient investors.
Stay in the know!
And that wraps up this month’s edition of Kenno Vietnam Pulse. We hope you found these updates helpful in understanding Vietnam’s market and investment landscape. To receive future editions directly in your mailbox, feel free to subscribe to our monthly newsletter. If you would like a closer look at investment opportunities in Vietnam, we invite you to connect with us.
