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.
Vietnam's economy grew almost 10% in Q3/2026, its fastest pace since 2022, driven by strong investment and exports. To keep it growing, the government instructed banks to cut lending rates in October, which lowers borrowing costs for businesses. It then cut electricity prices and petrol taxes from November to hold down inflation, the main risk that could stop lending rates from falling further. Despite the strong economy, the stock market fell for a third straight month in October as high US bond yields and continued foreign selling weighed on share prices. In our view, Vietnamese share prices have lagged company earnings all year, which gives long-term investors a low entry price for businesses that are still growing profits before foreign buying returns.
Stock Market Movement
October's decline came as global investors moved into US government bonds, with the 10-year US Treasury yield reaching a 24-year high of 5.3% in early October as US inflation stayed high. Foreign investors net sold more than USD 900 million of Vietnamese shares in the month, keeping up a year of net selling that continued through the FTSE Russell upgrade in September. When local banks cut rates in late October, the index recovered part of its losses, led mostly by Vingroup-related stocks and a handful of large banks. We expect the recovery to spread to more companies once lower borrowing costs show up in their earnings over the coming quarters.
As foreign investors sell, local investors make up an even larger share of trading than usual, which is why the VN Index has been moving more on sentiment than on company results. Many retail investors in Vietnam trade with borrowed money, with margin lending at a record high in October (The Investor). This has led to quick price swings in both directions, leaving many companies trading below what their earnings support. We expect this market structure to change as foreign buying returns, starting with the index funds that will add Vietnamese shares in stages through September 2027 under the FTSE upgrade.
Vietnam continues to work toward an emerging market upgrade by MSCI, which would bring a second wave of index-fund buying after FTSE Russell's. From November 16, brokers can cover a foreign fund's payment if it is short of cash, which eases the pay-in-full requirement MSCI has long cited as a barrier. The government is also gradually expanding English-language disclosure requirements, which makes company information more accessible to international investors. Most global emerging market funds follow MSCI's index, so an upgrade opens Vietnam to a much larger pool of long-term foreign capital.
Macroeconomic Developments
With 9.95% GDP growth in Q3/2026, Vietnam is cutting interest rates to keep the economy expanding at that pace. Strong foreign direct investment provides an important source of foreign currency inflows, with disbursements reaching a five-year high of USD 21.1 billion in the first nine months of 2026 (9M/2026), according to Vietnam News. Borrowing had become expensive over the past year, with banks paying up to 8–10% on deposits to attract savings. More than 20 banks cut their rates in late October, as the government aims to bring business loan rates down by 1.5–2 percentage points. Cheaper funding into 2027 gives companies more room for investment and hiring.
Vietnam's growth this year has come mostly from businesses rather than households. Exports, factory output, and public investment drove most of the gains, with goods exports up 24.5% in 9M/2026 (VIR). Retail sales grew a slower 7.8% after removing price increases, which means household spending is lagging the economy. As consumption keeps the economy growing when export orders or public budgets slow, the Vietnamese government has placed an increasing focus on supporting households to reach its 10% growth target for 2026.
Lower energy bills help households and keep inflation in check at the same time. When fuel costs pushed inflation to 5.1% in September, the government introduced measures to protect its 4.5% full-year target. From November 1, Vietnam cut electricity prices by 2%, its first cut in 20 years apart from the COVID-19 period. It also temporarily removed the special consumption tax on petrol until March 2027, which lowered petrol prices about 7%. Households get more to spend through Q1/2027, which supports consumer demand just as cheaper credit reaches businesses.
Sector Highlights
Commercial banks are paying for part of the rate cuts, which is why bank shares fell across the sector after the State Bank of Vietnam's instruction (VietNamNet). After record profits in 2025, banks are now passing part of that profit to the businesses and households that borrow from them. So far, most have offered discounted loans to selected borrowers instead of cutting rates for every customer, so the full cost has yet to show in their results. Banks make up around a quarter of the VN Index, so we expect this shift to move earnings growth away from banks and toward companies outside the financial sector.
Public investment is speeding up toward year-end, which supports construction as well as consumer spending. By the end of September, the government had disbursed 62.9% of its public investment plan for the year, 12.9 percentage points ahead of the same point in 2025 (Nhan Dan). Since October, ministries and provinces have been scored monthly on their progress in delivering planned spending, which we expect to keep projects on schedule through year-end. These projects also create jobs and income across the provinces, which supports household spending well beyond the construction sector.
Outside the government's own programs, foreign companies are still committing long-term capital to Vietnam's consumer economy. On October 11, Muyuan, China's largest pig farming group, broke ground on a USD 140 million farm and feed complex in central Vietnam's Gia Lai Province (The Investor). Projects like this speed up the move from small household farms, which still produce around 38% of Vietnam's pork, to large farms with higher quality controls. The shift toward larger, more professionally managed farms is also relevant to companies such as our portfolio holding Masan MEATLife (MML), whose business model benefits from growing demand for consistent quality and food safety standards.
The Month at Kenno
On October 14, we had the pleasure of welcoming Chris Hunt as our new Chief Investment Officer. Chris brings more than 30 years of investment and research experience across Asia, including several years in Vietnam as Head of Research at Ho Chi Minh City Securities Corporation (HSC). He now leads the investment team’s day-to-day work, while Mikael Nastamo continues as CEO and remains closely involved in investment strategy and decisions, drawing on his extensive experience and network in Vietnam. Together, they are strengthening our investment capabilities and broadening our research into a wider range of companies and opportunities across the Vietnamese market.
The team also spent several days in Ho Chi Minh City meeting management at portfolio companies and businesses across our expanding research universe to assess how they are responding to changes in interest rates, regulation, and consumer demand. These discussions give us first-hand insight to test our views and identify companies with strong long-term prospects, which matters most in a retail-led market where share prices have been driven by sentiment.
Vietnam ends October with faster growth, cheaper credit, and lower energy costs, which are the conditions that support company earnings over the coming year. Share prices have yet to reflect this, with the market outside the Vingroup companies trading at around 10 times earnings, close to its lowest level in more than a decade. The Kenno Vietnam Fund holds well-run companies that benefit as Vietnam's growth broadens, which we believe positions long-term investors well as prices catch up with earnings.
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.
