In December, the Kenno Vietnam Fund increased 2.0% in USD and 0.8% in EUR. The VN Index gained 5.5% month-over-month (MoM), led primarily by Vingroup-related stocks. Market volatility remained high due to rising deposit and interbank interest rates and rumors around leadership changes. However, pressures from both interest rates and FX eased toward the end of the month, helping the index finish in positive territory. As investors looked ahead to the Lunar New Year high consumption season, consumer stocks also recovered in line with the stock market, albeit at a slower pace, as November demand was still impacted by flooding. During the month, we selectively increased exposure to an attractively valued real estate company.
The Vietnamese stock market was highly volatile in December 2025, with the VN Index moving by more than 1% in 10 of 23 trading sessions. With no earnings update ahead of the reporting season, most of this volatility was driven by macroeconomic developments and news related to Vingroup, which accounts for approximately 25% of the VN Index’s total market capitalization.
The market opened the month on a strong note, extending its positive momentum from November as the State Bank of Vietnam (SBV) rolled out supportive measures. These included Open Market Operations (OMO) rate adjustments and the activation of USD/VND FX swap facilities, which allow banks to access VND liquidity using USD. Together, these actions added short-term liquidity to the banking system, eased year-end funding pressures, and helped boost market sentiment.
However, the VN Index pulled back sharply in the second week of the month amid persistent concerns about rising interbank and deposit rates. In addition, ahead of the late-December Communist Party congress, rumors of potential changes in key leadership positions - including the Party Leader, the Prime Minister, and the President – added to uncertainty and raised worries about possible disruptions to pro-growth economic policies.
The market rebounded in the second half of the month as macro pressures began to ease. In the FX market, USD/VND pressures in the free market cooled notably, with the premium narrowing to around 1.5% versus the official rate, down from a peak of more than 5% earlier in the past month. This signaled an improvement in USD availability and a reduction in pressure on the dong’s value. Interbank liquidity also improved, with the overnight interbank rate falling to around 4.6–5.0%, roughly 2.5–3.0% below the recent peak near 7.5%. Greater clarity around upcoming leadership decisions, including the expectation that the current Party Leader will remain in his role, helped reduce uncertainty and restored market sentiment. The VN Index ended December with a 5.5% return in local currency.
Market liquidity stayed soft through most of December, as high funding costs and early-month market weakness kept investors on the sidelines. Trading activity picked up in the fourth week as investors started bargain-hunting and used the pullback to add to positions, which pushed turnover higher. Average daily trading value inched up to USD 979 million, a modest 2% MoM increase, but still well below the USD 1.13 billion average seen in the first eleven months of 2025 (11M/2025).
Foreign investors turned to modest net buying after four months of selling, with inflows of USD 66 million – a small amount, but still a positive sign. However, the buying was highly selective, concentrated in a few large-cap stocks such as MBB, MWG, HPG, VPL, VPB, VJC, VNM, and FPT, suggesting selective accumulation rather than a broad-based return of foreign demand. Year-to-date, foreign investors have withdrawn USD 5.3 billion from the Vietnamese market, compared to a net outflow of USD 3.6 billion in 2024. This was driven by concerns over VND devaluation, the impact of tariffs imposed by the Trump administration, and profit-taking activities during the third quarter. Positively, in our view, further reforms are underway as part of a clear roadmap toward additional market upgrades by FTSE Russell and MSCI by 2030. The most recent step is the introduction of the global broker model in December 2025, which allows foreign investors to trade via custody accounts without opening local securities trading accounts. Along with expectations of strong economic growth, these developments support our view that foreign inflows will resume in 2026, which will benefit several of our core holdings.
Consumer stocks rebounded in December after declining in November, when investors were concerned about the impact of severe flooding from September to November on demand and distribution. The recovery, however, was slower than the broader market. November retail sales remained weak at 7% year-over-year (YoY), as expected. Even so, investors were looking ahead to a seasonal pick up in demand as the New Year holidays approached. Furthermore, Mobile World (MWG) reported solid November results: its mobile phones, laptops, and white goods retail businesses grew 18% YoY in sales, while the grocery chain delivered 14% YoY sales growth over the first eleven months of 2025. These results reinforce what we’ve been seeing across the sector — modern retailers like MWG, FRT, WinCommerce, and PNJ continue to benefit from the structural shift away from traditional trade. This trend is accelerating as disposable incomes rise. Another supportive factor for the consumer sector is the new personal income tax (PIT) policy that took effect on January 1, 2026. With higher deductions and a revised tax brackets, millions of Vietnamese taxpayers will feel less financial pressure. In simple terms, lower PIT means more disposable income. And when consumers have more to spend, it tends to show up in stronger demand — which should benefit the consumer and healthcare companies in our portfolio.
The Vietnam dong appreciated 0.1% in December 2025. Seasonally high USD demand for importing raw materials faded, and year-end remittances helped ease pressures in the FX market. Remittances to Ho Chi Minh City in 2025 are estimated to reach USD 10.5 billion, an increase of 10.5% YoY. Year-to-date, the Vietnam dong has lost 3.2% against the US dollar compared to a 4.2% devaluation in 2024.
In 2025, the VN Index increased 40.9% in local currency. Excluding Vingroup–related stocks, the VN Index rose more modestly by 12.9% in local currency – equivalent to 9.2% in USD. Consumer staples and consumer discretionary posted decent gains of 13.1% and 16.4%, respectively, in local currency. This overall annual performance was driven by the underlying strength of the economy and the earnings of listed companies, which offset the weak performance in the first half, primarily due to the impact of Trump’s tariffs. Vietnam’s GDP grew 8% YoY in 2025, and listed companies reported a 29% YoY increase in net profit in 9M/2025. Looking forward, we believe the market outlook for 2026 is positive, supported by continued accommodative monetary and fiscal policies, reforms aimed at streamlining administration, faster public investment, and the prospect of renewed foreign inflows ahead of the official emerging market upgrade in September 2026.
The Kenno Vietnam Fund returned +2.0% (USD) and +0.8% (EUR) in December 2025. Year-to-date (YTD) return is +9.3% in USD and -3.8% in EUR.
Although the VN Index increased 5.5% MoM in local currency, the rally was highly concentrated in a small number of large-cap stocks such as Vingroup-related stocks (VIC: +30% MoM and VHM: +21% MoM). Consumer stocks, as mentioned above, rebounded at a slower pace. Performance of consumer and healthcare stocks in the portfolio was mixed in December. While MWG (+10.6% MoM), PNJ (+6.6% MoM), and TRA (+12.7% MoM) performed well thanks to positive earnings, MSN (-0.5% MoM), FRT (+1.7% MoM), and MML (-3.5% MoM) underperformed without any specific reasons. We are confident about the portfolio’s earnings outlook for 2025, with estimated net earnings growth of 42% YoY.
In December, we met privately with Traphaco (TRA) and FPT Retail (FRT) to review their 2025 performance and discuss their outlook for 2026. Our conversation with TRA’s new CEO was especially valuable, as she outlined the company's plans for adapting under new leadership. This includes responding to significant changes in the pharmaceutical market, such as the rapid shift from traditional drugstores to modern pharmacy chains and government policies favoring established, well-branded drug companies.
We also joined the three-day “Nam Long Journey” event by Nam Long Group (NLG) and attended the Masan Consumer Holdings (MCH) listing roadshow in Ho Chi Minh City. These sessions gave us direct access to senior management and a clearer understanding of each company’s strategic priorities, execution plans, and long-term growth prospects. Our trading activity was minimal, as we only purchased additional NLG shares. We remain confident in the company’s fundamentals and its ability to capture the next upcycle in Vietnam’s property market. This view is reinforced by strong presales across its upcoming township launches, which were confirmed during the NLG event in December.
Below we highlight three investment cases that illustrate our portfolio management activities during the month.
MSN share price stayed relatively quiet in December, despite positive news from its subsidiaries, Masan Consumer Holdings (MCH) and WinCommerce (WCM). MCH stock completed its move from the Unlisted Public Company Market (Upcom) to the Ho Chi Minh Stock Exchange (HoSE) in December, officially joining Vietnam’s main board. As a core subsidiary of Masan Group (MSN) and the country’s largest consumer staples producer, MCH contributed 37% of MSN’s 2024 revenue and over half of its profit. Given its scale and profitability, the listing should enhance transparency and indirectly create value for MSN’s shareholders.
MCH’s growth is still in its early stages, driven by a structural shift toward higher-quality, premium products. Vietnam’s mass-market segment still accounts for around 50% of consumption, compared with roughly 20% in markets such as China, so there is plenty of room for consumers to trade up. MCH’s four core categories - seasonings, convenience foods, beverages, and home & personal care - aim for long-term growth of 15–20%. Management continues to guide for double-digit growth into 2026, driven by higher volumes and a more premium product mix.
To support its growth strategy, MCH utilizes the 4,400-store network of WCM, an FMCG and grocery chain subsidiary of MSN, to test new products and expedite the time-to-market. This is backed by its strong R&D capabilities that combine global expertise with deep local consumer insights. The company reports a new-product success rate of approximately 20%, significantly above the regional average of 5-10%, highlighting its ability to maintain and expand its market share against multinational competitors.
Turning to WCM, the business contributed about 40% of MSN’s revenue and around 5% of its profit in 2024. Performance in the first eleven months was in line with our expectations. Revenue grew 18.2% YoY, and WCM added 603 new stores, expanding its network to 4,431 locations nationwide and reaffirming its market leadership by scale. Profitability also improved, with net margin nearing 1% in the first nine months of 2025, compared with a loss in the same period last year. This reflects stronger same-store sales, better logistics efficiency, and tighter control of in-store operating costs.
Insights from our recent meeting reinforce our confidence in FRT’s robust earnings growth outlook. We expect the net profit to increase by 103% in 2025, followed by a 38% compound annual growth rate (CAGR) from 2025 to 2028. This growth is mainly supported by Long Chau Pharmacy, Vietnam’s largest modern pharmacy chain, which operates about 2,500 stores nationwide and holds an estimated 12% share of the retail pharmaceutical market.
Long Chau’s growth is supported by continued market share gains and ongoing operating optimization. The store network is projected to reach about 3,000 outlets by 2027, after which expansion is expected to slow. We believe this target is realistic, supported by the chain’s low market penetration in many regions and its proven operating model, which is based on a broad product range and competitive pricing. Store-level productivity is improving, as shown by higher customer traffic and increased repeat purchases.
Profitability is rising with scale: net margin has grown from 0.9% in 2023 to an estimated 2.5% in 2025 and is projected to reach 3.8% by 2028. This margin expansion is driven by stronger bargaining power with suppliers, greater economies of scale, and a gradual shift in product mix toward higher-margin items, including specialty drugs and supplements.
Beyond pharmacy retail, Long Chau plans to develop a comprehensive healthcare ecosystem over time, encompassing preventive care, diagnostics, treatment support, and related services. Its first step is already gaining traction: its preventive healthcare business now operates more than 200 vaccination centers. Vaccination coverage in Vietnam remains low, at approximately 4–5%, compared to 15–30% in other markets, and is still primarily focused on children. FRT’s strategy is to focus on adult vaccination, which remains significantly underdeveloped in Vietnam.
MWG’s share price rose 11% in December after the company reported strong results for the first eleven months of 2025 and announced significant progress toward the planned IPO and listing of Dien May Xanh (DMX) in 2026.
The IPO timeline is moving ahead more quickly than originally anticipated, reflecting streamlined regulatory procedures and strong internal execution. DMX includes MWG’s two retail chains in Vietnam and one chain in Indonesia, specializing in mobile phones, laptops, accessories, electronics, white goods, and home appliances. We see the IPO as the beginning of a new growth phase for DMX, enabling sustained double-digit expansion and strengthening its competitive positioning relative to other retail chains.
Strategically, the IPO serves two objectives. In the near term, it allows DMX to operate with greater focus and financial transparency. Over the longer term, it facilitates the development of dedicated management teams for each core business and creates a clearer path to unlock value at the group level. In this context, we see the IPO as timely and structurally positive for MWG’s shareholders. We believe that DMX’s scale, market leadership, and strong earnings visibility will increase the likelihood of a successful IPO. We expect management to prioritize sustained double-digit earnings growth at DMX to optimize valuation. Our forecasts assume DMX’s earnings growth of 27% in 2025 and a 17% compound annual growth rate (CAGR) from 2025 to 2028, supported by market share gains in Vietnam and abroad, as well as ongoing efficiency improvements reflected in lower operating expenses as a percentage of sales (13.4% in 2024, 11.8% in 2025 and expected 10.4% in 2028).
Operating performance at the group level remains solid. In the first eleven months of 2025, MWG recorded revenue growth of 16% YoY, in line with our expectations. Smartphone sales remained strong, and the consumer electronics segment gained momentum toward year-end as DMX increased its market share amid ongoing industry consolidation. Meanwhile, the grocery and FMCG chain Bach Hoa Xanh (BHX) continued its rapid expansion. The company opened 112 stores in November alone, bringing the total year-to-date openings to 712, equivalent to a 40% increase in store count compared to the end of 2024.
TRA’s share price rebounded 13% in December, supported by stronger fundamentals in the first nine months of 2025. Net profit grew 12% YoY during this period, ahead of our previous forecast of 2.3% for 2025. This outperformance was primarily driven by the Eastern medicine segment, which accounts for approximately 58% of core revenue and achieved 10% growth. Premium herbal products performed exceptionally well, with sales mostly doubling YoY, supported by improved packaging, higher-quality inputs, and a stronger presence in modern pharmacy chains.
Operational efficiency also improved. Gross margin in manufactured medicines rose by 4.6 percentage points in 9M/2025, driven by higher factory utilization. The company completed a logistics restructuring, reducing the number of sales offices from 29 nationwide to only four regional hubs. These changes, along with digital transformation initiatives and a centralized sales order system, are expected to enhance efficiency further.
Looking ahead to 2026, we anticipate continued growth in both Eastern and Western medicine segments. In Eastern medicine, TRA plans to expand premium offerings, strengthen online engagement, and increase penetration in Southern Vietnam, where its presence remains limited. In Western medicine, management aims to boost R&D and deepen access to hospital channels. Based on these factors, we forecast revenue growth of 7% and net profit growth of 14% for TRA in 2026.
We end the year with confidence in both the portfolio and the broader market outlook. Despite periods of significant volatility, the fund delivered resilient performance in 2025, supported by disciplined positioning and our exposure to companies with solid fundamentals and clear growth drivers. Looking ahead to 2026, we expect easing macroeconomic pressures on interest rates, supportive monetary and fiscal policy measures, and recovering consumer demand to create a favorable environment for our holdings. Portfolio companies’ net earnings are expected to grow at 17.1% YoY in 2026 and 16.8% on average in the next three years. We remain focused on quality, valuation discipline, and long-term opportunities as we continue to navigate the market on your behalf.