May was another uneven month for Vietnamese equities. The VN Index rose 0.6% in USD, but Kenno Vietnam Fund's net asset value declined 4.6% in USD and 4.1% in EUR, as most portfolio holdings fell during the period. Foreign selling continued to act as a headwind, while the unresolved conflict in the Middle East kept investors on edge – raising concerns about inflation and dampening consumer sentiment. At Kenno, we remain focused on the longer term. Flow-driven markets can be stubborn, but they are not permanent – and when sentiment eventually catches up with fundamentals, we believe the gap between price and value in our portfolio will close.
Market Overview
Market can stay irrational longer than we think
The VN Index was broadly flat in May, with Vingroup (VIC), Vinhomes (VHM), and a few banks continuing to dominate market attention, much as they did the month before. The main talking point was VinFast’s plan to transfer its manufacturing assets and related real estate to a separate entity outside Vingroup in a deal worth about USD 530 million. Under the proposed structure, VinFast (now VFVN), which is listed on NASDAQ, would keep its global R&D, intellectual property, after-sales, and sales businesses, giving it a lighter balance sheet on paper, while the cash proceeds would go mainly toward debt repayment. In our view, however, the business itself does not materially improve. It looks more like a reshuffling of assets and liabilities within the chairman’s broader ecosystem. More importantly, it highlights how urgently the group still needs capital. Last year, VinFast’s revenue more than doubled to around USD 3.6 billion as electric vehicle (EV) deliveries improved, but net loss also widened to more than USD 3.9 billion. In other words, the company lost more than it generated in revenue. Gross margin remained negative at 42.5%, while quarterly adjusted EBITDA (an indicator of cash profit) was around negative USD 1 billion, suggesting the business is still burning roughly USD 1 billion in cash each quarter.
Vinhomes has also introduced a policy it describes as mobilizing idle gold held by the public. In simple terms, the idea is to encourage people who have accumulated gold over the years to use it when buying property. At a time when credit conditions in Vietnam are tighter, this could help bring more buyers into the market by allowing gold to serve as part of the payment structure. Given the scale of Vinhomes’ current pipeline, with mega projects ranging from 2,800 hectares to more than 9,000 hectares, it is not surprising that the group is looking for additional funding channels. Overall, this reinforces our view that the recent rally in Vingroup-related stocks is not backed by stronger fundamentals. Rather, it reflects the market’s expectation that the group will keep finding ways to raise capital for as long as it can.
Outside that group, the broader market remained subdued, held back mainly by continued foreign selling and ongoing concern about tensions in the Middle East. Year to date, net foreign outflows have reached about USD 2.5 billion. In our view, that reflects investor concern about further depreciation of the Vietnamese dong, the possibility that the Federal Reserve will keep rates higher for longer, and a stronger US dollar, all of which have pulled capital away from emerging markets and back toward the US. The conflict in the Middle East has added to that pressure by keeping oil prices elevated and raising broader inflation concerns. Vietnam has managed the energy side reasonably well so far, but if the conflict lasts longer than expected, higher input costs could still weigh on consumption and investor sentiment. That remains one of the main reasons many investors are staying cautious. That said, as we noted last month, our expected returns already assume a 2–3% depreciation in the dong.
Before closing this section, it is worth stressing that market moves are not driven by flows alone. Earnings and valuations still matter. If we exclude Vingroup-related companies, the broader market delivered aggregate revenue growth of nearly 20% and net profit growth of more than 30% in Q1/2026. Retail and consumer names were particularly encouraging, with sector profit up 30–70% year-over-year (YoY), helped by market share gains from traditional trade and e-commerce as tax enforcement becomes stricter. In addition, the replacement cycle in Information and Communication Technology (ICT), supported by faster AI adoption and higher average selling prices, has also helped lift margins and support sales volumes. We expect these trends to continue through the rest of the year. On valuation, the VN Index is now trading at close to 10 times earnings if we exclude Vingroup names, which is near the lower end of its historical range. Taken together, we think investor interest should gradually return once external pressures begin to ease.
What really matters to us?
Rather than focus too much on short-term market moves, we are spending more time on the structural changes taking place in the economy. These shifts may look gradual on the surface, but they are already starting to shape where growth and market share will go, and that matters more to us when we think about the portfolio.
One important shift is the government’s stronger push to crack down on counterfeit goods and intellectual property violations. Since early May, authorities have stepped up inspections nationwide, with ministries and local agencies asked to handle at least 20% more cases than in the same period last year. This builds on earlier campaigns and, in our view, shows a more serious effort to formalize parts of the economy that have long operated in the grey market. We have already seen visible examples, including action against large copyright piracy networks and broader enforcement in food and consumer goods. In 2025 alone, market inspectors uncovered more than 23,000 violations, ranging from goods of unclear origin and counterfeit products to price manipulation and food safety breaches. For listed consumer and retail companies, this should be a net positive. As enforcement improves, market share is likely to shift away from informal sellers and toward established brands that can meet higher standards on product quality, traceability, and compliance. That is particularly relevant in food retail, where consumers are becoming more careful about origin and safety, while smaller traditional operators may find it harder and more expensive to stay compliant.
A second shift is happening in e-commerce. Platform fees have continued to rise through 2025 and into 2026, extending the repricing cycle that began last year. Most recently, in May 2026, Shopee adjusted seller fees in several categories, while TikTok Shop also continued to raise its transaction fee in Vietnam and lifted commissions by around 0.5–2.2% in a number of segments. At the same time, regulators are paying closer attention to how these fee changes affect sellers and competition in the market. Both Shopee and TikTok Shop (which together command ~90% of the market’s gross merchandise value) have both been asked to provide information to the authorities as part of that review. Taken together, this suggests the era of easy, subsidy-driven price competition is fading. As platform costs and compliance requirements rise, the advantage should move toward larger, more established retailers that already operate with better systems, stronger brands, and more disciplined pricing. We think that is one reason authentic retailers such as Dien May Xanh (DMX) and FPT Shop have continued to see healthy growth in categories like accessories, watches, and small appliances, which have grown 60–70% YoY over the past two quarters.
A third structural shift is taking place in government itself. Vietnam is moving more of public administration onto digital systems, with the aim of reducing paperwork, improving coordination across ministries, and making execution more consistent. A key milestone was the launch of National Data Center No. 1 in August 2025, which the Prime Minister described as the “heart” of the country’s digital transformation. The broader goal is to bring fragmented public databases into a more connected system and make government services easier to run and easier to use. For example, services such as residency registration, driver’s license applications, and tax filings can now be completed fully online through a personal VNeID account. What used to take up to a month can now often be done in just a few days. In that context, FPT remains well placed. The company has been involved in Project 06, the national population-data initiative, and has built digital infrastructure used across banking, healthcare, and public administration. As this investment continues, we think FPT should remain one of the clearer corporate beneficiaries of Vietnam’s digitalization push.
Portfolio Updates
In May, TNH Hospital Group (TNH) held the last annual general meeting (AGM) among our portfolio companies, hosted at its new hospital in northern Vietnam ahead of the facility’s opening. Giang, our Head of Investment, chaired the meeting following the earlier Board transition. Management laid out the group’s direction for the next three years, with a clearer focus on improving profitability at existing hospitals while bringing two new facilities into operation this year. We discuss this in more detail later in the letter.
We also made a modest portfolio adjustment during the month, reducing our position in VRE into strength and continuing to add to FPT at what we believe was an attractive valuation. In our view, VRE’s recent rally was not supported by a meaningful change in fundamentals and appeared to be driven largely by sentiment around Vingroup-related stocks. By contrast, FPT was still trading at around 11 times our 2026 earnings estimate, despite a solid three-year earnings growth outlook of roughly 17% a year. At current levels, we think FPT offers a more attractive balance of upside and downside than VRE, which is why we made the switch.
At the same time, the Investment Team continued to look for new ideas, including a number of potential IPO opportunities. Two names that stand out as broadly aligned with our mandate are DMX, MWG’s core electronics retail subsidiary, and CP Vietnam, the local subsidiary of Thailand’s largest private conglomerate and one of Vietnam’s leading integrated agro-food businesses. More broadly, the return of potential listings after nearly seven years with very few meaningful new entrants suggests that IPO activity may finally be picking up again. That would be positive for the market, both because it creates new investment opportunities and because it points to gradual improvement in the regulatory framework supporting new listings. We are still in discussions with these companies and expect more to come, and we hope to convert some of these opportunities into attractive investments over time.
Below, we highlight investment cases that illustrate our portfolio management activities during the month.
FPT Retail (FRT): Healthcare & Discretionary | 9.4% weight | -12.6% MTD
FRT’s share price fell 12.6% in May, mainly because of foreign selling and investor concern over tighter enforcement in the healthcare sector. The recent regulation raises administrative penalties for pharmacies that sell prescription drugs without a valid prescription, offer supplements of unclear origin, or misuse pharmaceutical practice certificates. At first glance, that may look like a risk for pharmacy chains. In our view, however, it is unlikely to hurt Long Chau in a meaningful way and may instead strengthen its competitive position over time.
In practice, these rules have existed for years, but enforcement has often been loose. In Vietnam, many people are used to buying medicine based on past experience rather than a current prescription. For example, patients may ask for antibiotics they have taken before, or continue using an old prescription for chronic conditions long after it has expired. Smaller independent pharmacies often find it hard to refuse these sales. What looks different now is that regulators appear to be stepping up inspections and follow-through, which should lead to better compliance across the market.
We think this shift will be more challenging for traditional drugstores, especially those that are less compliant and do not have the systems needed to adapt. A key change is the nationwide rollout of e-prescriptions across hospitals and medical facilities from 1 January 2026. Pharmacies will need to connect to the national system and verify prescriptions before dispensing certain medicines. This should favor larger, better-run chains like Long Chau, which already has stronger compliance processes and the technology to support them. As a result, we expect Long Chau to continue taking market share from smaller stores. Based on our estimates, its market share in the retail pharmacy channel stands at only ~25% at the moment, indicating still abundant room for further consolidation.
We also see encouraging signs in the vaccination business. The government is putting more emphasis on preventive care, including regular health check-ups to help detect illness earlier. It has also moved to expand vaccine coverage, including HPV, under public health programs – HPV coverage in Vietnam stands below 3%, compared with about 30% in many developed countries. Over time, these steps should improve public awareness and support demand for preventive healthcare services, indirectly benefiting Long Chau's vaccination business. This now contributes around 8% to Long Chau's revenue, and is expected to become a more meaningful contributor from 2028 onwards. More broadly, it supports the company’s longer-term ambition to build a broader healthcare platform and enhances the valuation multiples ahead of the potential IPO in 2028.
Overall, we remain positive on Long Chau and leave our earnings forecast for FRT unchanged, with a three-year compound annual growth rate (CAGR) of 36%.
Mobile World Group (MWG): Consumer Discretionary & Consumer Staples | 16.9% weight | -9.2% MTD
DMX, MWG’s core subsidiary in the phones and electronics retail business, has officially been approved for an IPO in 2026. The company is looking to raise about USD 550 million by issuing a 16.3% stake of the pre-money shares. If the deal is fully subscribed, it would be the largest IPO in Vietnam in the past seven years by size. Based on the proposed valuation, DMX would trade at around 12 times our 2026 earnings estimate. In our view, that looks reasonable given its solid growth outlook over the next few years, supported by continued demand in phones, electronics, and home appliances, further market share gains, and contributions from newer businesses such as financial and utility services, its online platform, in-home technician services, and its electronics joint venture in Indonesia.
We expect the IPO to attract strong investor interest, especially given our forecast for DMX earnings growth of about 26% in 2026. A successful listing would also help surface more of the value within the broader MWG group. Even so, we prefer to stay with MWG rather than switch part of our position to DMX. The reason is simple: MWG should benefit not only from DMX’s listing, but also from the stronger long-term upside at Bach Hoa Xanh (BHX), its grocery and Fast-Moving Consumer Goods (FMCG) retail business.
In the first quarter, BHX delivered revenue growth of nearly 20% YoY, helped by rapid store expansion. The store count rose 142% from a year earlier, and the company remains on track to open at least 1,000 stores in 2026. More importantly, profitability continued to improve even as BHX expanded aggressively. Net margin increased from 0.2% in Q1/2025 to 4.4% in Q1/2026. This improvement came from better control of fresh product wastage, more efficient logistics and store operating costs, and a strong cash position, which also supported higher financial income.
More broadly, BHX is benefiting from Vietnam’s shift away from traditional trade toward modern retail. That shift is being driven by urbanization, stricter tax enforcement and e-invoicing, and changing consumer preferences for convenience, food safety, and clearer pricing. These are areas where traditional wet markets and smaller grocery shops often struggle to compete. According to Euromonitor, modern trade’s share of the grocery and FMCG market could rise from 12% in 2024 to 24% in 2033, implying a market opportunity of about USD 20 billion for modern retailers. Alongside WinCommerce (MSN’s subsidiary), we believe BHX is well placed to capture a meaningful share of that opportunity.
Taken together, we believe DMX’s IPO and BHX’s earnings growth give MWG a strong path to deliver attractive returns over the next three years. We forecast earnings CAGR of 22% for 2025–2028, supported by both more value being unlocked at DMX and continued expansion at BHX.
TNH Hospital Group (TNH): Healthcare | 7.4% weight | -6.4% MTD
TNH has now held its 2026 AGM, which also marked the company’s first shareholder meeting under its new chairwoman. At the meeting, management set ambitious targets for 2026, with revenue expected to grow 64% and operating profit 182%, even though the company is still likely to report a net loss this year. The main reason is not weak demand, but the cost of growth. TNH is bringing a new hospital and a new maternity and pediatric center into operation, which will lift depreciation and interest expenses in the near term. In our view, that short-term pressure is understandable. New hospitals usually need time to build patient volumes, improve utilization, and reach a more normal level of profitability.
With four general hospitals and one specialized hospital either operating or ready to ramp up, management is now shifting its focus for the next three years. The priority is no longer expansion for its own sake, but making better use of the assets already in place and improving group profitability. That shift is already showing up in execution. TNH has been adding higher-value medical services, upgrading patient rooms, and linking staff incentives more closely to operating performance. These changes appear to be helping. Revenue has grown by about 30% on average over the past three quarters, supported by a recovery in the more established hospitals and better utilization at the newer hospital opened in late 2024.
Looking ahead, cost control will matter just as much as revenue growth. Medical supplies and staff costs make up more than 70% of the cost base, so even modest improvements here can make a meaningful difference. We think the company is moving in the right direction. The Board now includes members with stronger operational and financial experience, and that should help TNH manage purchasing, staffing, and capital allocation more effectively. With Giang, our Head of Investment, now leading the Board, we also expect the pace of governance improvement and internal restructuring to pick up.
So while TNH may still report a loss in 2026, we expect a meaningful improvement in underlying performance, with cash flow and operating profit rising sharply from 2025. More importantly, we see 2026 as a transition year rather than a setback. As newer facilities mature and the company focuses more on execution and cost discipline, TNH should be in a better position to return to profitability from 2027 and grow on a more sustainable basis. On that view, we continue to see attractive upside over the next five years.
Closing Remarks
Buying into weakness may sound counterintuitive when the broader market index is still making new highs, but that is where we see opportunity at this moment. External concerns may continue to weigh on sentiment for a while, but what matters more to us is the fundamental change taking place across the economy, much of which we discussed above. We expect those structural trends to keep building over the coming years. Our portfolio is positioned around these long-term themes, and we believe it remains on track to deliver the returns we expect, even if the path is not always smooth in the short term.
