Market Movement – JULY 2026: NAVIGATING THE CROSSCURRENTS

The Iran war have entered a critical new phase, shifting toward an active contest for operational control and freedom of navigation through the Strait of Hormuz. While oil flows persist via northern maritime lanes, bypass pipelines, and “shadow fleet” tankers disabling Automatic Identification System (AIS) transponders, aggregate maritime transport volumes remain materially suppressed compared to pre-conflict baselines.

Meanwhile, inflationary pressures are broadening from energy commodities into agricultural supply chains. The projected extension of the El Niño phenomenon into early 2027—compounded by sustained high costs for crude oil, fertilizers, irrigation, and freight—is elevating second-round inflation risks across global food prices, wage demands, and services where central banks face severe constraints against near-term monetary easing while market inflation expectations remain unanchored.

Vietnam’s 1H2026 GDP expanded by 8.18% YoY (with 2Q2026 accelerating to 8.39% YoY), driven primarily by outperformance in manufacturing and processing. However, the durability of this momentum faces underlying headwinds, including sluggish real retail consumption, trade balance pressures, and slow disbursement in public investment. Specifically, cumulative public investment disbursement reached VND360tn by June 30 (representing just 35.8% of the Prime Minister’s full-year mandate). To achieve the government’s full-year GDP growth target of above 10%, 2H2026 growth must approach 11.9%—effectively designating accelerated public capital disbursement as the nation’s single most critical growth catalyst.

Domestic interest rates face limited headroom for near-term relief. As of July 10, credit growth reached 7.91% YTD, significantly outpacing deposit growth at 6.07% YTD and widening the system-wide funding deficit to approximately VND2,700tn. While Circular 25 has relieved certain capital safety constraints, and modest VND depreciation (~0.4% YTD) affords the State Bank of Vietnam operational flexibility for targeted liquidity support, central bank authorities will likely prioritize systemic stability while navigating foreign exchange risks and domestic economic requirements.

Turning to equities, recent corrections have derated valuations to compelling levels for medium-to-long-term positioning. However, attractive valuation alone is not a sufficient catalyst to trigger a broader re-rating or ignite aggressive bargain-hunting capital. As of July 22, the VN-Index has retreated nearly 14% from its all-time high, closing below the key 1,700-point threshold alongside a decline in average daily liquidity to VND13tn per session. Nevertheless, we maintain a cautious stance in terms of new capital deployment, recommending defensive cash buffers while selectively accumulating quality equities in sectors leveraged to the economic recovery cycle and public infrastructure deployment.