Market Movement – March 2026: RESOLUTE COMMITMENT TO THE GROWTH AGENDA

US invocation of Section 122 (imposing a 10% tariff for 150 days) offers a temporary reprieve for Vietnam, compressing reciprocal tariffs from 20% down to 10%. However, secular headwinds are intensifying as the Trump administration expedites Sections 232, 301, 338, 201, and 604 to permanently embed these tariffs, coupled with targeted levies on AI chips, steel, automobiles, and timber. Concurrently, a protracted conflict in Iran threatens to severely disrupt global supply chains, potentially negating any near-term tariff advantages for domestic exporters (notably textiles and seafood).

On the monetary policy front, oil prices stubbornly hovering around US$90/bbl threaten to push US CPI to 3.2%-3.7% YoY, effectively stalling the anticipated rate cut trajectory. Nonetheless, the base case for a Fed rate cut remains intact, driven by the imperative to lower the cost of capital amidst a rapidly weakening labor market (Feb 2026 Non-Farm Payrolls contracted by 92,000, propelling the unemployment rate to 4.4%).

Domestically, credit growth reached 1.4% YTD by late February, outpacing deposit mobilization (0.36% YTD). This divergence continues to strain systemic liquidity, briefly pushing interbank rates toward the 20% threshold. Compounding these geopolitical risks are emerging inflationary pressures stemming from elevated oil prices, which directly inflate both production costs and the broader cost of living.

Looking ahead to 2H26, we anticipate the State Bank of Vietnam (SBV) will pivot toward a more accommodative monetary stance relative to the first half, aiming to undergird official growth targets. Inflation and exchange rate pressures are poised to escalate beyond historical norms. Under a less sanguine scenario characterized by a sharp depletion of foreign exchange reserves, the cost of capital and the DXY could remain elevated, mirroring the dynamics of 2022; however, systematic risks appear better contained due to the decoupling of liquidity pressures from the real estate sector.

While the deployment of AI agents enables corporate margin expansion, it introduces secular downside risks to aggregate demand through job displacement. Guided by Resolution 79/NQ-TW, new energy security readiness has emerged as both a critical bottleneck and the premier catalyst for Vietnam to attract next-generation AI infrastructure FDI, surpassing traditional industrial land banks as the primary draw.

In light of geopolitical and systemic liquidity risks—evidenced by the VN-Index shedding 6% in early March—our current strategy prioritizes defensive cash positioning. Capital deployment should only be triggered following deep market discounts, strategically targeting: (1) cyclical growth drivers (Banking, Energy [Oil & Gas, Electricity], Logistics); and (2) beneficiaries of the market upgrade roadmap under Circular 08/2026/TT-BTC (Securities).