MARKET STRATEGY REPORT 2026 – BUILDING STRATEGIC POSITIONING

By the end of 2025, the VN-Index had risen by 40.87% YTD. However, the rally was largely driven by stocks within the Vingroup ecosystem, with limited breadth across the broader market. The VN-Index ended the year trading at a P/E of around 17.3x. Excluding the impact of Vingroup stocks, the VN-Index valuation declines to 14.6x (median: 16.3x), which we view as an attractive valuation range for medium- to long-term investment.

The VN-Index’s price performance in 2025 featured unprecedented surprises. The tariff shock in early April 2025 triggered a sharp 17% decline (223.5 points) in the VN-Index, in line with the global equity sell-off. However, following the postponement of tariff implementation, the VN-Index staged a V-shaped recovery and rebounded strongly. This rally extended throughout 2025, delivering a 63% gain from the tariff-induced trough, driven primarily by VIC stocks, with intermittent participation from securities, banking, and other real estate stocks.

Tariff negotiations, persistent inflation, and central bank interest-rate policies became the main focal points for global equity markets. However, macroeconomic data indicate that most economies have managed to sustain growth, supported by improvements in labor productivity, even as inflation has eased only gradually amid rising costs. As a result, central banks have maintained a cautious approach to rate cuts. Nonetheless, most global equity markets recorded solid gains over the year. Gold emerged as the best-performing asset (approximately +60%), driven by concerns over geopolitical risks and rising sovereign debt levels.

Countries have increasingly turned to expansionary fiscal measures as an alternative policy tool, given the limited remaining room for central banks to cut interest rates in 2026. The global growth outlook for 2026 points to a slight deceleration in GDP growth to 2.9% from 3.0% in 2025. However, the key downside risk lies in weakening consumer confidence across most economies, which has continued to decline since mid-2025. At the same time, financial system liquidity is beginning to show signs of tightening, while geopolitical risks are on the rise.

Against this backdrop, the Vietnamese Government remains steadfast in its commitment to high growth. Despite mounting challenges following the tariff shock and severe flooding and natural disasters in 4Q2025, Vietnam reported GDP growth of 8.02% in 2025. The GDP growth target for the 2026–2030 period is set at 10%. Growth momentum is expected to be driven by domestic fundamentals—through institutional, legal, and administrative reforms, alongside a stronger role for the private sector—while continuing to leverage traditional strengths such as exports and FDI.

2025 also marked a pivotal year for Vietnam’s equity market, highlighted by its upgrade to FTSE Secondary Emerging Market status. However, the upgrade will only become effective in October 2026. As a result, foreign investors continued to post net selling in Vietnam’s equity market during 2025, amounting to VND 124 trillion (approximately USD 4.8 billion). This trend was broadly consistent across Southeast Asian equity markets in 2025. Nevertheless, we expect this trend to reverse in 2026, supported by the market upgrade event and a positive VND–USD interest rate differential.

We forecast that NPAT of companies under our coverage will grow by 14.0% YoY in 2026 (vs. +21.1% in 2025). Under our base-case scenario, we decompose the VN-Index into two components. The VN-Index excluding Vingroup stocks is expected to continue trading in line with its five-year median P/E, while we believe the rally in VIC-related stocks is unlikely to be sustained in 2026. This scenario implies a VN-Index level of approximately 2,040 points..

Our 2026 strategic portfolio prioritizes sector leaders in banking, retail, residential real estate, and public investment, as these stocks simultaneously meet the following criteria: (1) sustainable core business growth in 2026; (2) direct beneficiaries of the market upgrade event; (3) attractive valuations with potential for re-rating driven by subsidiary IPOs in 2026; and (4) continued upside over the next five-year cycle supported by accelerated public investment.