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INVESTMENT OUTLOOK ON EARNINGS SEASON: SEEDS OF PROSPERITY

In Q1 2026, we expect the Vietnamese stock market to focus on:
U.S. tariffs are increasingly being used as a geopolitical lever. As tariffs become more unpredictable, companies are shifting from cost optimization to risk optimization by diversifying, prioritizing markets with stable FTA frameworks, strengthening control over technical standards and rules of origin, and selecting reliable suppliers.
Institutions are described both as a bottleneck and as a breakthrough, laying the groundwork for administrative reform programs that not only reduce procedural steps but redesign process flows, alongside stronger enforcement and higher compliance standards. However, rapid issuance of regulations, inconsistent guidance, and short implementation timelines may challenge businesses’ ability to keep pace, as regulatory overlap across government levels remains a key 2026 risk.
Interest rates in the economy trended upward in Q1 2026. We believe this increase is reasonable, reflecting liquidity supply–demand conditions as the State Bank of Vietnam (SBV) adopts a more defensive stance amid global macroeconomic uncertainties, rather than signaling a prolonged tightening cycle. We expect the SBV to maintain a flexible monetary policy stance to support growth and rising fund demand for production and business activities. As a result, interest rates are likely to stabilize over the next 3–6 months, with differentiation depending on individual banks’ risk appetite.
The capital-raising wave reduced market leverage to 104% by the end of 2025, down from 125% in Q3 2025, thereby lowering market risk, as funding costs led to slightly higher margin lending rates. Additionally, the Ministry of Finance Circular No. 08 introduces mechanisms for foreign investors that align more closely with international practices, an important development ahead of FTSE’s review in March 2026.
Investors should closely monitor the following key factors: (1) changes in Japanese government bond (JGB) yields and the yen, which may impact global liquidity; (2) potential shifts in U.S. policy amid fiscal challenges and Donald Trump’s nomination of Kevin Warsh for Fed Chair; (3) ongoing U.S.–Iran tensions, which remain contained and manageable; and (4) a low risk of a pandemic outbreak, as Nipah is considered a regional concern have prior experience in managing Covid-19.
We anticipate overall market profit growth of about 24% YoY in Q1 2026, driven by a low base and strong contributions from the real estate sector as projects are completed and revenue is recognized. Financial services are expected to increase their earnings share as liquidity recovers, the market upgrade nears, and emerging growth drivers such as TCX, VPX, and VCK emerge. The non-financial sector should maintain momentum from policies that promote public and private investment, consumption, and improved gross margins. Banks are expected to stabilize with credit growth around 15% YoY, and NIM is likely to have bottomed out.
We project the VN-Index P/E target range at 12.5x–14.5x over the next 3–4 months, influenced by rising 10-year government bond yields. If Vingroup's valuation returns to its historical average, the market P/E could be 1.0–1.3 points higher than our base scenario. Supportive factors include a possible 25 bps Fed rate cut in Q1, strong earnings growth, and Vietnam's stock market upgrade by FTSE. However, we face challenges such as policy misalignment between the BoJ and Fed, liquidity management issues between the SBV and State Treasury, uncertainties from the Trump administration, and geopolitical risks. Accordingly, the reasonable trading band for the VN-Index over the next three months is 1,533–1,849.