Vietnam: The new Asian tiger
Vietnam’s economic growth, underpinned by several secular drivers such as favourable
demographics, robust growth in exports, foreign direct investment (FDI) and the government’s
pro-growth policies, remains intact. LSEG Data & Analytics consensus expects Vietnam’s
GDP to grow by 7.3% in 2025 and by 6.7% in 2026, while the local government has set
an ambitious growth target for 2026 of 10%. This economic progression is achieved
at a modest inflation rate of c 3% at present, aided by low inflationary pressure
in China (imports from which are significant for Vietnam). The strong macroeconomic
fundamentals underpin a robust outlook for double-digit earnings growth across Vietnamese
equities (24% for 2025, according to Dynam Capital, and 20% for 2026). This compares
with 21.8% per year from 2015 to 2019 and somewhat slower growth of 11.6% per year
from 2020 to 2024, which was affected by the COVID-19 pandemic, the real estate and
bond market issues, as well as the government’s anti-corruption agenda.
Economic growth uninterrupted by the new tariffs
Despite the recent tariff turmoil, Vietnam’s exports to the US increased by 28% y-o-y
in 9M25 (even if partly due to front-loading orders ahead of the final US tariff determination),
and Dynam Capital expects 12–15% growth in total exports in 2025. The robust growth
this year was assisted by exports of computers and other electronics, which were up
45.9% y-o-y in 9M25 and made up 22.2% of total exports. The relative level of tariffs
compared to other countries in the region (current tariffs are only 10% higher) seems
more important to the growth in exports from Vietnam than the absolute level of tariffs.
Exports of electronics assembled in Vietnam continue to be driven by strong FDI (such
as Apple’s move of some of its production sites to the country), supported by a sustained
low level of factory wages compared to China and former Asian tigers such as Thailand
and Malaysia. Another contributor to exports has been a recent surge in tourism, especially
from China.
There is also evidence of an increasing sophistication of exports, as illustrated
by FPT Corporation, Vietnam’s largest IT and digital services company, which derives c 60% of its revenues
from software outsourcing. Growth stories like FPT are supported by Vietnam’s young,
relatively well-educated workforce, as evidenced, for instance, by Vietnam’s results
in the Programme for International Student Assessment. In Q125, FPT inaugurated a
93ha semiconductor and AI research centre in Da Nang City to turn it into Vietnam’s
‘Silicon Bay’, with a total investment of $172m. FPT was VNH’s top holding until end-April
2025, but VNH took some profits and the company left VNH’s top 10 holdings at end-August
2025. FPT’s share price declined over the last 12 months, which we understand may
have been the result of: 1) lower visibility on the pipeline of large projects due
to delays in the capital expenditure of large multinational corporations amid the
trade tensions earlier this year, 2) a change in controlling shareholders in one of
its telecommunications divisions and 3) uncertainties surrounding the impact of AI
on outsourced software. That said, it has proved a strong performer within VNH’s portfolio
in the past.
‘Doi Moi 2.0’ may accelerate growth
The Vietnamese government’s pro-growth, capitalistic mindset and a drive towards domestic
reforms are illustrated by its
new agenda, which some compare to the Doi Moi reforms in the 1980s, which opened the
country to global trade. The
current reforms involve:
- streamlining the government (eg approval processes for real estate and infrastructure
projects),
- boosting the capabilities of the private sector,
- pursuing ambitious tech sector targets, and
- fostering aggressive infrastructure roll-out.
VinaCapital estimates that these reforms should add c 2pp to Vietnam’s current GDP
growth of c 6–7% per year in the coming years (which it believes to be broadly in
line with estimates from the International Monetary Fund). The 2025 public investment
plan of VND900tn ($35–40bn) is more than 40% higher than the actual disbursement in
2024. However, disbursement continues to lag: by end-November 2025, about 60.6% of
the annual public investment plan had been
disbursed, only slightly up from 58.2% in the same period of 2024. Reforms to public
investment and construction procedures, together with strong central pressure on disbursement,
are intended to streamline approvals and are contributing to somewhat faster execution
in key transport infrastructure projects (even if overall disbursement still lags
the ambitious annual plan). This has direct implications for companies such as leading
steel producer Hoa Phat Group (7.3% of end-October 2025 portfolio).
VNH sees domestic consumption as an important part of Vietnam’s story
Long-term growth in Vietnam’s domestic private consumption is underpinned by favourable
demographics (as its c 100 million population has a median age of 32 and is characterised
by a high participation of women in the workforce), as well as growing urbanisation
(currently at a still-low level of 39%) and a rising middle class. VNH’s direct urbanisation
plays are companies such as Vinhomes (Vietnam’s largest residential developer), as well as the above-mentioned Hoa Phat Group. A notable example of a play on Vietnam’s rising consumption is Mobile World Corp, an omnichannel retail company historically focused on mobile phones and electronics
but now growing its Bach Hoa Xanh groceries business, which was VNH’s top holding
as of October 2025. The company reported increases of 14% and 73% y-o-y in revenue
and net profit after tax, respectively, in 9M25.
VNH’s largest sector weighting is to banks, which offer a broad-based exposure to
Vietnam’s growth story. This includes six of its top 10 holdings: MB Bank, Techcom Bank, Sacom Bank, Asia Commercial Bank, VietinBank and VP Bank. Many of these banks are using digitalisation to their advantage in terms of customer
reach, efficiency and margins, according to Dynam Capital. Banks represented 38% of
VNH’s end-October 2025 portfolio, which was possible following recent changes to Vietnam’s
single sector restrictions, with the upper limit raised from 30% to 40% (the restriction
on a single stock was raised to 20%). VNH runs a concentrated, high-conviction portfolio
with 28 names as of October 2025 and the top 10 investments account for 62.5% of its
NAV (see Exhibit 2).
VNH seeks out small and medium-sized companies that have the potential to double their
earnings in four to five years, as well as best-in-class blue chip companies. It invests
solely in companies meeting its strict criteria regarding ESG practices, in particular
with respect to disclosures and market communication. This creates a relatively narrow
investable universe of 60–80 stocks (out of c 400 quoted on the Ho Chi Minh City Stock
Exchange), of which VNH selects between 25–30 to actively trade in, with its portfolio
turnover at around 30–40% in any given year. This translates to a high active share
against the VNAS Index (normally around 75%).
