Vietnam: Strong Fundamentals Point to the Next Phase of Growth
The First Half of 2026: Vietnam Continues to Demonstrate Remarkable Economic Resilience
The first half of 2026 once again demonstrated how resilient the Vietnamese economy has become. Despite geopolitical tensions in the Middle East, ongoing trade uncertainties, and generally volatile global capital markets, Vietnam recorded GDP growth of 8.39% in the second quarter. As a result, economic growth reached 8.18% in the first half of the year, making it one of the highest growth rates worldwide.
What is particularly remarkable is not only the pace of growth but also its quality. Unlike many emerging markets, Vietnam’s expansion is supported by multiple growth drivers. Industrial production and manufacturing remain the country’s primary engine of growth, expanding by more than 10%. At the same time, the services sector, private consumption, and tourism continue to perform strongly, while agriculture remains a stable contributor to overall economic growth.
This broad-based economic expansion enhances Vietnam’s resilience to external shocks and highlights the increasing maturity of its economic model.
Structural Reforms and Investment Continue to Drive Growth
In addition to its strong macroeconomic fundamentals, Vietnam continues to benefit from long-term structural trends. The country is increasingly establishing itself as a strategic manufacturing and technology hub within global supply chains. Strong foreign direct investment from across Asia, combined with a consistent infrastructure development strategy, continues to support this transformation.
Foreign direct investment remains at record levels, while the government is investing heavily in transportation infrastructure, energy, and digitalization. These investments improve productivity across the economy and create a solid foundation for sustainable corporate earnings growth.
Private consumption also remains robust. Rising household incomes, a young population, and the continued return of international tourists are driving strong retail sales and service sector activity.
Corporate Earnings Confirm the Positive Economic Momentum
The strength of the economy is increasingly reflected in corporate performance. Companies listed on the Ho Chi Minh Stock Exchange increased their earnings by nearly 50% year-over-year during the first quarter of 2026.
Equally encouraging is the growing diversification of earnings growth. Whereas banks were the primary contributors in previous years, positive earnings momentum is now increasingly coming from consumer businesses, real estate, industrial companies, utilities, and basic materials. This broader earnings base enhances the stability of the Vietnamese equity market and supports a more sustainable long-term growth trajectory.
Attractive Valuations Despite New Market Highs
Although the Vietnamese stock market reached new highs during the spring, valuations remain attractive. The average price-to-earnings ratio is broadly in line with its five-year average and, excluding several heavyweight stocks, remains close to historical lows.
At the same time, we expect portfolio earnings within the Lumen Vietnam Fund to grow by approximately 16% to 17% annually in both 2026 and 2027. In our view, current market valuations still do not fully reflect Vietnam’s long-term earnings potential.
Short-Term Uncertainty, Constructive Long-Term Outlook
Equity markets traded largely sideways during the second quarter as investors assessed the potential implications of the conflict involving the United States and Iran, as well as rising energy prices, on global inflation and economic growth. Continued foreign capital outflows also weighed on short-term market sentiment.
However, it is encouraging to see domestic investors consistently return to the market during periods of weaker prices. This strong local investor base has largely absorbed foreign selling pressure and reflects the increasing maturity of Vietnam’s capital market.
Outlook: Macroeconomic Strength and FTSE Upgrade Could Provide Further Upside
We also expect additional support from Vietnam’s anticipated inclusion in the FTSE Emerging Markets Index. This upgrade is likely to enhance the country’s visibility among international investors and could attract additional capital inflows from both passive and active investment strategies over the medium term.
Positioning of the Lumen Vietnam Fund
Against this backdrop, the Lumen Vietnam Fund continues to follow a disciplined bottom-up investment approach focused on high-quality companies with strong balance sheets, sustainable earnings growth, and technical chart analysis as part of the investment process. We view the market consolidation of recent months not as a sign of weakening fundamentals, but rather as a healthy pause within an intact long-term upward trend.
We remain convinced that Vietnam will continue to rank among Asia’s most attractive growth economies and equity markets over the coming years, offering significant long-term value creation potential for investors.
