Market Insights April 2026
Economic growth accelerated in 1Q26
IN BRIEF
• The 1Q26 print represents a solid foundation, but the margin of softness against the government initial target of 9%, combined with rising inflation and a widening trade deficit, warrants careful policy calibration heading into Q2. The SBV faces a narrowing window to balance growth support with price stability, particularly if global oil prices and USD strength persist. Consumption resilience in March is an encouraging forward indicator, but external risks including Middle East conflict and regional demand softness remain live variables. We maintain a constructive but watchful stance on Vietnam as macroeconomic pressures are beginning to build.
• The VNIndex’s four-month bull run abruptly ended in March with the sharpest decline since October 2023 to close at 1674.5 (-11% MoM) due to a severe global risk-off environment following the US-Israel-Iran war on Feb 28.
The 1Q26 print represents a solid foundation, but the margin of softness against the government initial target of 9%, combined with rising inflation and a widening trade deficit, warrants careful policy calibration heading into Q2. The SBV faces a narrowing window to balance growth support with price stability, particularly if global oil prices and USD strength persist. Consumption resilience in March is an encouraging forward indicator, but external risks including Middle East conflict and regional demand softness remain live variables. We maintain a constructive but watchful stance on Vietnam as macroeconomic pressures are beginning to build
Vietnam’s economy sustained strong growth momentum into 2026, with Q1 GDP expanding 7.83% YoY — an acceleration from 7.07% YoY in Q1 2025 and one of the more robust quarterly prints in the region, even as the headline figure came in modestly below the 8.0% YoY official target. Growth composition was broad-based. Industry remained the primary growth engine, rising 9.01% YoY and contributing approximately 38% of total output expansion, with manufacturing leading at +9.73% YoY and construction holding firm at +8.36% YoY. External trade rebounded sharply, with a modest deficit. Trade activity surged 23% YoY, though import growth outpaced exports at +27% YoY, resulting in a trade deficit of USD 3.64 bn for the quarter. The import acceleration likely reflects both restocking demand and front-loading ahead of anticipated trade policy shifts which are dynamics worth monitoring in Q2 data. The Vietnam manufacturing PMI remained above the 50 threshold in March, extending the current expansion streak to nine months. However, the index eased to 51.2 from 54.3 in February, marking the softest improvement in operating conditions since last September.
Investment flows signal durable confidence. Total social investment rose 10.7% YoY. Notably, registered FDI surged 42.9% YoY, reflecting a robust project pipeline and sustained foreign interest in Vietnam’s manufacturing and logistics sectors. Notable registered FDI mega-Projects include USD 2.2bn LNG Quynh Lap (PV Power & SK), USD 1.2bn Samsung Thai Nguyen, and USD 1.7bn capital contribution from Haryanto Sudarno Kusuma into VLD (HCMC). Disbursed FDI rose a more measured 9.1%. Public investment disbursement reached USD4.4bn in Q1 2026 (+45% YoY), completed 10.4% annual plan.
Domestic consumption proved resilient, with nominal retail sales advancing 10.9% YoY and real retail growth of 7.0% — a meaningful signal given the global demand uncertainty of the period. Service consumption continued to outpace retail sales of goods, up 13.3% YoY and tourism also increased 12.5% YoY with international arrivals reached 6.8 million in 1Q26.
Inflation warrants close monitoring. March CPI rose 4.65% YoY, which is the highest reading in five years, driven primarily by energy-related transport costs (a nearly 30% spike in domestic gasoline prices) amid escalating Middle East tensions. 1Q26 average CPI came in at 3.51%, with core inflation at 3.63%, indicating that underlying price pressures remain contained but are on an upward trend. The divergence between headline and core figures points to energy pass-through as the dominant driver, rather than broad demand-pull inflation.
In March 2026, severe VND liquidity tightness drove a sharp post-Tet rise in interest rates, with SOCB deposit rates up 70bps MoM (+120bps from their November 2025 trough). Systemic strain was evident as interbank overnight rates spiked to 11%, while outstanding reverse repo (OMO) balances dropped to VND 290tn—their lowest since November 2025. This squeeze stems from a prolonged post-Covid structural imbalance where credit demand consistently outpaces deposit growth. Consequently, the banking system's pure Loan-to-Deposit Ratio (pure LDR) hit a record 110%, forcing banks to fiercely compete for capital.
In the FX market, the VND depreciated 1.1% MoM, erasing early-year gains to record a 0.2% YTD decline. Escalating pressures from the Iran war, rising oil prices, and a stronger DXY widened the gap between free-market and official USD/VND rates from 1.5% to as much as 5%. To counter these strains, the State Bank of Vietnam (SBV) intervened—mirroring its interventions in late 2025—by selling USD via cancellable 180-day forwards at 26,850 VND/USD. This flexible strategy stabilizes market sentiment while protecting FX reserves. Concurrently, safe-haven demand pushed domestic gold premiums to extreme levels, trading VND 25 million to VND 30 million above global prices amidst the ongoing exchange rate volatility.
The VNIndex’s four-month bull run abruptly ended in March with the sharpest decline since October 2023 to close at 1674.5 (-11% MoM) due to a severe global risk-off environment following the US-Israel-Iran war on Feb 28. Despite the drawdown, liquidity remained resilient, indicating strong absorption by domestic buyers. In March, average daily trading value (ADTV) rose 5.4% MoM on the HSX to USD 1.2bn, and 6.4% across all three bourses to USD 1.3bn. Foreigners remained net sellers for the third consecutive month, offloading USD 665.3mn across all bourses. Outflows were concentrated in large-cap proxies: VIC (-USD 185.0mn), FPT (-USD 97.2mn), and STB (-USD 95.2mn). Conversely, inflows selectively targeted consumer and agri-chemical plays: MWG (+USD 56.2mn), DCM (+USD 36.7mn), and MCH (+USD 35.0mn).
The sell-off was broad-based, with nearly half of all sectors suffering double digit declines. Information technology (-19%) was the primary laggard, dragged heavily by FPT (-20%) amid global tech weakness. Ironically, despite surging crude prices, the Utilities (-19%) and Energy (-16%) sectors sold off sharply, driven by PLX (-30%), OIL (-19%) as the market priced in potential severe margin compression from domestic retail price caps, and GAS (-27%).
Valuation-wise, at end March, the VNI trades at a TTM P/E of 15.3x, lower than its 5-year average P/E of around 17x. Geopolitical tail risks remain the primary overhang. Domestically, tightening systemic liquidity is a growing concern; with several commercial banks now pushing 12M deposit rates above 9%. Investors will closely monitor Q1 macro prints, earnings reports, and AGM season guidance. On the upside, the recent 11% correction has improved the risk-reward profile for bottom-fishers, with a major near-term catalyst approaching on April 8: FTSE Russell’s review regarding Vietnam's upgrade to Secondary Emerging Market status.
