Vietnam Insider – While the VN-Index has surged, a selective analysis by VinaCapital suggests a significant portion of the market remains deeply undervalued, offering international investors a compelling entry point into fundamentally sound companies before a predicted “normalization” cycle.
The Story So Far: A Market Driven by a Few Giants
At a recent investor conference on October 28, VinaCapital, one of Vietnam’s leading fund management companies, delivered an intriguing analysis of the country’s surging stock market.
While the benchmark VN-Index has delivered a robust 32.9% year-to-date (YTD) gain, the picture changes dramatically upon closer inspection. According to Nguyen Hoai Thu, VinaCapital’s Deputy CEO, excluding a handful of major stocks—specifically the Vingroup conglomerate and Gelex—the market’s increase shrinks to just 13.4%.
This disparity highlights a crucial point for global investors: the overall index is being heavily skewed by a few high-flyers, masking significant value elsewhere.
Where the Money Has Gone (and Where it Hasn’t)
The Real Estate sector has been the undeniable star, rocketing by an astonishing 162.5% YTD. This performance is far ahead of profit forecasts; real estate share prices have risen 2.8 times faster than their projected full-year earnings growth. Other outperforming sectors include Industrials and Securities.
However, the analysis revealed a curious disconnect in several other high-potential sectors:
| Sector | Projected Full-Year Profit Growth | YTD Stock Price Performance | Implication |
| Technology | +18.1% | -24.3% (Decline) | Deeply undervalued relative to earnings potential. |
| Essential Consumer Goods | +42.3% (Second only to Real Estate) | +4.9% (Minimal Gain) | Strongest earnings growth, but stock price has barely moved. |
“Many fundamentally sound stocks have simply not kept pace with the broader market’s growth,” commented Ms. Thu. “This divergence means there are still substantial investment opportunities for 2026.”
VinaCapital’s Playbook: How to Spot the Hidden Gems
For international investors focused on long-term value, VinaCapital is zeroing in on sectors that meet two stringent metrics: PEG (Price/Earnings to Growth) and ROE (Return on Equity).
- PEG Ratio (Price/Earnings to Growth): This metric refines the standard P/E ratio by factoring in a company’s projected earnings growth (G). A lower PEG ratio (ideally around 1x or less) signals that a stock may be undervalued by the market relative to its growth prospects.
- ROE (Return on Equity): A core profitability measure, this indicates how efficiently a company is generating profit from its shareholder equity. VinaCapital targets sectors with an ROE above 15%.
Based on these criteria, VinaCapital identifies the following five sectors as having the most attractive valuations right now: Materials, Banking, Consumer Goods, Healthcare, and Technology
The Three Most Attractive Sectors for Global Investors
VinaCapital’s research highlights specific catalysts for several key sectors:
- Consumer Goods: The recovery of domestic consumption is a powerful engine for economic growth. Retail stocks are expected to benefit significantly, particularly those successfully gaining market share.
- Banking: The sector is poised for a strong outlook, driven by projected credit growth of 19-20% and the easing of credit limits (‘credit room’). Additionally, the revival of the property market and accelerated public investment will support asset quality, especially for well-managed, large banks with high capital adequacy ratios (CAR).
- Infrastructure/Materials: The Vietnamese government’s aggressive push for major public investment projects is a massive economic stimulus. Companies involved in construction and materials are direct beneficiaries of this policy, guaranteeing robust demand.
The Critical Caution: FX and Interest Rate Risk
While bullish on long-term value, VinaCapital advises investors to closely monitor two crucial risks:
- Exchange Rate (USD/VND): The Vietnamese Dong has been under pressure, with the USD/VND exchange rate increasing significantly, signaling potential volatility.
- Interest Rates: Following a period of low rates, the mounting pressure from the rising exchange rate may force the central bank to adjust interest rates upward in the near future.
The stock market is highly sensitive to these two factors. VinaCapital’s long-term advice remains unchanged: focus on a long-term strategy, select stocks based on strong fundamentals, and prioritize attractive valuations.
Source: Vietnam Insider