Vietnam's Economy Is Booming and Its Stock Market Is Flat. VOF Just Bought That Gap.

A 9% GDP economy, 30% earnings growth, 10% deposit rates and a 9.3x multiple — the fund's pitch is that liquidity, not fundamentals, is the only thing standing between Vietnam and a re-rating.

VOF.L · Earnings Call · 2026-10-27

The elephant, and the rubber band

Michael Kokalari, VinaCapital's chief economist, opened the FY2026 results webinar by walking straight at the awkward part: “The economy is really strong this year in Vietnam. The government is reporting 9% GDP growth. Earnings growth could be around 30% this year. And despite that, the stock market is basically flat.” — Michael Kokalari, Chief Economist · 2026-10-27 His explanation is mechanical rather than macro-mystical. Twelve-month deposit rates sit at 8%–9%, with 10% available at reputable banks, against a level around 7% above which Vietnamese savers historically pull money out of equities. Mortgage rates of 13%–15% have coincided with house prices down roughly 20% from the peak. The stock market, in other words, is not voting on the economy; it is voting on the bank counter. What is driving those rates is the boom itself, not inflation. Credit growth has outrun deposit growth — officially by four to five percentage points, by Kokalari's fuller accounting closer to seven — leaving a loan-to-deposit ratio near 115%. His forecast is that rates stay high into mid-2027 and then roll over, and that equities “sniff it out” three months early. That is the entire investment case in one sentence: a valuation that is “pricing for crisis levels” attached to a market waiting on a deposit-rate catalyst nobody can date.

The mismatch between how strong the GDP growth and the earnings growth is versus the market just kind of going sideways, it's building up like almost like a rubber band ready to spring back.
Michael Kokalari, Chief Economist · 2026-10-27

What actually changed: a portfolio rebuilt, not tweaked

Strip away the macro and the real news is operational. Portfolio manager Khanh Vu transacted roughly $850 million during the year — $470 million of divestments recycled into $370 million of reinvestment — for a 39% turnover ratio against a historical norm in the single digits. “That resulted in a turnover ratio of 39%, one of the largest levels that we've seen in recent years.” — Khanh Vu, Portfolio Manager · 2026-10-27 Out went good-but-slow compounders; in came faster banks (MB Bank, Techcombank Securities via a rare IPO), brokers (SSI), Mobile World in retail, Gemadept in ports and Gelex Infrastructure. ACB, once the top holding, was trimmed as the fund rotated out of defensive banks. NAV returned 10.5% in dollar terms, a recovery from a prior-year contraction but well behind the Vietnam index, roughly 70% of whose return came from a single stock the fund did not own. That omission is now fixed: Vingroup was initiated post-year-end at just over 5% of the portfolio, inside the fund's 4%–6% high-conviction band. Vu's confession is unusually frank — the stock traded at 90x–100x earnings, carried negative net interest coverage and housed an EV arm burning $3bn–$4bn a year, until the group moved those operations outside. “You don't play to where the puck is, you play to where the puck is going.” — Khanh Vu, Portfolio Manager · 2026-10-27 The top ten names now carry 58% of assets, ~30% earnings growth this year, 20%–25% expected in 2027, on 9.3x.

The long wave: a connector country, not a cheap market

The freshest language in the call is structural, and it is where the fund does its real differentiating. Connector country — an IMF label Kokalari applies to Vietnam alongside Mexico and Poland — is the thesis that a bamboo-diplomacy state can make the middle-complexity goods that the NHS will not buy from China and cannot economically reshore. It pairs with the East Asian development model (manufacturing at 25% of GDP versus >30% peaks elsewhere, hence ~15 years to run) and with blocks of countries fragmenting into friend-shoring and BRICS spheres. Add ten years of favourable demographics and a government that looks ready to let U.S. dollar borrowing in — debt below 50% of GDP — and the fund is arguing for a five-to-seven-year boom. That framing matters because it reframes the flat tape as a gift rather than a verdict. It also explains the phrasing around bamboo diplomacy and the confident dismissal of U.S. tariff risk: the global keyword set is saturated with tariff uncertainty — it dominated Know Trend's market-wide rankings through 2025 — yet tariffs do not appear in VOF's own top themes at all. Management's view is that the Peter Navarro paper reads more like an exoneration than an indictment, and that punishing a connector country is not in Washington's interest. Foreign direct investment up ~15% year-on-year, with Samsung committing another $5 billion, is their proof.

The things that are not fixed

The discount is the sore thumb. It narrowed this year but only to around 20%, and Vu conceded it is "an area we need to work on." Against ~$935 million of assets, the fund has returned almost $900 million since its capital-return programme began — $91 million of buybacks plus nearly $20 million of dividends last year — roughly the size of the vehicle itself, with a 2% dividend maintained for the new year and a reworked fee structure (1% on the first billion, performance fee measured over five years versus a FTSE benchmark with clawback). The other unresolved item is the EM upgrade. FTSE Russell's reclassification arrives in tranches — 10% in September, 25% next March, then 35% and 35% — worth perhaps $1.5bn–$3bn of passive money, but the interim effect has been net outflow as frontier ETFs sell and the index weight collapses from ~30% of the frontier basket to under a percentage point. The fund's answer is an active share of 69%: be positioned before the flows, not against them. Until deposit rates crack, that is a promise rather than a catalyst — and one the market has heard before.