Sector Report

2025 recap: Weather-led Year with Policy Breakthrough

Electricity demand growth in 2025 reached only ~4% YoY, lagging GDP expansion. This underperformance was largely attributable to cooler than average weather compared with both 2024 and multiple-year norms, which dampened consumption. More favorable hydrological conditions also resulted in strong hydropower generation, allowing hydropower output to outperform thermal power during the year.

Total installed capacity rose to approximately 90 GW, representing an annual increase of 6–7 GW, primarily driven by baseload power expansion.

On the policy front, 2025 marked a turning point following the regulatory stagnation of 2022–2024. Several long standing legal bottlenecks were resolved, most notably the revision of Power Development Plan (PDP) VIII and the introduction of new, technology specific power pricing frameworks, improving sector visibility and investment conditions.

2026 outlook and long-term trajectory toward 2030: Weather transition and geopolitical tensions

We expect the current La Niña phase to be short lived, followed by a return to El Niño conditions, which would reduce hydropower output and increase reliance on thermal generation to meet rising demand. Under our base case scenario, electricity demand is projected to grow by ~8.5% YoY in 2026, while our high case scenario assumes 10–15% YoY growth. Against this backdrop, we forecast a ~29% YoY recovery in the full market price (FMP).

Geopolitical risk has emerged as an additional uncertainty. The Iran conflict, which began on 28 February 2026, has triggered upward shocks in global fuel markets, including crude oil, fuel oil, and natural gas/LNG prices across Europe and Asia. This raises concerns for gas/LNG fired power generation in Vietnam.

Vietnam’s banking sector wrapped up 4Q25 on a strong note, with banks under our coverage delivering aggregate pre-tax profit of VND 85.3 tn, up +15.9% YoY and +13.8% QoQ, comfortably beating expectations. The outperformance was largely driven by write-back income and improved credit momentum at quota-rich banks. However, beneath the headline numbers, earnings growth was far from uniform. While TCB (+95% YoY), VPB (+66%), and HDB (+60%) led the charge with outsized gains, others struggled to keep pace: ACB posted a -39% YoY drop and STB slipped into the red with a VND 3.4 tn loss. The results highlighted not just the operational divergence across banks, but also the importance of balance sheet agility, credit quota management, and provisioning strategy in a tightening liquidity environment.

As we enter 2026, we expect the macro backdrop and reform tailwinds to remain constructive, but rising CoF, uneven credit quota allocation, and persistent Group 5 exposures may create headwinds. We maintain a selective stance, favoring banks with strong deposit franchises, ample credit room and disciplined risk management. Our current top picks include VCB, CTG, MBB, and VPB, with detailed forecasts to follow in upcoming bank-specific reports.

3Q25 Snapshot: Listed industrial park (IP) developers posted robust results, with revenue reaching VND 21.8 tn (+19% YoY) and net profit surging 59% YoY to VND 5.2 tn. Key drivers included lower COGS at IDC/NTC/KBC and strong gains from rubber-linked names (GVR/PHR/DPR) on consumption and land conversion.

Near-Term Headwinds: Despite tariff stabilization (India ~25%, ASEAN peers ~19%) reviving tenant interest, leasing decisions remain sluggish amid macro uncertainty and transshipment risks (potential 40% tariff on VN exports). MOUs/new leases fell 27% YoY, with muted momentum likely into 2026 as tenants favor ready-built factories (RBFs) and smaller projects. Rising development costs and land clearance challenges are compressing margins for new IPs to 30–35% vs. >50% for existing parks.

Long-Term Outlook: Demand fundamentals remain intact, supported by:

1.         Major infrastructure upgrades (expressways, ring roads),

2.         New FDI incentives (Circular 33/2025, amended Investment Law),

3.         Competitive rental rates vs. regional peers.

Investment View: 2026 earnings may soften for BCM, IDC, VGC, SZC on slower lease recognition. We favor KBC for its expanding land bank and positive 2025–26 outlook, and rubber-to-IP converters (PHR, GVR) for structural upside.

With 9M25 results broadly in line, we maintain a constructive view on the banking sector heading into 4Q25 and 2026. We see four key drivers sustaining earnings momentum: (1) resilient credit growth, (2) gradual improvement in asset quality, (3) NIM stabilization, and (4) a stronger recovery in writeback income following the implementation of the revised Credit Institutions Law effective from October 15, 2025.

We currently forecast sector-wide profit growth to accelerate from ~15% in 2025 to 18% in 2026.

After peaking at 1.84x in August 2025, the trailing P/B of our bank coverage has decreased 16.4% to 1.53x at the end of 3^rd November 2025 – lower than 5Y average of 1.65x (Chart 2). Within the corrections, the trailing P/B of STB, CTG, MBB and HDB were still higher than its historic average while peers experienced a significant decrease (Chart 1). Additionally, the forward P/B ratio is estimated at 1.28x, presenting an attractive valuation in light of the projected 18% YoY growth in 2026 PBT and a strong ROE of 18%.

The brokerage sector delivered a standout 3Q25, with total PBT tripling YoY and margin lending surging +84% YoY to USD 7.8 bn, underpinned by resilient retail inflows and supportive margin schemes despite persistent foreign net outflows. VIX and SHS outperformed on proprietary trading gains, while SSI and VPS (VCK) recorded robust earnings on the back of a rebound in brokerage activity. TCX and VPBankS (VPX) saw solid contribution from investment banking.

Brokers gear up for the next cycle with capital raises and IPOs. A wave of IPOs and capital-raising plans — led by TCX, VPX, VCK, HCM — reflects sector-wide preparation for the next phase of market development. With increased equity and balance sheet strength, brokers are expanding margin capacity and reinforcing market share ahead of a potential reclassification to Emerging Market status.

Structural reform remains central to upgrade momentum. Following Vietnam’s upgrade by FTSE Russell (effective Sep-2026), attention now turns to the interim review in March 2026 and the longer-term MSCI reclassification path. Key reforms are underway to align the market with global standards — including the implementation of a central counterparty (CCP) system and improved access mechanisms for foreign institutional investors. Notably, regulators are working on a framework that would allow global brokers to directly execute trades on behalf of their clients. These initiatives are critical to strengthening investor confidence and ensuring Vietnam remains on track for structural market elevation.

Recently, the power sector witnessed the emergence of several new policies and initiatives, as a part of the broader strategy to support the development of the overall energy sector and Vietnam’s ambitious GDP growth targets. These include Resolution No. 70-NQ/TW on ensuring national energy security by 2030, with a vision to 2045, proposed adoption of two-component electricity pricing model from 2026 and discussions around the implementation of Direct Power Purchase Agreement (DPPA) mechanism to boost investments into renewable energy (especially private sector).

Our view

These developments reinforce the importance of developing and diversifying the power supply to support sustainable growth of the economy and energy industry, especially as Vietnam targets double-digit annual GDP growth in the coming years. Renewable energy remains one of the key drivers, implying long-term benefits for renewable players, such as REE, HDG, GEG, PC1 and GEX.

However, in the short-term, we believe that execution risks remain. It may take time for proposed solutions/initiatives to materialize their positive impacts, especially that related to regulatory issues of DPPA mechanism self-production and self-consumption rooftop solar power. The modernization of transmission grid is also urgent to ensure a stable electricity system. These are among critical factors required to foster a more developed electricity market, alongside gradual removal of cross-subsidies and adoption of two-component pricing model. Hence, we remain neutral on key electricity-related stocks under our coverage (REE, HDG, GEX, POW, PPC), except for NT2, backed by its 2025-2026 solid growth momentum outlook.

On the other hand, oil and gas and coal sectors will continue to play a critical role to compensate for the intermittent nature of renewable energy, thereby supporting the integrated energy value chain.

Leasing Demand Weakens Despite Stable Rents

In 1H25, Vietnam’s industrial land leasing activity declined sharply, with total leased area falling 79% YoY to just 318 hectares. The downturn was primarily driven by concerns surrounding potential U.S. reciprocal tariffs. Despite this, rental rates remained stable in 2Q25, with Southern industrial parks averaging USD 179/m²/term and Northern parks at USD 139/m²/term.

Robust Earnings on Cost Optimization

Listed industrial park developers reported strong financial performance in 1H25, with total revenue reaching VND 36 trillion (+32% YoY) and net profit surging to VND 10.1 trillion (+74.7% YoY). The profit growth was largely attributed to improved cost efficiency, particularly at KBC and VGC, which benefited from reduced capital expenditures in 2Q25.

2H25 Outlook: Recovery Signals Tempered by Risks

•           Tenant Interest Rebounds Amid Tariff Stabilization, but leasing decisions remain cautious. Smaller plot sizes are preferred due to transshipment-related tax risks, including the potential imposition of a 40% export tariff.

•           MOU and New Lease Signings Decline 27% YoY, which may negatively impact revenue and profit recognition in 2026.

Policy Support vs. Rising Development Costs

•           Regulatory Tailwinds: Amendments to the Investment Law and continued tax incentives (e.g., 2-year corporate income tax exemption) are expected to support foreign direct investment (FDI) inflows.

•           Margin Pressure: Rising land compensation costs, driven by updated provincial price tables, are compressing profit margins on new industrial park projects to 30–35%, down from over 50% previously.

•           2H25 Net Profit Forecast: A YoY decline of 12.9% is anticipated.

Banks under our coverage posted aggregate 2Q25 PBT of VND 75 tn (+16.4% YoY), 3% ahead of forecast, driven mainly by CTG (+79% YoY) on sharply lower provisioning. Ex-CTG, sector earnings growth slowed to +9% YoY. 1H25 PBT reached VND 141 tn (+13% YoY), with SOCBs +15% and JSCBs +11%.

2Q25 operational highlights:

• Credit growth remained robust, led by property lending (+15% YTD vs overall +9.9%) and sectors such as wholesale/retail, auto, and stock brokerage. JSCBs outperformed SOCBs
• Deposit growth kept pace with credit; CASA rose to 23.4% and FX deposits +13% YTD. VCB maintained a funding edge via State Treasury and Social Security channels, though smaller banks could face 2H25 deposit pressure.
• Asset quality broadly stabilized (NPL +0.8% QoQ; Group 2 loans −17% QoQ), with notable improvements at ACB, MBB, VPB, while BID, TCB, HDB, MSB weakened. Provision coverage fell to 87.9%, the lowest since 2019, keeping provisioning risks elevated.
• NIM edged up headline-wise, but fell −11 bps QoQ ex-one-offs, pressured by mortgage mix, volume-over-margin growth strategies, and higher CoF at certain JSCBs.

2H25 outlook – Selectivity required

• Earnings divergence to persist: JSCBs +18% YoY vs SOCBs +8% YoY. Additional credit quota adds 1.5–2% system headroom, likely skewed to infrastructure, property, and construction.
• Funding costs may rise on interbank spikes from fiscal cash-flow timing; smaller banks most exposed.
• Provisioning pressure to remain given low coverage ratios and stricter collateral deductibility under Decree 86.
• Writeback upside from the Revised Law on Credit Institutions (codifying Resolution 42) and property recovery remains an earnings wildcard.
• Fee income opportunities from gold/crypto exchanges and digital asset services, though near-term monetization is limited.

Vietnam’s equity market in 2025 stands at a pivotal juncture. Investor expectations are rising—not only for continued macroeconomic stability and sustainable growth, but more importantly, for the long-anticipated structural milestone: an upgrade from frontier to emerging market status. This goal remains a top strategic priority for both the Government and the State Securities Commission (SSC), forming part of broader efforts to elevate Vietnam’s standing in regional and global financial markets.

Despite external challenges—including intensifying geopolitical tensions, tighter global monetary conditions, and escalating trade risks (notably reciprocal tariffs from the United States)—Vietnam’s domestic macroeconomic outlook remains broadly positive. The IMF and OECD forecast global GDP growth at approximately 3.2–3.3% in 2025. In contrast, Vietnam has set an ambitious growth target of 8.3–8.5%, with double-digit expansion projected in subsequent years. This underscores the government’s strong commitment to sustaining recovery momentum and advancing structural reforms.

However, the banking sector’s outstanding credit—estimated at around 140% of GDP—highlights limited room for further monetary policy easing. This reinforces the urgency of accelerating capital market development to diversify funding sources, reduce systemic reliance on bank credit, and promote more inclusive and resilient economic growth.

On the regulatory front, Vietnam has made significant strides. Circular 68/2024/TT-BTC and its amendments now permit foreign institutional investors to trade equities without full prefunding—removing a long-standing barrier to market access. Additionally, the revised Securities Law has officially taken effect, introducing comprehensive updates designed to meet FTSE Russell’s emerging market criteria and align more closely with MSCI’s standards. These reforms lay a critical legal foundation for attracting a larger share of global institutional capital.

Market sentiment started to price in the upgrade expectation. VN-Index broke its historical record and is approaching the 1,600 level in August. Liquidity surged significantly, with matched order value on HOSE exceeding VND 70 tn on several trading days, driven by strong buying interest from both retail and foreign investors. This was not merely a technical breakout, but a strong reaffirmation of investor confidence in the country’s economic prospects and the anticipated upgrade to emerging market status.

Against this backdrop, we maintain a constructive outlook for the securities industry over the medium to long term. Brokerage firms with strong capital bases, advanced technology platforms, agile product development capabilities, robust risk management frameworks, and high-quality human resources are well-positioned to capitalize on emerging opportunities in a rapidly evolving global landscape.

The State Bank of Vietnam (SBV) has officially issued Circular 14/2025 effective from 15 Sept 2025 (Cir. 14), replacing Circular 41/2016, with the primary objective of aligning Vietnam’s banking regulations more closely with Basel III standards. While Cir. 14 enforces stricter capital adequacy requirements, it also introduces notable recalibrations to Risk-Weighted Assets (RWAs) under the Standard Approach (SA), particularly favoring retail and SME lending – thereby unlocking potential for new credit growth avenues across the banking sector.

In parallel, SBV has also released a draft amendment to Circular 13/2018 focused on strengthening risk governance. The draft emphasizes the role of the Board of Directors, reinforces the three-lines-of-defense model, and improves the internal capital adequacy assessment process (ICAAP). Additionally, an amendment to Circular 52/2018 has been proposed, introducing asset quality metrics – such as exposure to the Top 100 borrowers, overdue debt coverage ratio, and ratio of other assets to total assets – into the rating criteria. In addition, we also expect the SBV to issue regulation on the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) with a phased implementation roadmap to ensure smooth adoption across the banking system. We believe these developments suggest a concerted effort to lay the groundwork for eventually phasing out credit growth quotas in the foreseeable futire.

2H25 Outlook: AI and Digital Transformation as Twin Growth Engines

Looking ahead, artificial intelligence and digital transformation are poised to remain central to Vietnam’s technology strategy. According to Gartner, global spending on generative AI (Gen AI) is projected to grow by 76% year-over-year in 2025, following a more than fourfold increase in 2024. NVIDIA has also highlighted the emergence of Agentic AI as the next frontier in AI development.

However, broader global IT spending may remain subdued due to persistent macroeconomic uncertainties. For Vietnam, AI continues to be a strategic catalyst. Qualcomm’s launch of its third global AI R&D center in Vietnam underscores the country’s growing importance in the global AI ecosystem. AI has also been officially designated as a national strategic technology, further reinforced by the formation of the Au Lac AI Alliance.

To support this momentum, hyperscale data center investment will be critical. Viettel is currently leading efforts in this space, positioning itself as a pioneer in infrastructure development. Complementing this, the recent approval of a number of Data, Digital Technology related Laws marks a significant milestone in Vietnam’s digital transformation and technological innovation journey. Under this framework, data is recognized as the core asset of the digital era, with cybersecurity emerging as a top priority. This aligns with the government’s push for the National Data Center project, which is expected to drive robust demand for enterprise data centers.

Challenges Ahead

Despite strong policy support and corporate engagement, the scalability of AI and data center infrastructure faces several structural challenges. These include shortages in skilled human resources, constraints in electricity supply, and the need for more comprehensive AI-related regulatory frameworks.

Investment Highlights

Most favorite stock: FPT – Strong fundamentals and leadership in digital transformation.

Stocks to Watch: CTR (Viettel Construction), CMG (CMC Corporation) – Positioned to benefit from infrastructure and cybersecurity demand.

1H 2025 recap: Global Weakness, Domestic Resilience

Global steel production declined by 1.3% year-over-year (YoY) to 784 million tons in the first five months of 2025 (5M2025), reflecting subdued economic conditions and weak demand from global construction and industrial sectors

Despite global softness, Vietnam’s domestic steel demand remained robust, growing 11% YoY in 5M2025, supported by a recovering real estate sector and strong public investment.

Input material price trends down while steel price remains stable to provide margin expansion for steel producers

Higher protectionism is the theme observed in both international and domestic markets, leading to a higher importance of the domestic steel market compared to export

2H 2025 outlook

Domestic channel can maintain positive growth thanks to property market and public investment

Steel price may take time to recover due to the slow recovery of China

On July 4th, 2025, official anti-dumping (AD) measures for hot-rolled coil (HRC) were announced, with minimal changes from the preliminary findings. In our view, these developments create a favorable environment for domestic steel producers, enhancing both market share and profitability. The sector’s earnings outlook remains positive, largely driven by the strong performance of Hoa Phat Group (HPG), while we maintain a more cautious outlook for galvanized steel producers such as Hoa Sen Group (HSG) and Nam Kim Steel (NKG) given the higher exposure of galvanized steel segment on export markets.

Recommendation

Top pick: HPG

Urea Fertilizer Producers (DPM, DCM)

Urea prices have been on an upward trend since early 2025, supported by elevated natural gas prices in Europe. Combined with favorable input costs—driven by a sharp decline in oil prices in Q2—this environment is expected to support moderate earnings growth for urea producers such as DPM and DCM in 1H25.

Looking ahead, a major regulatory shift will take effect in July 2025, when fertilizer products will be reclassified from “non-taxable” to “5% VAT taxable.” This change enables producers to claim input VAT refunds, including 10% VAT on natural gas and 5% on phosphate rock, effectively lowering net production costs. Estimated annual VAT savings are approximately VND 500 billion for DPM and VND 350 billion for DCM, equivalent to 75% and 24% of their 2024 pretax profits, respectively.

These developments are expected to significantly enhance profitability from 2H25 onward. Forecasts indicate that DPM could achieve a pretax profit of VND 602 billion (+562% YoY), while DCM may reach VND 862 billion (+91% YoY) in 2H25. This earnings momentum is likely to extend into 2026, supported by the full-year impact of VAT rebates, although growth may normalize as the low base effect fades.

Phosphate-Based Fertilizer and Chemicals (DGC)

For DGC, the VAT rebate will have a limited impact on earnings. Nevertheless, the company is expected to deliver steady growth, with net income projected at VND 1.79 trillion (+17% YoY) in 2H25 and VND 4.4 trillion (+25% YoY) in 2026. Key growth drivers include:

Sustained strength in selling prices

Increased utilization of in-house raw materials

Gradual recovery in sales volumes as raw material shortages ease from Q4 2025 onward

Vietnam’s banking sector demonstrated solid resilience in 1H25, delivering robust credit growth of 8.3% year-to-date (~19% YoY as of June 26), despite facing ongoing margin compression and asset quality challenges. Credit expansion was driven primarily by the real estate and mortgage segments, with state-owned commercial banks (SoCBs) regaining momentum. However, net interest margins (NIMs) declined to their lowest levels since 2016–2017, reflecting heightened competition and rising funding costs. Liquidity remained stable, supported by strong State Treasury deposits, though the widening deposit–credit gap merits close attention.

Earnings growth moderated to 9.5% YoY in 1Q25 but is expected to accelerate to 11–13% YoY in 2Q25 for banks under our coverage.

Looking ahead to 2H25 and into 2026, key domestic growth drivers—including a recovering real estate market, infrastructure lending with the acceleration of public investment—are expected to remain central to sector momentum. Structural capital market reforms, such as the rollout of International Financial Centers (IFCs) and regulatory sandboxes for digital assets, are likely to reshape longer-term business models. Simultaneously, the codification of Resolution 42 marks a significant legal breakthrough in non-performing loan (NPL) resolution, unlocking asset recovery potential and improving capital efficiency.

Importantly, the planned removal of the credit quota mechanism from 2026 is expected to alter competitive dynamics and favor banks with stronger capital buffers, particularly as Vietnam continues aligning with Basel III regulatory standards.

We project pre-tax profit (PBT) growth of 14% YoY in 2025 and 16% YoY in 2026, supported by approximately 17% credit growth, gradual NIM stabilization (at around 3.28%), and easing credit costs (declining from 1.04% to 0.95%).

Our investment preference continues to favor banks with structurally low funding costs, which are better positioned to defend margins and gain market share in a competitive environment. Additionally, as legal bottlenecks ease and the primary real estate market stabilizes, banks with significant exposure to the sector are likely to benefit from renewed credit expansion—driven by new project launches—and greater fee income diversification via related subsidiaries.

Finally, we highlight turnaround candidates with credible restructuring efforts, where earnings surprises could be supported by reduced provisioning needs and improved debt recovery.

Accordingly, our top picks for 2H25 and 2026 are CTG, MBB, TCB, STB, and VPB.

1H2025 recap: Condominium market in Hanoi and HCMC Slows Down – Neighboring Areas Heat Up

According to CBRE, the condominium supply in Hanoi recorded 3,920 units (-67%QoO, + 68%YoY); the total unit sold reached 3,950 units (-63%QoQ, +72%YoY). The strong upward trend in condominium prices since late 2023 seems to slow down with the average primary selling price of USD2,920/sqm (+2%QoQ, +28%YoY). In HCMC, the condominium supply remains limited, with only 350 units launched for sale (-90%QoQ, 30%YoY), maintaining the lowest quarterly launch volume since 2008. The demand surpassed supply with 502 units sold (-85%QoQ, -17%YoY). The average primary selling prices were about USD3,000/sqm (+1%QoQ and 24%YoY).

In contrast, neighboring area markets including Bac Giang, Hai Duong, Hai Phong, Ha Nam, Binh Duong, Ba Ria–Vung Tau (pre provincial merger) sees increased activity following news of a proposed merger. The landed property prices have recorded increases ranging from 5% to 30%.

2H2025 outlook: Improving Supply and Demand Support Housing Market Recovery

We expect the supply to improve further thanks to the legal reform, driven by the resolution of previously stalled and the newly approved projects, including for social housing. Recent policies that may ease the housing shortage include Resolution 171, which addresses land use conversion issues for developers and Resolution 201, which introduces pilot mechanisms to accelerate social housing development.

Additionally, the supply in other tier-1 and tier-2 markets such as Hai Phong, Hung Yen, Dong Nai, Long An, and merged areas with HCMC including Binh Duong, Ba Ria–Vung Tau is expected to continue rising from numerous upcoming project launches by major developers, supported by simplified legal procedures and accelerated infrastructure investment following provincial mergers.

The housing demand is expected to improve, supported by (1) relatively low interest rates of around 5.5-7.9% for the first 1-3 years and (2) infrastructure development, which enhances connectivity between Hanoi, HCMC and nearby provinces. Price increase may slow down in the near-term due to higher supply in 2025-2027F.​ 

In the long term, we believe the real estate market still has growth potential as housing demand remains high, supported by (i) favorable demographics, (ii) a low current urbanization rate with expectations to reach 50% by 2030 with 1,000–1,200 urban areas, and (iii) a growing middle class. With higher supply expected in the coming years, we anticipate the absorption rate will return to around 85%, similar to levels seen in 2018–2019, rather than demand continuing to exceed supply as in 2024.