5 August 2025

Vietnam Enterprise Investments Limited

("VEIL" or the "Company")

Quarterly Insights

VEIL is a London-listed investment company investing primarily in listed equities in Vietnam and is a FTSE 250 constituent.

A Real-Time Update on Vietnam's Accelerating Reforms

Tuan Le, Lead Portfolio Manager

At the beginning of 2025, I described Vietnam's bold reform programme as setting the stage for sustainable growth and positioning the country as a high-value investment destination. Six months later, it is time to see whether the vision is matching reality and what this means for the economy, capital markets, and our portfolio at VEIL.

To quickly recap, the reforms set out to streamline governance, invigorate the private sector, ignite domestic demand through significant public investment, enhance capital markets, and accelerate technological innovation. Essentially, Vietnam set out to surgically remove legacy bureaucratic bottlenecks and unleash private enterprise, creating an economy structurally resilient to global volatility.

These reforms are already leaving an imprint. Vietnam's GDP growth in the first half of 2025 reached 7.5%, the highest in over a decade, supported by strong domestic demand, surging government spending, and exports up 14.4%. The FDI story continues to defy the sceptics, with registered investments hitting US$21.5bn, the highest since 2009, and actual disbursements of US$11.7bn, up 8.1% year-on-year. Clearly, investors have not lost their appetite for Vietnam despite external trade uncertainties.

The reshaping of government ministries from 19 to 14 and provincial mergers from 63 to 34 is now complete. Early indicators suggest these changes are significantly accelerating decision-making on infrastructure approvals and investments. Admittedly, some local-level teething problems persist as provinces adapt to the new structure, but we anticipate that ongoing government fine tuning will iron these out. Once fully integrated, we expect these structural shifts will significantly lift productivity.

Public investment is humming along at full throttle, with about US$36bn earmarked for this year alone, up from US$26bn in 2024. Key projects like the North-South high-speed railway and major highway expansions are not just on track but running ahead of historical project timelines. This infrastructure push, vital for lowering Vietnam's high logistics costs of around 18% of GDP, is creating a tangible tailwind for construction, real estate, and industrial materials sectors. VEIL has strategically increased exposure to infrastructure-linked stocks to catch this momentum.

Vietnam's capital market reforms are beginning to show meaningful results. The abolition of cumbersome pre-funding requirements for foreign investors and the successful rollout of the Korean-backed KRX trading system have significantly improved market access and efficiency. Investor sentiment has responded in kind, with the Vietnam Index reaching an all-time high on 28 July, fittingly coinciding with the 25^th anniversary of the Ho Chi Minh Stock Exchange.

Liquidity has surged, with daily trading volumes now regularly exceeding US$1.5bn, and July's turnover rising nearly 90% year-on-year. Confidence around Vietnam's anticipated upgrade to FTSE Emerging Market status is steadily translating into real capital inflows. These developments reinforce our strategy of concentrating the portfolio in market-leading enterprises best positioned to benefit from an increasingly investable and dynamic capital market.

On the technology front, Vietnam's ambitions are becoming reality, powered by significant legislative incentives from Decree 182. Global giants like Nvidia and Samsung are now fully embedded, driving Vietnam's tech ecosystem forward, while homegrown champion FPT rapidly scales its AI capabilities. This positions Vietnam firmly in global high-value technology supply chains and supports our conviction in tech investments.

However, despite these positive developments, downside risks remain. Foremost is the uncertainty around the definition of transshipment. Should restrictive interpretations materialise, the impact could exceed current market expectations, weighing on manufacturing, exports, and overall GDP growth. Weaker-than-expected global growth, especially in key markets like the US, China, and the EU, may further pressure trade volumes and foreign direct investment inflows.

Domestically, the greatest challenge is sustaining the current pace of reform. While progress has been encouraging, the real test lies in execution, particularly in integrating restructured administrative bodies, delivering infrastructure, and advancing capital market depth. Any delays or inefficiencies could slow public investment, limit productivity gains, and defer broader economic benefits. Maintaining momentum in legislative reforms also depends on ongoing political alignment, with policy slippage or uncertainty posing risks to investor confidence.

On monetary policy, foreign exchange pressures persist, and surging credit demand has occasionally tightened liquidity within the banking system. This has led to a modest rise in interbank rates and increased the need for the State Bank of Vietnam to provide liquidity support through open market operations. While the likelihood of the central bank adopting tighter policy measures remains low, unexpected global market volatility or financial shocks could challenge market liquidity and dampen investor sentiment, particularly with the Vietnam Index near record highs.

Despite the Vietnam Index's strong performance, VEIL's NAV rose 0.9% in H1 2025, lagging the broader market. This relative underperformance was primarily due to US$1.6bn of foreign investor outflows, which disproportionately impacted large-cap, fundamentally strong stocks central to VEIL's strategy. The Index's advance was also largely concentrated in a handful of property and conglomerate names, particularly the Vingroup trio (VIC, VHM, VRE), which VEIL is underweight due to limited clarity on funding and execution risks.

Nevertheless, the portfolio continues to reflect Vietnam's reform-driven growth trajectory: banks, riding the wave of accelerating credit growth; infrastructure sectors benefiting from both public and private sector momentum; and consumer retail and digital technology sectors, well placed as domestic affluence and digitalisation gather pace. We remain confident that these exposures position the fund to benefit from the structural tailwinds now taking shape.

Overall, we remain bullish yet clear-eyed about the path ahead. Vietnam's reform journey is far from complete, but the foundations laid so far reassure us that the country is rapidly turning its ambitious vision into lasting economic prosperity.

Top Ten Holdings (54.0% of NAV)

Source: Bloomberg, Dragon Capital

NB: All returns are given in total return USD terms as of 30 June 2025

For further information, please contact:

Vietnam Enterprise Investments Limited

Steven Mantle

+44 75537 01237

[email protected]

Jefferies International Limited

Stuart Klein                                                                                                                       

+44 207 029 8703

[email protected] 

Montfort

Gay Collins

+44 (0)7798 626282

+44 (0)20 3770 7905

[email protected]

h2Radnor

Iain Daly

+44 20 3897 1830

[email protected]

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