Broadening capex cycle takes hold as external pressure persists

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Monthly Insights

Vietnam is entering a more manufacturing and investment-led phase of growth. Industrial production, FDI, public investment, and business formation all accelerated in 4M 2026, while domestic consumption and services activity held firm. Although the Iran conflict continued to generate volatility across global markets, easing oil prices and domestic policy action helped moderate immediate inflation and supply concerns.

Industrial production rose 9.9% YoY in April, bringing 4M26 IIP growth to 9.2%, while manufacturing expanded 10.0% YoY in April and 9.9% YTD. Growth broadened further into investment and infrastructure-linked sectors, including chemicals (+20.6%), metals (+18.7%), non-metallic minerals (+17.9%), and motor vehicles (+17.0%), pointing to a recovery extending beyond electronics into a wider capex cycle. Domestic demand also strengthened. Retail sales and services revenue rose 12.1% YoY in April and 11.1% YoY YTD. Services activity continued to outperform, led by accommodation and food services (+13.4%) and tourism-related services (+12.1%), reinforcing the broadening of growth beyond manufacturing into consumer-facing sectors.

Investment indicators strengthened materially. Public investment disbursement reached $7.1bn YTD, up 10.4% YoY and equivalent to nearly 20% of the 2026 disbursement plan. Disbursed FDI reached $7.4bn (+9.8% YoY), the highest four-month level in five years, while registered FDI rose 32.0% YoY to $18.2bn. Manufacturing accounted for approximately 69% of newly registered and expanded capital. Business formation also accelerated, with nearly 77,800 newly established enterprises (+50.7% YoY), and total active additions exceeding 119,000 (+32.8% YoY). That this is occurring against a more uncertain external trade backdrop strengthens the read.

On the external front, total trade turnover reached $344.2bn YTD, up 24.2% YoY, with exports rising 19.7% and imports up 28.7%. Import growth was concentrated in machinery, electronics, and intermediate goods, with production-related imports accounting for over 94% of total imports. Electronics and computer component imports alone rose 52.3% YoY to $65.3bn, suggesting firms continue to expand production capacity despite ongoing tariff repricing and energy-driven volatility.

Inflation moved higher in April, the first material evidence that lagged energy pass-through has begun as April CPI rose 5.5% YoY. CPI averaged 4.0% in 4M26, with core inflation at 3.9%. Both remain below the government’s 4.5–5.0% ceiling, but the cushion narrows if oil stays elevated. Policy support has helped soften the impact: Decree 72’s tariff cuts on refined products and fuel-tax reductions have limited domestic pass-through, with both measures up for review at end-June and room to extend if conditions warrant.

Equity markets recovered, with the VNI up 10.7% MoM in USD terms, but the rally was narrow. FTSE Russell confirmed Vietnam’s upgrade to Secondary EM status on 8 April, effective September 2026, with the government targeting MSCI EM inclusion by 2030. Beyond the index move, underlying fundamentals are broader: Dragon Capital’s Top-100 universe reported Q1 NPAT growth of around 56% YoY, the strongest YoY change since the post-Covid period, with 69 of 100 names posting positive growth. The combination of broadening earnings and a narrow price move points to scope for prices to converge with fundamentals once the external picture settles. The H2 path depends on whether the policy buffers are extended, oil stabilises, and earnings momentum broadens beyond the largest contributors.