Tariff Impact on Vietnam and VEIL Strategy

Overview

Tariff Impact on Vietnam was a webinar hosted by Dragon Capital one week after the announcement of the US “Liberation Day” tariffs, which set a 46% rate on Vietnamese exports before a 90-day reprieve. The session updated investors on the tariff’s impact on Vietnam’s economy and stock market, the government’s response, and how the VEIL and VEF portfolios had been positioned and adjusted. Dr Le Anh Tuan, Chief Investment Officer, opened with a macro and market update, followed by Le Anh Tuan, Lead Portfolio Manager of VEIL, and Mai Vu, Lead Portfolio Manager of VEF, who each covered fund positioning and strategy. A live Q&A followed the presentations.

Key Discussion Points

• GDP impact analysis: Dragon Capital’s methodology for estimating the tariff’s impact on Vietnam’s GDP, distinguishing direct effects (via exports) from indirect effects (via domestic consumption). The worst-case scenario (46% tariff) was estimated at a 2% GDP hit; the team’s expected range was 15–25%, implying a smaller impact.
• Currency outlook: Assessment of VND resilience, driven largely by strong local sentiment and substantial USD holdings outside the official reserve system.
• GDP growth forecasts: Scenario ranges of 6.5–7% (more aggressive tariff outcome) versus 8–9% (milder outcome with stronger domestic stimulus).
• Corporate earnings revisions: Market-wide listed-company earnings growth forecast revised down from 15–17% to 9.8%, with sector-level detail (e.g., property revised up, retail and energy revised down).
• Valuation context: Current market valuations compared to the 2020 (COVID) and 2022 (domestic banking crisis) troughs.
• Government policy response: Overview of prospective fiscal and monetary stimulus measures and efforts to diversify export markets.
• VEIL portfolio positioning: Domestic-focused allocation with minimal direct US export exposure, cash raised pre-announcement, sector exposure (banking, retail, technology/FPT, infrastructure, property), and reasoning behind reduced industrial park exposure.
• VEF portfolio positioning: Cash raised to 17%, limited direct export exposure (Gemadept, Kinh Bac City), EPS growth revised from ~19–20% to ~13%, and a focus on opportunistic buying in banking and real estate following sector pullbacks.
• Live Q&A: Topics included potential VND appreciation pressure from US negotiations, anti-dumping duties on Chinese transshipment, GDP sensitivity under a 20–25% tariff scenario, Vietnam’s relative position versus other tariffed countries, FX reserve levels, delegation talks with US officials, fund access vehicles, Vietnam’s “Đổi Mới 2.0” reform agenda, triggers for redeploying cash, Vietnam-vs-India valuation comparisons (using FPT as an example), the role of exports versus the private sector and FDI in driving GDP, and the outlook for FDI inflows.
• Closing note: Investors were invited to the Vietnam Access Conference, 16–18 September, in Ho Chi Minh City.

Subsequent performance is reported in VEIL’s monthly reports.

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