Dragon Capital funds lock in profits on two stock groups, poised to deploy capital as markets remain volatile

Against the backdrop of complex global geopolitics, particularly the U.S.–Iran conflict, Vietnam’s stock market has seen pronounced corrections. Even large institutional investors reported losses in the first quarter of 2026. Dragon Capital’s DCDS fund, for instance, recorded a 6.6% decline in Q1 2026, slightly worse than the 6.2% drop of the overall market index.

Cause: pressure on prior “hot” growth stocks

Explaining the fund’s performance, Vo Nguyen Khoa Tuan, Senior Portfolio Manager in Dragon Capital’s securities division, said that the stocks which had previously surged and were key contributors to DCDS’s strong 2025 results were also the ones facing the deepest pressure during the correction. Many holdings had risen 100% to 200% earlier and then experienced significant declines, which weighed on portfolio performance in the short term.

Development: profit-taking and portfolio rebalancing

DCDS said it actively took profits and reduced exposure to some higher-risk, higher-beta stocks. The portfolio has since been rebalanced toward a more balanced positioning, which the fund says should help create a foundation for a rebound once the market stabilizes.

The fund also implemented a rotation strategy aimed at defensive positioning and flexible adaptation. It reduced weight in interest-rate-sensitive sectors such as real estate and equities, while increasing allocation to sectors viewed as more resilient to macro volatility, including banks, retail, and technology. The portfolio is oriented toward companies with solid financial fundamentals and high asset quality to support growth continuity in a tighter monetary environment.

Cash management: raising liquidity during higher-risk periods

In parallel, DCDS adjusts cash weighting based on market risk. During higher-risk periods, the fund can raise cash to 20–30%. The fund described this as an active capital-accumulation approach, intended to be deployed when sell-offs discount the prices of many quality companies below intrinsic value.

Data and outlook for 2026

Despite negative returns in Q1 2026, DCDS said it remains focused on improving performance for the remainder of 2026. The fund’s expert indicated that the main growth driver is expected to come from an earnings recovery among listed companies, with a consensus forecast of 18–19%. DCDS also identified potential groups that could grow by more than 40% and are less exposed to external geopolitical factors.

Looking at broader market conditions, the fund cited expectations for Vietnam’s stock market expansion, including a capitalization target around 120% of GDP, alongside development of trading infrastructure and new financial products. It also pointed to a wave of large-scale IPOs estimated at $50 billion and a market upgrade roadmap as potential catalysts for foreign capital to return more strongly in the second half of the year.

Impact and target return

On that basis, DCDS assessed a target return of around 10% or higher than the savings rate in 2026 as feasible.

Longer-term performance emphasis

Looking further ahead, the fund reiterated the importance of disciplined investing. It said that over 3–5 years, DCDS still maintains average growth of over 22% per year, significantly higher than the market index, despite short-term fluctuations.