Dragon Capital: interest rates no longer cheap, but VN-Index has room to rise 17%

At the Investor Day on 07 April 2026, Dragon Capital experts said the market is trading at an attractive valuation after a recent adjustment. With a view to 2030, they described the current period as suitable for gradual accumulation by new investors.

Oil shock and market reaction

Dragon Capital analysts linked the recent volatility to the US–Iran conflict that erupted in late February 2026. They said crude oil prices rose from about 70 USD per barrel to 100–110 USD, a level not seen since 2022. Financial markets, including Vietnam, reacted quickly, while expectations for the Fed to cut rates twice in 2026 “nearly faded.” Foreign capital temporarily pulled back from emerging markets broadly.

Domestic growth outlook and potential downside

Despite external risks, Dragon Capital said the government remains committed to a 10% growth target, citing strong starting conditions. In 2025, GDP reached 8%, trade turnover exceeded 900 billion USD, and both public investment and FDI peaked in five years. The PMI stayed in expansion territory for 8–9 consecutive periods.

In a scenario where warfare dynamics and oil prices persist at current levels, Dragon Capital projected GDP growth could fall about 0.5–1 percentage point below the target. However, it said the long-term growth trajectory remains intact. Even if GDP slows to 8.5–9% amid cooling global growth, Vietnam would still rank among the leading economies in the region.

Inflation, fuel policy and energy supply

Drawing lessons from 2022, Dragon Capital said oil at 100–110 USD per barrel could lift inflation to 4.5–5%, still within government targets. It noted that the fuel price stabilization fund would be activated immediately, additional 2025 budget revenues would be mobilized to replenish the fund, and fuel taxes could be adjusted downward.

On supply, the Nghi Son refinery has secured supply through the end of May 2026. The government is also seeking alternatives from Japan, Korea, and Singapore.

Interest rates and exchange-rate expectations

Dragon Capital said interest rates have risen from the historic lows of 2024–2025, but current levels are comparable to 2022, when Vietnam recorded 8.2% GDP growth. It described the 2026 economic base as stronger, with healthier firms, a budget surplus, and positive business sentiment. The fund said rates are considered appropriate for a two-digit growth environment and are likely to stabilize near term, with room for flexible adjustments depending on external developments.

On the exchange rate, Dragon Capital said the dong is expected to remain relatively stable despite pressure from the Fed’s tightening path and Vietnam’s status as a net energy importer. It cited expected volatility of only 1–3% and said there is no currency crisis scenario.

FTSE Russell inclusion and foreign capital flows

According to the latest announcement, by September 2026 Vietnam will officially join the FTSE Russell Emerging Market index. Dragon Capital described this as a milestone reflecting market maturity and said it will trigger mandatory capital allocation by passive funds tracking the index, supporting more sustainable and predictable foreign capital flows compared with frontier markets.

It also noted that in January–February 2026, many active funds had net bought Vietnam before the conflict caused a short-term disruption.

Valuation and investment guidance toward 2030

Dragon Capital said valuation remains attractive after the correction, with prices lower than before the sell-off while fundamentals remain unchanged. It recommended that investors accumulate gradually toward 2030, prioritizing allocations through funds to manage risk in a volatile environment.

The fund emphasized: “Interest rates are no longer cheap, but that is not a reason to abandon stocks. In assessments from not only Dragon Capital but also many others, when GDP grows 8–10%, the stock market still has substantial room to grow, not only in double digits but potentially 15–17%.”

Policy support and portfolio approach

Dragon Capital pointed to Resolutions 68 on private sector development and 79 on the state economy as creating a solid institutional foundation for the growth cycle ahead.

For cautious investors, it said bonds and deposits can provide a sound base, but an equity allocation should be maintained. In a volatile environment, it added, fund allocations can help assess total risk more effectively than selecting single stocks.