VN-Index underperforms after Middle East shock, slides to 11th in the region

Year-to-date through 2026, the VN-Index declined 6.2%, slipping from 6th of 13 markets (end-Feb) to 11th of 13, while still outperforming India (-14.5%) and Indonesia (-18.5%). Korea remained the leader with +19.9%, followed by Thailand (+15.0%) and Singapore (+5.1%).

March 2026 performance: broad-based weakness

The VN-Index recorded a 10.9% month-on-month decline in March 2026, ranking 8th out of 13. The decline was less severe than Korea’s stock index (-19.1%), Indonesia (-14.4%), the MSCI Emerging Markets Index (-13.3%), Japan (-13.2%), and India (-11.3%), but worse than the Philippines (-10.0%).

All 13 markets in the watchlist posted negative performance for the month, reflecting a broad impact from an oil-price shock linked to Iran’s blockade of the Hormuz Strait. Northeast Asian markets were hit hardest due to high trade openness and heavy energy imports. By contrast, Malaysia (-1.5%) and Singapore (-2.2%) were less affected, supported by their net energy-export positions.

The U.S. also moved into negative territory (-4.6%), suggesting energy risk and inflation pressures were affecting markets beyond emerging economies.

Volatility and trading dynamics

According to VnDirect, intramonth volatility rose to about 16% (1,580–1,880 points), the highest since the Covid-19 period. The move reflected panicked selling and margin calls in the first half of the month, followed by buying flows that helped the market rebound from the support area.

March 2026 also showed a defensive shift in fund positioning. High-beta, large-cap, and foreign-funded groups—Technology, Real Estate, and Banking—faced the strongest selling pressure. Meanwhile, buy-and-hold flows concentrated on sectors that benefit directly from geopolitical volatility, including Insurance and Chemicals.

Liquidity rose even as the index fell

The market’s average daily trading value in March 2026 reached 33.9 trillion VND per session, up from February’s 31.8 trillion, despite the VN-Index falling 10.9%. This suggests liquidity did not weaken, but was driven by both panicked selling and bargain-hunting.

By exchange, liquidity increased as follows: HoSE rose 5.4%, HNX surged 23.8%, and UPCoM rose 6.7%. HNX stood out for momentum into mid- and small-cap groups, including oil & gas, chemicals, and securities.

Valuation support and policy backdrop

The elevated liquidity alongside a decline in the index points to a “panic selling” state. The first half of the month saw margin calls and selling in large-cap groups, while the second half brought bargain-hunting flows returning, focused on beneficiaries from oil-price movements and defensive stocks.

Valuation levels after the correction became more attractive, supporting expectations of a rebound as geopolitical tensions ease. The narrative also received a boost after FTSE Russell announced an upgrade at the start of April 2026.

Bank deposit rates and earnings yield

The 12-month deposit rate level continued to rise in March 2026, with pronounced increases at state-owned banks and large private banks, indicating broad-based rate hikes across the system. In March, the state-owned group posted the largest increase to 5.9% (+0.7 percentage point), followed by large private banks (+0.5 pp). Mid- and small-sized private banks rose only 0.1 pp.

The average earnings yield (E/P) of the VN-Index in March 2026 rose to 7.3% as the index declined by about 6% on average versus the prior month.

The spread between the VN-Index’s earnings yield and the 12-month deposit rate remained positive in March 2026, though it narrowed from the first three quarters of 2025 as deposit rates rose again.