Vietnam's benchmark VN-Index falls sharply in first week of Middle East conflict

VN-Index, which tracks the performance of Ho Chi Minh Stock Exchange, dropped sharply in the first week of the U.S.-Iran conflict, reflecting growing global market volatility, though analysts say short-term corrections could make valuations more attractive.

The VN-Index lost 113.23 points during the week, sliding from 1,880.33 to 1,767.10. In the final trading session on Friday alone, the index dropped 40.67 points, marking the steepest decline of the week.

While the market was initially supported by gains in oil and gas, energy, mining and chemical stocks earlier in the week, sector performance later diverged. Stocks such as GAS (PV Gas), PLX (Petrolimex), PVC (PCchem), POW (PV Power), BFC (Binh Dien Fertilizer JSC) and MIC (Military Insurance Corporation) closed lower, while others including MSR (Masan High-Tech Materials), PVD (PV Drilling), BSR (Binh Son Refining and Petrochemical JSC), DPM (PVFCCo) and DCM (PVCFC) posted gains.

Declining stocks outnumbered advancers on the Ho Chi Minh Stock Exchange (HoSE), with 237 stocks falling compared with 88 rising. Banking, securities, real estate, insurance and retail stocks were largely in the red.

Transaction value on the HoSE dropped to VND32.3 trillion ($1.23 billion), the lowest level of the week. Foreign investors extended their net selling streak with outflows of nearly VND1.39 trillion ($52.94 million) across the two main exchanges.

Their net buying was recorded in stocks including BSR, DCM, MWG, PVT and VCI, while net selling in stocks like FPT, SSI, VIC, VHM, VPB, VIX and GEX.

Analysts at Viet Dragon Securities (VDSC) said the market has faced a mix of opposing factors since the beginning of the year. Following a ruling by the U.S. Supreme Court and the introduction of a temporary tariff mechanism by the United States, Vietnam has retained a competitive advantage with relatively favorable effective tariff rates.

However, interest rates are likely to remain elevated in the short to medium term, while global geopolitical risks could turn into an economic shock if conflicts escalate and disrupt key energy supply routes.

Such uncertainty has pushed investors to increase the risk discount rate applied to equities, limiting the scope for valuation expansion, VDSC said. Excluding companies in the Vingroup group, the market is currently trading below its baseline valuation for 2026 based on projected earnings growth for the year.

As a result, although external risks remain, analysts believe that if uncertainty remains only a “headwind” rather than developing into a full economic shock, short-term corrections could make market valuations more appealing.

VDSC also noted that persistently high energy prices could undermine U.S. growth stimulus efforts and force the Federal Reserve to maintain or tighten its policy stance to curb inflation.

In the current environment, where the market is pricing in scenarios ranging from baseline to negative, both upside and downside risks remain, analysts said. Investors are therefore advised to diversify portfolios broadly and focus on key investment themes for 2026.

For investors with a higher risk appetite, VDSC suggested tactical allocations to sectors that benefit directly from disruptions in supply chains, shipping rates or oil prices - provided valuations remain attractive and risk budgets are clearly defined.