“At the moment of truth, there are either reasons or results.”

– Charles E. Yeager - a United States Air Force officer and test pilot who was the first pilot to exceed the speed of sound

It was an excellent year for AFC, with three out of four AFC Funds reporting double-digit gains in 2025. The AFC Uzbekistan Fund led performance for the year with a gain of +20.3%, and we believe that these returns could mark a turning point for the AFC Uzbekistan Fund as the country’s capital market appears to be at an inflection point now (read more in the AFC Uzbekistan Fund Manager Comment below).

The AFC Asia Frontier Fund reported a third straight year of very robust double-digit gains, and over the past three years the fund has achieved an excellent 23.3% annualised return. Even though the fund has seen very consistent returns in the last three years, we believe this is the start of a multi-year trend in our markets. You can read more in our annual piece “AFC Asia Frontier Fund – 2025 Review and Outlook for 2026” which discusses why we remain positive on Asian frontier markets as well as our key conviction calls for 2026.

Read here: "AFC Asia Frontier Fund – 2025 Review and Outlook for 2026"

The AFC Iraq Fund continues to leverage the economic transformation taking place in Iraq, and over the last three years, the fund returned a phenomenal +253.0%, outperforming all global benchmarks. The consistent and robust performance by AFC Funds continues to signify the diversification benefits that Asian frontier markets offer to sophisticated investors.

AFC Quarterly Webinar on Thursday, 22^nd January 2026

AFC Funds delivered robust returns in 2025, led by the AFC Uzbekistan Fund, AFC Asia Frontier Fund, and AFC Iraq Fund. Asian frontier markets are entering 2026 with strong tailwinds behind them in the form of solid economic and earnings growth backed by very attractive valuations.

Please join us for our quarterly update on Asian frontier markets where we will discuss these significant developments, such as the performance and outlook for our AFC Asia Frontier Fund, AFC Iraq Fund, AFC Uzbekistan Fund, and AFC Vietnam Fund.

The speakers on the webinar will be:

• Thomas Hugger, CEO & Fund Manager
• Ruchir Desai, Co-Fund Manager of the AFC Asia Frontier Fund
• Ahmed Tabaqchali, Chief Strategist of the AFC Iraq Fund
• Scott Osheroff, CIO of the AFC Uzbekistan Fund
• Vicente Nguyen, CIO of the AFC Vietnam Fund

The webinar will highlight the following key points:

• Drivers of performance for the AFC Asia Frontier Fund in 2025
• AFC Asia Frontier Fund Outlook for 2026
• Key country picks for the AFC Asia Frontier Fund for 2026
• 2026 Outlook for the AFC Iraq Fund, AFC Uzbekistan Fund, AFC Vietnam Fund
• Key Concerns and Risks

The webinar will be held on Thursday, 22^nd January 2026 at 8:00 am NY, 1:00 pm UK, 2:00 pm Swiss and 9:00 pm HK/SG time and will be recorded for viewing at your convenience.

The webinar will run for 75 minutes, including a 30-minute Q&A session following the fund managers' presentations.

If you are unable to attend, please register nonetheless, and we will send you the link to the recording a day after the webinar.

Additionally, we will add the recorded webinar to our YouTube channel, where you can also find the previous webinars and other interesting AFC-videos. Subscribe to it NOW with the link below:

January 2026 Subscription Cut-Off Date

The next cut-off date for subscriptions for our funds will be 26^th January 2026. If you would like to know more about the subscription process, please get in touch with us at This email address is being protected from spambots. You need JavaScript enabled to view it.

Please find below the managers’ comments on each of our four funds for December 2025.

AFC in the Press

AFC Travel

Thomas Hugger, Ruchir Desai, and Peter de Vries are based in Hong Kong, while Andreas Vogelsanger is based in Bangkok, Vicente Nguyen in Ho Chi Minh City, Scott Osheroff in Tashkent, and Ahmed Tabaqchali in London and Iraq. If you have an interest in meeting with our team at their homeports or during their travels, please contact Peter de Vries at This email address is being protected from spambots. You need JavaScript enabled to view it.

AFC Uzbekistan Fund - Manager Comment

The AFC Uzbekistan Fund Class F shares returned +7.4% in December 2025 with a NAV of USD 1,511.60, bringing the year-to-date return to +20.3% and the return since inception (29^th March 2019) to +51.2%.

Capital Markets

December saw the much-anticipated capital markets legislation to properly modernise Uzbekistan’s capital markets passed by the government, just in time for the New Year!

On 18^th December 2025, President Mirziyoyev signed a decree on “Additional measures to improve the investment climate in the capital markets” with a focus out to 2030. This includes attracting at least USD 1 billion in investment to the domestic capital market (equity and corporate bond issuances), legislation on the permission of dual listings of Uzbek public companies, and fungibility. The latter point has been a key condition for many foreign investors to begin participating in the upcoming privatisations of state-owned enterprises (SOEs).

This decree sets in motion the potential for a significant increase in local and foreign investor participation, and we expect to see a sharp rise in brokerage account openings over the coming months as this news is digested and SOE IPO timelines get clearer focus. Participation is already starting to increase through the corporate bond market. Local companies, specifically microfinance institutions and technology companies, are leading the charge with several new corporate bond issuances per month. The yields are higher than the ~20% that is achievable in a bank term deposit in local currency, making them very attractive. The increasing retail participation in corporate bonds is already trickling over into the equity market, which bottomed during the spring months and is on a much more sustainable trajectory than the “animal spirits”-fuelled market of 2021 and 2022. When companies such as the Uzbekistan National Investment Fund (“UzNIF”) and Uzbekistan Airways eventually IPO, they are likely to be issuances that this growing local investor pool will aggressively diversify into.

The decree also stated that the capital markets sandbox, which was initially a temporary solution to the problem of insufficient modern legislation around the existing capital markets law, will now become permanent (who needs perpetually “new” legislation when the existing sandbox, which works, can just be made permanent?)! This is important, for the last thing investors want is for the rules of the game to be changed on them. The sandbox’s permanence, in addition to its growing list of participants - Austria’s Raiffeisen Bank became its sixth approved participant in December - is a huge boost of confidence ahead of the planned IPOs, as all the pieces of the puzzle for Uzbekistan’s capital markets to enter a trend of sustainable development are in place.

A further focus of the President’s decree is the proposed inclusion in the capital markets sandbox of enabling Uzbek citizens to invest in equities listed abroad, specifically in American and East-Asian stock markets. With few investment options outside of bank term deposits and real estate in Uzbekistan, the permission of trading in foreign securities (which would likely take place through the Tashkent Stock Exchange via depository receipts) should see a surge in new brokerage account openings. This is another catalyst to dramatically increase brokerage account openings and therefore investor participation.

By all looks and measures, 2026 should give further validation that we are at the inflection point for Uzbekistan’s capital markets, now wanting to see catalysts that will drive further upside, something which we have written about ad-nauseum over the years. This should translate into a substantial increase in liquidity and the long-overdue kickstart of the country’s IPO market. We look forward to sharing these developments as 2026 commences, with the next significant milestone being clarity on the IPO of the Uzbekistan National Investment Fund (UzNIF) planned for the first half of 2026.

At the end of December 2025, the fund was invested in 23 names and held 10.9% in cash. The portfolio was allocated to Uzbekistan (89.0%) and Kyrgyzstan (0.1%). The sectors with the largest allocation of assets were financials (60.7%) and materials (13.6%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 4.17x, the estimated weighted harmonic average P/B ratio was 0.70x, and the estimated weighted average portfolio dividend yield was 2.70%.

AFC Asia Frontier Fund - Manager Comment

The AFC Asia Frontier Fund (AAFF) USD A-shares returned +3.0% in December 2025 with a NAV of USD 2,289.05. The MSCI Frontier Markets Asia Net Total Return USD Index gained +5.9%, while the MSCI Frontier Markets Net Total Return USD Index went up by +4.8%, and the MSCI World Net Total Return USD Index increased +0.8%. Year to date, the fund has delivered a +19.7% return. The performance of the AFC Asia Frontier Fund USD A-shares since inception on 30^th March 2012 now stands at +128.9% while the MSCI Frontier Markets Asia Net Total Return USD Index returned +24.5% during the same period. The fund’s annualised performance since inception is +6.2%. The broad diversification of the fund’s portfolio has resulted in low risk with an annualised volatility of 10.3% and a correlation of the fund versus the MSCI World Net Total Return USD Index of 0.49, all based on monthly observations since inception.

It was another very robust year for the AFC Asia Frontier Fund, making it three years in a row of substantial double-digit percentage gains. Over the past three years, the AFC Asia Frontier Fund has returned an excellent annualised return of 23.3%. For more on what drove performance in 2025, please read our piece "AFC Asia Frontier Fund – 2025 Review and Outlook for 2026", which also provides the outlook for our key markets and key calls. In December, gains were broad-based and led by Uzbekistan, Kazakhstan, Pakistan, Papua New Guinea, and Mongolia.

Inflation in Pakistan remained relatively low in 2025 despite the impact of the floods in the summer of 2025. This has now allowed the State Bank of Pakistan to further ease monetary policy with a benchmark interest rate cut of 50 basis points in December 2025. This environment of lower interest rates is one of the reasons we remain positive on Pakistan, as economic activities are now beginning to be supported by these lower interest rates, and we expect the economic momentum to translate into robust earnings growth in 2026.

State Bank of Pakistan Reduced Interest Rate by 50 Basis Points as Inflation is Under Control

GDP growth in Sri Lanka keeps coming in ahead of expectations as the economy grew by 5.4% YoY in 3Q25. We are not surprised by this as we witnessed strong business and consumer sentiment during our on-the-ground visits to Sri Lanka in 2025.

The recent floods in December 2025 will surely have an impact on GDP growth, but we expect this impact to be short-lived as the government has the fiscal room to undertake a major reconstruction effort in the areas of the country impacted by the floods.

Furthermore, tourist arrivals were not impacted by the recent climate events with Sri Lanka welcoming more than 250,000 tourists in December 2025, which took annual tourist arrivals to an all-time high of 2.4 million. These numbers signify the tourism boom underway in Sri Lanka.

With tourism doing well, consumer and business spending picking up, and the government having a larger fiscal outlay for reconstruction activities, we would not be surprised if 2026 GDP growth in Sri Lanka remains in the 5% range.

Sri Lanka Tourist Arrivals Reached an All-Time High in 2025 (in mn)

The best-performing indexes in the AAFF universe in December were Mongolia (+5.7%) and Vietnam (+5.5%). The poorest-performing markets were Bangladesh (-2.3%) and Sri Lanka (-0.4%). The top-performing portfolio stocks this month were a retail store operator in Papua New Guinea (+44.4%), a nickel explorer in Vietnam (+27.9%), a Cambodian gold producer (+18.8%), a Kazakh bank (+18.6%), and a gold explorer in Papua New Guinea (+18.0%).

In December, the fund exited a convenience store operator in Mongolia and added to existing positions in Mongolia and Sri Lanka.

At the end of December 2025, the portfolio was invested in 58 companies, 2 funds, and held 5.2% in cash. The two biggest stock positions were a bank in Uzbekistan (4.6%) and a cement producer in Pakistan (4.5%). The countries with the largest asset allocation were Pakistan (17.7%), Sri Lanka (13.6%), and Uzbekistan (10.5%). The sectors with the largest allocation of assets were financials (37.0%) and consumer goods (17.8%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 7.06x, the estimated weighted harmonic average P/B ratio was 1.38x, and the estimated weighted average portfolio dividend yield was 3.51%. The fund’s portfolio carbon footprint is 0.16 tons per USD 1 mn invested.

AFC Iraq Fund - Manager Comment

The AFC Iraq Fund Class D shares returned +0.5% in December 2025 with a NAV of USD 2,400.25, underperforming its benchmark, the Rabee Securities RSISX USD Index (RSISUSD index), which gained 2.2% during the month. The fund gained 43.5% in 2024 on the back of a stellar performance in 2023 of +110.4%. The fund is up by 16.9% for the year versus the index, which went up by 13.7%. Since inception, the fund has gained 140.0% while the RSISUSD index is up by 70.4%, an outperformance of 69.6%. The annualised return since inception of the fund stands at +8.7% p.a.

The year’s solid performance brings the AFC Iraq Fund’s three-year return to an increase of 253.0% versus an increase of 224.5% for its benchmark, with the performance driven by the dynamics that are fuelling a secular transformation of Iraq’s economy following decades of conflict. Foremost among them are the cumulative positive effects of the relative stability that the country has enjoyed over the past few years, which created a stable and predictable macroeconomic framework for businesses and individuals to operate in and plan for capital investments. The second is the significant structural fundamental development accelerating the adoption of banking away from cash and informality, bringing about a transformation of the sector and its role in the economy.

In 2023-24, the economy’s secular transformation was boosted by the cyclical positives of strong oil prices that allowed the government to pursue expansionary budgets that expanded non-oil GDP by 13.8% in 2023 and a further estimated 2.5% in 2024. However, in 2025 these cyclical positives began to reverse into cyclical negatives, with non-oil GDP projected to increase by 1.0% as oil prices weakened considerably versus those of 2023-24 – Brent crude averaged 15.1% lower in 2025 than that for 2023-24. Despite the conventional wisdom that sees Iraq primarily through the oil lens, the RSISX USD Index continued to make new all-time highs as oil prices were hitting five-year lows. At the end of 2025, Brent crude was down 15.3% for the year, while the AFC Iraq Fund was up 16.9%, and the RSISX USD Index up 13.7%. This emphasises that the Iraq investment thesis is more than simply oil, in that the cyclical negatives of weaker oil prices would dampen, but not derail, the secular transformation of the economy – a point made a few months ago in “Market at an All-time High, Oil Prices Crashing, What Gives?”

The reversal of the tailwinds of 2023-24 into headwinds in 2025 were part of the fundamental backdrop to the technical assertion made here throughout the year that “the market’s technical picture continues to remain positive and that the consolidation phase would continue with the likely consolidation or pullback should be within its multi-month uptrend”. Promisingly, this turned out to be more like an upside correction, reflecting the market’s technical health and the potential for a resumption of the prior powerful uptrend (chart below).

Rabee Securities U.S. Dollar Equity Index and Daily Turnover

Outlook for 2026

The headwinds of weaker oil prices should continue to dampen but not derail the dynamics fuelling the economy’s secular transformation, which would continue to unfold in 2026 as much as they did in 2023-25 and, in the same way, drive the market’s performance. Supporting this assertion is the expected rebound in non-oil GDP growth, which is projected to grow by 1.5% in 2026, and a further 2.5% in 2027.

Two key factors will come into focus throughout the year and beyond. The first is the growth trajectory of the top banks in the country, whose fortunes brightened considerably following the introduction of the Central Bank of Iraq (CBI)’s updated regulations on foreign transfers in November 2022. These, then, fast-tracked the economy’s adoption of banking and the move to formality that disproportionally benefited these banks, who subsequently experienced exceptional quarter-on-quarter and year-over-year growth for the first two years. While this heady growth, as expected, moderated meaningfully over the last few quarters, the follow-up raft of measures introduced by the CBI in 2025 will further positively impact their fortunes. The most significant of which is the multi-year comprehensive banking sector overhaul, taking effect in late 2025, which aims to modernise the sector, align it with international best practices, and attract direct international institutional investments into the sector. The effect of these measures will unfold over a number of years, nevertheless, they will have an equally profound effect on the banking sector as those of the November 2022 regulations, and just like them, will disproportionally benefit the top quality banks.

Consequently, a “new normal” for the banking sector will begin to take shape in 2026, in which the future growth trajectories of the top banks will be from a higher base and from a significantly improved financial position. This new normal will be marked by an accelerated adoption of banking and of formality, coupled with an acceleration of the move away from the dominance of cash and informality. These are developments that the AFC Iraq Fund’s investment thesis for the banking sector contends would come with growth in credit, resulting in an expansion of the money circulating in the economy and consequently to a meaningful increase in non-oil GDP. Over time, this should support the growth in top banks’ earnings, and ultimately feed into higher stock market valuations –driven by earnings growth and by the increases in market multiples placed upon these earnings.

The second key factor will be the effect of lower oil prices on government spending, and subsequently on the non-oil economy, given the central role of government expenditures. Current market expectations are that Brent crude price for 2026-27 will average 12.4% lower than that for 2025, or 25.7% lower than that of 2023-24. Thus, all things being equal, the upcoming government will not have the wherewithal to meet its planned expenditures without the need for substantial debt issuance to augment its declining oil revenues. Over the next few years, the much-increased need for sovereign debt will play a big role in developing the country’s bond market, subsequently contributing to the equity market’s development. Ultimately, this will bring with it “bond market discipline” that has the potential to positively influence the structural imbalances between current and investment spending that were perpetuated in every budget over the last two decades.

With the end of 2025, the over-arching theme remains the same as that highlighted at the end of the prior year,  i.e., that both of the two key dynamics discussed – the cumulative positive effects of the relative stability and structural banking developments – are in the early stages of their transformation of the Iraqi economy, a process that would unfold over the next few years, bringing with it high economic growth that would feed into higher corporate profits, and ultimately higher stock market returns. We believe that the fund’s holdings stand to capture these returns in the next few years in the same way that they did in 2023-25.

However, risks remain given Iraq’s recent history of conflict, extreme leverage to volatile oil prices, as well as the real risk that a sustained crash in oil prices of two years or more will derail the economy’s secular transformation. However, there is no indication that such a sustained crash is on the horizon.

At the end of December 2025, the AFC Iraq Fund was invested in 8 names and had a cash level of 1.7%. The fund invests in both local and foreign-listed companies that have the majority of their business activities in Iraq. The markets with the largest asset allocation were Iraq (96.6%), Norway (1.6%), and the U.K. (0.1%).

The sectors with the largest allocation of assets were financials (68.3%) and communications (18.8%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 7.08x, the estimated weighted harmonic average P/B ratio was 1.99x, and the estimated weighted average portfolio dividend yield was 6.93%. The fund’s portfolio carbon footprint is 0.06 tons per USD 1 mn invested.

AFC Vietnam Fund - Manager Comment

The AFC Vietnam Fund returned −1.1% in December with a NAV of USD 3,550.51, bringing the 2025 return to +2.4% and the return since inception to +255.05%. This month, the fund underperformed the benchmark, the Ho Chi Minh City VN Index, which gained 5.8% in USD terms. The fund’s annualised return since inception stands at +11.1% p.a. The broad diversification of the fund’s portfolio resulted in an annualised volatility of 14.67%, a Sharpe ratio of 0.62, and a low correlation of the fund versus the MSCI World Index USD of 0.49, all based on monthly observations since inception.

In December, the VN-Index remained volatile, with Vingroup shares (VIC) again driving performance and contributing over 3% to the index’s gain. Overall, 2025 was a very challenging year for most active equity funds in Vietnam. Only ETFs matched the index’s performance, mainly due to their heavy exposure to Vingroup-related stocks (VIC, VHM, VRE, and VPL).

Vietnam Stock Market Summary 2025

2025 marked a defining turning point for Vietnam’s economy and equity market, transforming what initially appeared to be a significant external shock into a powerful growth catalyst. Following President Trump’s “Liberation Day” tariff announcement in April, initially threatening tariffs of up to 46% on Vietnamese goods, markets sold off sharply. However, Vietnam’s swift and skilful diplomacy reversed the narrative. Intensive negotiations led by Prime Minister Pham Minh Chinh resulted in landmark trade breakthroughs: an October framework agreement reducing tariffs to 0% on select exports, while tariffs on most other Vietnamese products were set at around 20%, broadly in line with regional peers such as Indonesia, the Philippines, Thailand, and Malaysia.

Crucially, Vietnam emerged as one of the biggest relative winners of the global tariff regime. While China and India faced tariffs of up to 50% and Indonesia suffered export bans, Vietnam retained a clear cost advantage of roughly 6%. This edge was further amplified by a controlled 4% depreciation of the Vietnamese Dong, boosting exporters’ profits by an estimated 15–20%. What markets feared as a crisis proved instead to be a structural tailwind.

The economic and corporate results were exceptional. Exports to the U.S. surged approximately 27% year-on-year to around USD 140 bn, driven by electronics (+62.8%) and machinery (+26.1%). Total exports reached roughly USD 440 bn (+16% YoY), pushing GDP growth to about 8%, the highest in more than a decade and the strongest in ASEAN. Corporate earnings rose by more than 20%, led by export champions such as MPC (profits tripled), TNG (record revenues), and PTB (double-digit growth), underscoring Vietnam’s competitiveness in global supply chains.

The VN-Index climbed to new all-time highs above 1,800 points, supported by record FDI inflows exceeding USD 21 bn, an unprecedented USD 48 bn infrastructure program across 250 projects, and an accommodative monetary stance that injected more than USD 60 bn into the economy. A major structural catalyst arrived in October when FTSE Russell officially upgraded Vietnam to Secondary Emerging Market status (effective September 2026), paving the way for USD 3.5–5.0 bn in passive inflows from global ETFs.

Despite a sharp tariff-driven correction in April, the market rebounded decisively, breaking above 1,500 points and peaking at 1,805.9 in December before a healthy consolidation set in. While index gains were concentrated in mega-caps, many high-quality export and domestic growth stocks remain attractively valued, setting the stage for the next leg of the cycle. Against this backdrop, the AFC Vietnam Fund remained resilient, rising approximately 2.4% year-to-date.

Looking ahead, Vietnam’s investment case is stronger than ever. With Resolution 68 firmly positioning the private sector as the economy’s growth engine, a 10% GDP growth target for 2026, transformative infrastructure projects such as the USD 67 bn North–South High-Speed Railway, and the upcoming FTSE passive inflow wave, Vietnam stands out as one of the most compelling long-term growth opportunities in global emerging markets. For investors seeking structural growth, improving market depth, and accelerating earnings momentum, Vietnam is no longer just resilient; it is entering a powerful new upcycle.

2025 Indices Comparison – VN-Index / VN Mid Cap Index / VN Small Cap Index

Market decliners continued to outnumber gainers, keeping market breadth negative for most of 2025; however, the broader uptrend remains firmly intact.

Advance / Decline Ratio

The VN-Index gained only around 14% in 2025, excluding the Vingroup stocks (VIC, VPL, VRE, and VHM), according to SSI, Vietnam’s largest brokerage. VIC has become the single largest constituent of the VN-Index, with a weighting of approximately 16%, and its market capitalisation now exceeds that of the four largest banks combined (VCB, BID, CTG, and TCB). Its valuation has reached an extraordinary level, trading at more than 130x earnings, far above the benchmark’s average P/E of 18x. Excluding Vingroup stocks, the VN-Index valuation appears far more reasonable at around 14 times earnings.

VINGROUP Corporation (VIC) – Valuation

Vietnamese Stock Market Outlook for 2026

Vietnam’s stock market is well-positioned for substantial upside in 2026. Vietcap Research forecasts the VN-Index to reach 2,033 points, implying a 14% gain in 2026 and a new all-time high. This outlook is supported by robust earnings momentum, with EPS expected to grow 19% year-on-year, following another strong earnings year in 2025. At a forward P/E of around 14x, the market remains attractively valued versus historical levels, leaving ample room for multiple expansion as economic growth accelerates.

By comparison, the average P/E of AFC Vietnam Fund’s top 10 holdings is approximately 7.5x, highlighting a significant valuation discount and underscoring the portfolio's continued undervaluation relative to both the broader market and Vietnam’s long-term growth potential.

P/E Comparison: Valuation Disconnect

Despite strong earnings momentum and a supportive macroeconomic backdrop, the AFC Vietnam Fund’s core holdings trade at a 50–60% discount to the broader VN-Index and at an extreme valuation gap relative to VIC, which now dominates index performance. This highlights a rare opportunity to gain exposure to Vietnam’s growth at deeply undervalued multiples, positioning the portfolio for meaningful upside as market breadth normalizes and earnings-driven re-rating resumes.

A key catalyst in 2026 will be Vietnam’s upgrade to FTSE Russell Secondary Emerging Market status, effective 21st September 2026. This long-awaited reclassification is expected to unlock USD 3.5–5 bn of passive inflows from global ETFs, supporting higher market liquidity and driving valuation uplift across the market. The upgrade reflects years of structural improvements, including the successful launch of the KRX trading system, enhanced foreign-investor access, and ongoing modernization of market infrastructure.

Macroeconomic fundamentals remain highly supportive, with GDP growth forecast at over 8%, exports expected to rise 12%, FDI growth projected at 7%, and inflation well controlled at around 3.5%. While risks remain, such as potential changes in U.S. trade policy or a slower-than-expected global recovery, the upside scenario remains compelling. If Vietnam approaches its 10% GDP growth target and public investment accelerates further, equity market returns could significantly exceed current forecasts.

With strong earnings growth, attractive valuations, structural inflows from the FTSE upgrade, and powerful domestic growth drivers, Vietnam’s equity market is well positioned to deliver another year of outperformance in 2026 and to build a foundation for sustained long-term returns.

Which Sectors Will Lead Performance in 2026?

Vietnam’s strong macro momentum and powerful structural catalysts point to four sectors positioned to drive market outperformance in 2026, offering highly attractive risk-reward profiles.

• Public Investment
Public investment remains a central growth engine. After record disbursement in 2025, government spending is set to exceed VND 800 trn in 2026. This provides direct, visible earnings support for infrastructure, transportation, energy, and urban development companies, making the sector one of the most policy-backed and resilient plays.

• Materials
Rising public investment and a recovery in private construction are driving a strong upcycle in the building materials sector. Demand for cement, steel, stone, and construction inputs is accelerating, with Vietcap forecasting 33% sector earnings growth in 2026. Companies located near highways, industrial parks, and large infrastructure projects are likely to benefit most as execution accelerates.

• Exporters
Despite record revenues and profits in 2025, export stocks remain deeply undervalued at just 6–7x forward earnings due to lingering tariff concerns. As trade fears fade and global demand stabilizes, we expect a powerful earnings-led re-rating. Electronics, textiles, seafood, and machinery exporters are well-positioned to become 2026’s standout performers.

• Financials
The FTSE Emerging Market upgrade and accelerating capital flows create a strong tailwind for banks and brokerages. Credit growth is expected to reach 15–20% in 2026, supporting margin expansion and fee income. Brokerages will benefit from rising liquidity and passive inflows, making financials a high-conviction sector for both growth and income.

Bottom line:
These sectors align perfectly with Vietnam’s dual growth engines, public investment and export competitiveness, and provide diversified exposure to the country’s ambitious 10% GDP growth target. We remain overweight these themes, confident they will lead the market higher as earnings momentum and valuation rerating converge in 2026.

Political Stability Reinforces Vietnam’s Long-Term Investment Case (2026–2031)

Vietnam’s political outlook remains highly stable heading into the 2026–2031 leadership term. On 23rd December 2025, the Politburo reached an early consensus on key leadership nominations, well ahead of official announcements, highlighting Vietnam’s structured and predictable succession process. This carefully managed transition reflects the Communist Party’s long-standing commitment to continuity, consensus, and policy stability.

For investors, this minimizes political risk and reduces the likelihood of disruptive policy shifts. Past leadership transitions have been smooth and market-friendly, reinforcing confidence in Vietnam’s institutional strength. Looking ahead, this political stability provides a solid foundation for sustained economic expansion, supporting the government’s ambition of around 10% annual GDP growth through 2030 and strengthening Vietnam’s appeal as a long-term investment destination.

Mr To Lam, General Secretary

At the end of December 2025, the fund’s largest positions were: Minh Phu Seafood Corp (7.8%) – a seafood company, Agriculture Bank Insurance (7.3%) – an insurance company, Lam Dong Minerals and Building Materials (6.6%) – a building material supplier, TNG Investment and Trading JSC (5.6%) – an apparel manufacturer, and Phu Tai JSC (5.3%) – a home and office furnishings company.

The portfolio was invested in 34 names and held 6.1% in cash. The sectors with the largest allocation of assets were consumer (38.8%) and financials (36.3%). The fund's estimated weighted harmonic average trailing 12 months P/E ratio (only companies with profit) was 9.59x, the estimated weighted harmonic average P/B ratio was 1.32x, and the estimated weighted average portfolio dividend yield was 4.07%. The fund’s portfolio carbon footprint is 2.70 tons per USD 1 mn invested.

I hope you have enjoyed reading this newsletter. If you would like any further information, please get in touch with me or my colleagues at This email address is being protected from spambots. You need JavaScript enabled to view it.

With kind regards,

Thomas Hugger
CEO & Fund Manager

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Disclaimer:

This Newsletter is not intended as an offer or solicitation with respect to the purchase or sale of any security. No such offer or solicitation will be made prior to the delivery of the Offering Documents. Before making an investment decision, potential investors should review the Offering Documents and inform themselves as to the legal requirements and tax consequences within the countries of their citizenship, residence, domicile and place of business with respect to the acquisition, holding or disposal of shares, and any foreign exchange restrictions that may be relevant thereto. This newsletter is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law and regulation, and is intended solely for the use of the person to whom it is intended. The information and opinions contained in this Newsletter have been compiled from or arrived at in good faith from sources deemed reliable. Opinions expressed are current as of the date appearing in this Newsletter only. Neither Asia Frontier Capital Ltd (AFCL), nor any of its subsidiaries or affiliates will make any representation or warranty to the accuracy or completeness of the information contained herein. Certain information contained herein constitutes “forward-looking statements”, which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “project”, “estimate”, “intend”, or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of Funds managed by AFCL or its subsidiaries and affiliates may differ materially from those reflected or contemplated in such forward-looking statements. Past performance is not necessarily indicative of future results.

For Switzerland only: This is an advertising document. The state of the origin of the fund is the Cayman Islands. This document may only be provided to qualified investors within the meaning of art. 10 para. 3 and 3ter CISA. In Switzerland, the representative is Acolin Fund Services AG, Maintower, Thurgauerstrasse 36/38, 8050 Zurich, Switzerland, whilst the paying agent is NPB Neue Privat Bank AG, Limmatquai 1 / am Bellevue, 8024 Zurich, Switzerland. The basic documents of the fund report may be obtained free of charge from the representative. Past performance is no indication of current or future performance. The performance data do not take account of the commissions, if any, and fund transfer costs incurred on the issue and redemption of units.

AFC Asia Frontier Fund is registered for sale to qualified/professional investors in Japan, Singapore, Switzerland, the United Kingdom, and the United States. AFC Iraq Fund and AFC Uzbekistan Fund in Singapore, Switzerland, the United Kingdom, and the United States. AFC Vietnam Fund in Japan, Singapore, Switzerland, and the United Kingdom. 

By accessing information contained herein, users are deemed to be representing and warranting that they are either a Hong Kong Professional Investor or are observing the applicable laws and regulations of their relevant jurisdictions.

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