A sharp stock market correction in July 2026 had a significant impact on both the performance and asset-allocation strategies of investment funds.

According to FiinGroup's July 2026 report on investment fund activities in Vietnam, the benchmark VN-Index fell 6.7% during the month, while 77.6% of listed stocks declined. The equity fund group posted an average loss of 7.4%, with all 91 funds tracked recording negative returns.

By the end of July, total net asset value (NAV) of securities investment funds in Vietnam stood at about VND247.8 trillion ($9.5 billion), down VND26.9 trillion ($1.03 billion), or 9.8%, from the end of June.

Total net withdrawals from funds during the month reached nearly VND5 trillion ($191.63 million), up 16.7% from the previous month. However, capital flows varied significantly across fund types.

Open-ended funds attract inflows again

According to FiinGroup, a major supplier of financial data in Vietnam, equity funds suffered net outflows of more than VND4.2 trillion ($160.97 million) in July, up 13.8% from the previous month. Most of the outflows, however, came from the closed-end fund VEIL.

VEIL recorded net withdrawals of over VND4.19 trillion ($160.66 million) in July, accounting for 96.7% of total net outflows from closed-end equity funds. Its cumulative net outflows in the first seven months of the year reached nearly VND11.97 trillion ($458.57 million).

Excluding VEIL, net outflows from equity funds in July stood at just over VND91 billion ($3.49 million).

Notably, money returned to open-ended equity funds after two consecutive months of net withdrawals. The group recorded net inflows of more than VND884 billion ($33.88 million).

VNEFUND attracted VND337 billion ($12.92 million) in net inflows, followed by LVF with VND305 billion, PRINCIPAL VNEQ-A with VND229 billion, FUEVFVND with VND173 billion, and DCDS with VND119 billion.

Despite the improvement in fund flows, managers were in no rush to deploy capital.

FiinGroup found that 25 of 36 open-ended equity funds increased their cash holdings in July, up sharply from 16 of 36 funds in the previous month.

DCDS was a notable example. The fund's cash allocation rose from 11.2% at the end of June to 27.4% at the end of July. Its bank deposits increased 3.1-fold from the previous month.

Several other funds also significantly increased their cash holdings. Viet Nam Select Equity Fund raised its cash allocation from 3.6% to 8.6%, while VLGF increased its allocation from 3.5% to 9.3%. SSI-SCA's cash allocation rose to 11.6%.

The trend emerged as the market had just undergone a sharp correction and equity fund performance deteriorated significantly.

In the first seven months of 2026, the average return of equity funds was negative 8.9%, well below the 12.2% gain recorded over the same period in 2025. Of the 74 funds with sufficient comparable data, 71 posted negative returns. Meanwhile, the VN-Index fell just 2.7% during the first seven months of the year.

Oil and gas stocks attract fund inflows

Alongside the increase in cash holdings, portfolio rebalancing in July also showed significant divergence among stock groups.

According to FiinGroup's data, HDB led funds' net purchases, at about 3.3 million shares.

Oil and gas stocks featured prominently among the most heavily bought shares. Funds purchased about 2.5 million PVD shares and 1.6 million PVS shares. BSR was also among the stocks that saw net buying by funds during the month.

Other stocks among the net purchases included ABB, VCB, CTR, DCM, IDC and CTD.

On the selling side, HPG topped the list with about 16.1 million shares sold net. PYN Elite alone sold about 11.1 million HPG shares during the month.

More notable was the selling trend in banking stocks.

Funds recorded net sales of about 11.2 million OCB shares, 9.7 million VIB shares, 7.1 million STB shares, 7 million ACB shares, 6.8 million MSB shares, and about 6.2 million VPB shares.

By value, banks faced the strongest net selling pressure. After receiving net purchases worth over VND1.29 trillion in June, the banking sector saw funds become net sellers of over VND4.17 trillion ($159.93 million) in July.

Net selling also totaled over VND1.73 trillion in the real estate sector, nearly VND1.68 trillion in financial services, and over VND1.04 trillion in basic materials.

Thus, following the market correction, capital inflows into equity open-ended funds have shown signs of a positive rebound. However, the fact that most funds have increased their cash holdings - combined with heavy net selling across certain large-cap sectors - indicates that portfolio allocation strategies remain cautious.

More broadly, the fund industry's asset base has also contracted significantly. Compared with its August 2025 peak, the industry's total NAV at the end of July 2026 was down about VND53.1 trillion ($2.04 billion), or 17.7%, even as the VN-Index remained 3.1% higher over the same period.

According to FiinGroup, this was partly because gains in the VN-Index were concentrated in a handful of large-cap stocks, while most other stocks and the funds' portfolios performed less positively.

Against this backdrop, the return of inflows to open-ended funds without a corresponding rapid shift into equities suggests fund managers are maintaining cash buffers rather than rushing to raise equity exposure following the market's decline.