Upgrading Vietnam's stock market from frontier to emerging market status is a key government objective. Authorities are working to meet the FTSE Russell criteria for the market upgrade review in September.
Tran Hoang Son, Head of Market Strategy at VPBank Securities (VPBankS), believes an upgrade would open the door to significant foreign investment. This is also seen as the most important catalyst for the market in the second half of the year.
A VPBankS analysis, citing Bloomberg data, shows that most markets experience a surge in foreign investment after an upgrade, whether by FTSE or MSCI. This influx is typically 5 to 7 times higher than the average before the upgrade.
"We estimate an inflow of 3 to 7 billion USD into Vietnam's market when the upgrade takes effect. If foreign investors deploy capital quickly, it will create a significant boost," Son said.
FTSE Russell is one of the three leading global index providers, alongside MSCI and S&P Dow Jones Indices, providing benchmarks for international investors.
Other securities firms predict even higher capital inflows. Vietcap, for example, suggests achieving emerging market status could attract 6 to 8 billion USD. SSI Securities estimates an inflow of around 1 billion USD from ETFs alone, excluding active funds. The Vanguard FTSE Emerging Markets ETF is projected to allocate over 363 million USD.
After net selling of over 37,000 billion VND on the Ho Chi Minh City Stock Exchange in the first 6 months of the year, foreign investors are returning. They have had an 11-session net buying streak, investing over 13,400 billion VND in the first half of July.
SSI experts believe VIC and VHM will attract significant foreign capital, at 161 million USD and 119 million USD, respectively. Other blue-chip stocks like MSN, VNM, HPG, VCB, and SSI are expected to attract 50 to 90 million USD each.
According to experts at Rong Viet Securities (VDSC), investment funds typically prioritize stocks already in the FTSE Vietnam Index. Capital then flows to attractively valued or high-growth stocks.
Vietnam has met 7 of the 9 criteria for upgrading from a frontier to an emerging market according to FTSE Russell. According to SSI, the market is "very close to completing the remaining two criteria": settlement cycle and failed trade costs.
The Ministry of Finance has implemented solutions to facilitate foreign investor trading and meet rating agency criteria. They issued a circular on uncovered trading. Recently, the State Securities Commission announced plans to implement a central counterparty (CCP) mechanism from 2027. They are also improving the legal and technical framework, engaging with rating agencies and foreign investors to discuss the current state and development of the market.
SSI analysts estimate a 90% probability of Vietnam being declared an emerging market by FTSE Russell by the end of the year. VPBank Securities puts the probability at 70% for a year-end upgrade and 30% for a March 2026 upgrade if further review is needed on settlement time differences, securities distribution, and handling of failed trades.
According to Mirae Asset Vietnam, most international markets rally 1 to 2 years before an official upgrade. Qatar rose 45%, Saudi Arabia 23%, and Romania 18%. The upgrade typically generates positive momentum in terms of capital flow and market sentiment for several months.
"If Vietnam is officially upgraded in September, this year will be an opportune time for investors to accumulate stocks that will benefit," wrote Mirae Asset analysts.
Both Mirae Asset and VDSC agree that securities companies will directly benefit from a market upgrade. These businesses can increase revenue from trading fees, services, and margin lending, as well as improve profits from proprietary trading.
Phuong Dong
