Vietnam to be promoted to emerging stock market by FTSE in September 2026
The reclassification is expected in multiple tranches, though details are not yet provided
[HO CHI MINH CITY] Vietnam is set to be reclassified to the secondary emerging market status by global index provider FTSE Russell on Sep 21, 2026, after eight years on the watch list for a potential upgrade from its frontier market status.
This promotion will place the country’s equity market in the same league as those of China, India, Indonesia and the Philippines, potentially unlocking billions of dollars in foreign investment.
In its statement on Oct 7 (US time) after the close of the US market, FTSE noted that Vietnam has met all the nine criteria required for a promotion following the removal of the prefunding requirement for foreign institutional investors and the establishment of a formal process for handling failed trades.
However, the reclassification is subject to an interim review in March 2026 to assess whether sufficient progress has been made in facilitating access to global brokers, who act as counterparties to mitigate risk for foreign investors when trading in Vietnam. FTSE deems this progress as “essential to support index replication and to meet the needs of the international investment community”.
The reclassification is expected to be implemented in multiple tranches, although details of the timeline and corresponding inclusion of Vietnam securities’ investability weight in the FTSE global equity index series have not yet been provided.
Gary Harron, head of securities services at HSBC Vietnam, said: “For Vietnam, shedding the frontier label can profoundly reshape investors’ behaviour and confidence, altering the trajectory of its continued long-term economic development and reducing dependence on any single trading partner.”
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Within the same annual country classification review, Greece is also set to be reclassified from advanced emerging to developed market status from Sep 21 next year.
Potential inflows
The bullish sentiment over the market upgrade outlook, alongside Vietnam’s pro-growth reforms and better-than-expected trade deal with the United States, has driven a more than 33 per cent gain in the benchmark VN-Index this year, positioning it as one of the best-performing stock markets in Asia.
“In our view, this suggests further upside after an FTSE upgrade might be limited,” HSBC analysts wrote in a note last month. “An additional risk to consider is the possibility that existing investors might sell on the news to take advantage of the recent bounce.”
HSBC Global Investment Research estimated on Wednesday (Oct 8) that the upgrade will potentially draw in between US$3.4 billion and US$10.4 billion to Vietnamese stocks from active and passive funds.
Meanwhile, the World Bank forecasts short-term inflows of around US$5 billion before and after the upgrade, with long-term international investment capital potentially reaching US$25 billion by 2030.
Tyler Nguyen, chief market strategist at Ho Chi Minh Securities Corporation, noted: “Such a magnitude of capital inflows would be more than sufficient to reverse the persistent foreign net selling seen in recent years, marking a decisive turning point for the market.”
Foreign ownership of Vietnamese stocks has fallen to multi-year lows of below 15.5 per cent of total market cap. Investors registered roughly US$4 billion in net sales in the first nine months of this year, surpassing the US$3.6 billion net foreign outflow recorded in the full year of 2024.
Analysts have cited several reasons behind the ongoing foreign sell-off, including a broader regional risk-off sentiment on emerging markets, the foreign exchange pressure, the wave of technology investments in the US, and profit-taking as valuations approach fair levels.
The dong has depreciated by nearly 3.5 per cent against the greenback since the beginning of this year, making it the worst-performing currency in Asean, where the currencies of its peers have appreciated by 6 to 7 per cent against the US dollar.
Quan Trong Thanh, head of equity research at Maybank Investment Bank Vietnam, said that as the reclassification would take time to materialise after the announcement in October, “macroeconomic factors have become more important for foreign investors than the upgrade narrative”.
The stock-market capitalisation of around 1,600 listed companies in Vietnam has exceeded US$350 billion, equating to around 73.5 per cent of the country’s gross domestic product in 2024. The nation aims to raise it to 120 per cent of GDP by 2030.
As at the end of September, the country has over 11 million stock-trading accounts, with 99.4 per cent held by retail investors.
More time needed for MSCI upgrade
FTSE rival MSCI, whose indices are widely tracked by both active and passive investment strategies, still classifies the South-east Asian nation as a frontier market – a designation that is considered riskier and restricts many institutional investors and passive funds from purchasing shares in locally listed companies.
In its June review, the index provider pointed out major hurdles in Vietnam’s equity market, including restrictions on foreign ownership. Companies in certain conditional and sensitive sectors remain subject to foreign ownership limits ranging from 0 to 75 per cent, affecting more than 10 per cent of the Vietnamese equity market.
Last month, the Vietnamese government approved an ambitious road map to upgrade the country’s stock market to emerging market status under FTSE Russell by 2025 and MSCI by 2030.
This followed a Sep 11 decree that opened its stock market wider through a series of reforms, covering both the hard criteria such as foreign ownership limit and softer considerations including the equal treatment of foreign investors.
Vietnam’s non-prefunding rule has also been further clarified. Last November, the authorities scrapped a prefunding requirement, under which foreign institutional investors had to deposit full funds before placing buy orders; this reduced capital efficiency and made Vietnam less attractive than other markets.
The current mechanism enables local brokers to provide foreign institutional investors with the necessary capital to support their securities purchase orders.
However, the full implementation of the central clearing counterparty mechanism – which supports making non-prefunding both effective and safe – is scheduled for completion by the end of 2027, with plans to begin as early as the first quarter of that year.
Vietnam’s new trading system, known as KRX, was launched in May, enabling a wide range of advanced features to align with international standards.
Maybank analysts emphasised that the upgrade is just one step in Vietnam’s broader effort to deepen its capital markets.
The country remains a notch below investment-grade in sovereign credit ratings by major agencies such as Fitch, Moody’s and S&P Global, limiting its companies’ access to foreign capital due to the higher perceived risk.
They added: “The defining catalyst will be a sovereign upgrade to investment-grade by 2028 (bull case) or 2030 (base case), which could lower risk premiums, attract foreign capital, stabilise foreign exchange and lift equities.”
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