Vietnam’s FTSE upgrade locked in for September after market reforms

[HANOI] Vietnam’s planned promotion to emerging-market status by FTSE Russell remains on track for Sep 21, 2026.

This comes as the index provider reaffirmed the timeline in its latest review released on Tuesday (Apr 7), pointing to progress in reforms to improve foreign investor access.

The reclassification from frontier to secondary emerging-market status for the country, which was first announced in October last year, will be implemented in phases through September 2027. Vietnamese equities will be gradually added to FTSE’s global equity indices to ensure an orderly transition and manageable capital inflows.

The FTSE Russell Index Governance Board said it is “satisfied” with Vietnam’s progress in implementing a “global broker” framework – a key index-inclusion requirement that refers to an optionality to allow foreign institutional investors to face global brokers as counterparties.

“Regulatory bodies, onshore and global brokers, custodians and buy-side firms have aligned on the key operational components needed for implementation, with the remaining work focused on finalising bilateral agreements between global and local brokers,” the London-headquartered index provider noted in its March interim review released on Tuesday.

The decision comes after Vietnamese regulators formalised a global broker framework under a February circular and enhanced the non-prefunding mechanism.

This allows foreign institutional investors to transact via international intermediaries – a shift aimed at aligning Vietnam’s market infrastructure with global standards and improving investor confidence.

“The Vietnamese government has been pushing for the upgrade for years, aiming to position the equity market as a key medium to long-term funding channel for the broader economy,” said Dinh Quang Hinh, head of macro and market strategy at VNDirect Securities – which is one of the Vietnamese firms expected to be eligible for key FTSE index inclusion.

“In the past, Vietnam’s economy leaned heavily on monetary policy to support both faster growth and macro stability. Going forward, this will need to be complemented by fiscal policy and deeper capital markets, particularly the stock market,” he added.

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Key items on watch

Preliminary screening suggests a broad slate of Vietnamese firms could be included, spanning large-cap blue chips such as steelmaker Hoa Phat, state-owned banks Vietcombank and BIDV, and VinFast’s parent company Vingroup.

Indicative mid-cap names include consumer giant Masan, IT firm FPT and dairy producer Vinamilk, while the small-cap list features Vietjet Aviation, brokerages such as SSI and Vietcap, and property developers such as No Va Land and Kinh Bac.

The final roster of Vietnamese stocks eligible for inclusion will be published on Aug 21, ahead of the September review.

Under FTSE’s plan, Vietnam will be removed from the Frontier Index in a single step in September, while its inclusion into global indices will be staggered across four tranches. After each phase, FTSE Russell will assess whether index-tracking funds can replicate the changes before proceeding further.

Vietnam’s initial weightings are projected to remain modest – about 0.037 per cent in the FTSE Global All Cap Index and 0.35 per cent in the FTSE Emerging All Cap Index – but the upgrade is seen as a structural milestone that could unlock gradual inflows from global passive and active funds.

Ho Chi Minh City Securities estimates that Vietnam’s FTSE upgrade could trigger passive inflows of roughly US$300 million to US$500 million, alongside a more substantial US$3 billion to US$5 billion from active funds.

“The exact magnitude of inflows remains fluid, as it ultimately depends on underlying country fundamentals,” its chief market strategist Tyler Nguyen wrote in an Apr 8 note.

He added that historical precedents suggest that index inclusion often leads to a front-loaded rally, followed by a period of volatility normalisation.

“Political stability under the new technocrat Cabinet, combined with a clear pro-growth agenda and commitment to accelerating legal reforms, is expected to... (reinforce) Vietnam’s attractiveness to active emerging-market funds,” he noted.

FTSE rival MSCI, whose indices are more widely tracked by both active and passive investors, still classifies Vietnam as a frontier market – a designation seen as riskier and one that limits participation by many institutional funds.

In its latest review in June, MSCI highlighted ongoing hurdles in Vietnam’s equity market, including foreign ownership limits, inadequate information disclosure, and underdeveloped stock lending and short-selling practices.

Hanoi has set a road map to secure an MSCI upgrade by 2030, though analysts say index promotion is only one step in a broader push to deepen capital markets. The country also remains below investment grade with major rating agencies such as Fitch Ratings, Moody’s and S&P Global, a factor that continues to constrain access to global capital.

Emerging markets facing headwinds

Emerging equity markets across Asia are facing headwinds, with foreign investors pulling back amid a global risk-off environment following the escalation of conflict in the Middle East.

In Vietnam, net foreign equity outflows year to date have surpassed US$1 billion, following a record US$5 billion in net selling in 2025, pushing foreign ownership as a share of total listed shares to new historical lows.

The benchmark VN Index also experienced heightened volatility, falling roughly 6.2 per cent in the first quarter and 9.3 per cent in March alone, as mounting geopolitical risks overshadow the widely anticipated FTSE upgrade to emerging-market status later this year.

The index jumped 3.5 per cent on Wednesday morning on optimism over FTSE’s reaffirmation of Vietnam’s upgrade and the recently announced US-Iran ceasefire.

Across South-east Asia, Singapore remains the only developed market in FTSE’s classification, while Thailand, Malaysia and Indonesia are categorised as secondary emerging markets. Vietnam’s elevation will bring it into that group, leaving markets such as the Philippines still in the frontier category.

Earlier this year, MSCI warned that it might downgrade Indonesia from emerging to frontier market status due to limited transparency in stock ownership and trading practices.

FTSE also flagged the same concerns and postponed its planned March review of the country.

The latest FTSE review noted that Indonesia’s secondary emerging-market status remains unchanged, with the index provider continuing to monitor the archipelago’s reforms to strengthen transparency, governance and data reliability.

The provider is set to determine its treatment of Indonesian securities ahead of the June 2026 review.