Post by : Badri Ariffin

Vietnamese stocks were added to FTSE Russell’s emerging market indexes on Monday, marking an important milestone for the country’s stock market after years of reforms aimed at improving access for foreign investors.

FTSE Russell estimates that the inclusion could lead to as much as $6 billion being directed into Vietnamese equities. Vietnam had been on the FTSE watchlist since 2018 as it worked toward entering the emerging market category, which also includes major markets such as China and India.

Vietnam Stock Market Reacts to FTSE Inclusion

Vietnam’s benchmark VN-Index (.VNI) opened 0.54% higher on Monday, supported mainly by gains in banking stocks. The index later gave up some of those early gains.

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Investor interest in Vietnamese shares had already started to improve ahead of the FTSE decision. Data from the Ho Chi Minh Stock Exchange showed that overseas investors were net buyers of shares worth 2.7 trillion dong, or about $104 million, last week.

Despite the recent buying, foreign investors remain net sellers in the Vietnamese market, with their net selling position standing at around 91 trillion dong.

FTSE Upgrade to Take Place in Four Stages

The move into the FTSE emerging market indexes will not happen all at once. The transition is planned in four stages through 2027.

Under the schedule, 10% will be added in September, followed by another 20% in March. A further 35% will be added in June, with the final 35% coming in September next year.

Thomas Nguyen, chief global markets officer at SSI Securities Corporation, Vietnam’s second-largest broker by market share, said the market could remain relatively quiet after the initial excitement. “I expect the market to remain relatively subdued until we approach 2027,” Nguyen said.

He added that investor attention could increase again as the market gets closer to the next inclusion stage in March. Since that allocation will be larger, he said local investors could see a more noticeable effect.

Vanguard Plans to Increase Vietnam Investment

The FTSE upgrade is also expected to influence major asset managers. Vanguard plans to increase its investment in Vietnam to around $2.5 billion over the next few years following the index inclusion.

However, some challenges remain for the Vietnamese market. These include foreign ownership limits and free-float restrictions affecting some companies.

MSCI Upgrade Expectations Rise

The FTSE decision has also renewed expectations that Vietnam could eventually receive an upgrade from MSCI.

Investors are watching the planned introduction of a central counterparty clearing mechanism, which is expected in 2027. The system could help Vietnam move closer to meeting MSCI’s requirements for market access.

Nguyen said the introduction of central counterparty clearing would be a key part of Vietnam’s efforts to secure a future MSCI upgrade.

“FTSE is about access into the market. MSCI is about scale,” Nguyen said, adding that central counterparty clearing is therefore particularly important.

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