Vietnam’s Historic Journey to Market Upgrade: A Landmark Event
By Minh Hue
Tue, September 30, 2025 | 10:04 am GMT+7
Vietnam is on the brink of a significant transformation in its global market positioning, as it gears up for a historic reclassification in equity benchmarks. This remarkable evolution has garnered robust support from reputable asset managers during FTSE Russell’s September consultation, as reported by Market Insider.
The Strong Signal from Asset Managers
In a striking early voting outcome, about 85% of the 26 major funds consulted have given their endorsement for Vietnam’s transition from a “frontier” to “secondary emerging” market status. This move is backed by some of the largest financial institutions in the world, including BlackRock, Vanguard, and State Street. They highlighted Vietnam’s improved liquidity and stronger regulatory alignment as key factors favoring this upgrade.
It’s interesting to note that while Fidelity and PIMCO expressed cautious support, both emphasized the importance of closely monitoring the rollout of the KRX trading platform, set to launch in the second quarter of 2026. On the flip side, only two small, Asia-based funds opposed the upgrade, citing trade tensions between the U.S. and Vietnam, particularly surrounding an unresolved 20% tariff issue.
Ongoing Structural Improvements
Vietnam’s stock market has shown considerable enhancements, including a 15% quarter-on-quarter increase in liquidity, clearly bolstering the case for greater accessibility. The successful execution of the Non-Prefunding (NPF) model has removed a significant barrier for foreign investors. Additionally, Decree 245/2025/ND-CP has alleviated concerns relating to foreign ownership limits (FOL) and currency risks.
FTSE Russell also acknowledged Vietnam’s strides in improving its trading infrastructure and overall market transparency. Notably, HSBC emphasized that the country has met a majority of the criteria for FTSE’s promotion, having satisfied seven out of nine requirements necessary for advancement to FTSE indices.
The Remaining Challenges and Considerations
Despite the progress made, analysts from HSBC pointed out that foreign ownership limits continue to be a concern. While it is not an explicit requirement, such limits could affect market accessibility from the perspective of some investors. Currently, only 12 Vietnamese stocks have hit their foreign ownership limits, with the average FOL standing at 42% and current foreign holdings pegged at 17%.
The anticipated decision regarding Vietnam’s market classification is expected after the U.S. market closes on October 7. If approved, Vietnam is poised for inclusion in the FTSE Secondary Emerging Index by March of next year.
Potential Capital Inflows: A Game Changer
The implications of this upgrade are enormous. Analysts have forecasted that if successful, Vietnam’s stock market may witness an influx of $5-7 billion from passive investments, with further allocations likely from active funds. The upgrade would also mean automatic inclusion in indices like FTSE All-World, FTSE EM, and FTSE Asia, obliging passive funds to acquire Vietnamese equities or ETFs.
HSBC’s analysis indicates a significant share of active funds from Asia and emerging markets already holds Vietnamese equities, with 38% of Asia funds and 30% of Global Emerging Markets (GEM) funds already invested in the region. Currently, the average stake of Asia funds in Vietnam stands at 0.5%.
In their most optimistic scenario, analysts predict that a reclassification by FTSE could potentially usher in as much as $10.4 billion into Vietnamese equities. This additional capital could position Vietnam as one of Asia’s premier destinations for foreign portfolio investment, as it sets the groundwork for a future upgrade by the Morgan Stanley Capital International (MSCI).
Current Market Position and Outlook
As of late September 2025, the VN-Index, representing the Ho Chi Minh Stock Exchange (HoSE), closed at 1,666.48 points, reflecting a modest increase of 0.35% from the reference level. This positive trajectory indicates a strong sentiment within the market, underlining the confidence of investors as they await the upcoming FTSE classification decision.
The landscape in Vietnam’s investment sector is evolving rapidly, and the potential upgrade signals a remarkable shift that could significantly reshape capital flows into Southeast Asia’s fastest-growing economy. The coming weeks will be crucial as this transition unfolds, promising a new era for investors and the Vietnamese market alike.