### Việt Nam’s Path to Emerging Market Status: Elevating Quality in the Stock Market
As Việt Nam’s stock market inches closer to achieving an emerging market classification, enhancing the quality of listed companies is becoming a primary focus. This transformation hinges significantly on the integration of foreign direct investment (FDI) enterprises and the adoption of robust environmental, social, and governance (ESG) practices.
#### The Role of FDI in Economic Growth
Foreign direct investment has long been a cornerstone of Việt Nam’s economic development, driving growth and boosting export figures. However, despite their considerable contributions, FDI enterprises have limited representation on the stock market. Among approximately 1,600 listed companies, only ten are FDI firms—comprising six on the Ho Chi Minh Stock Exchange (HOSE), one on the Ha Noi Stock Exchange (HNX), and three on the Unlisted Public Company Market (UPCOM). This underrepresentation does not align with the sector’s overall potential, which has been firmly established in the country’s economic landscape.
#### Attracting High-Quality FDI
During a recent conference on December 9, Vũ Thị Chân Phương, chairwoman of the State Securities Commission of Vietnam (SSC), underscored the necessity of attracting well-governed FDI enterprises to the Vietnamese exchanges. She pointed out that such listings could effectively rebalance the sectoral composition and enhance market quality. High-quality FDI firms typically embody advanced governance models, transparency, and adherence to international standards—key components that can help raise overall benchmarks and elevate the market’s profile.
“Việt Nam’s stock market is not merely pursuing scale; it aims for depth and sustainability,” Phương noted. By having high-quality FDI enterprises listed, the market can restructure its industry composition and achieve more sustainable growth, which is crucial for long-term stability.
#### Enhancing Market Supply and Attractiveness
The SSC views the integration of FDI companies as a means to strengthen the market’s supply side. This would result in an increased availability of investable and transparent long-term assets for both domestic and foreign investors, especially as Việt Nam anticipates increased institutional capital inflows following a market upgrade.
#### ESG: A Pillar of Corporate Governance
Incorporating ESG principles into corporate governance has shifted from being a niche focus to becoming essential for long-term viability in business practices. The Vietnam Listed Company Awards (VLCA) 2025 have highlighted this trend, showcasing a significant growth in the number of companies producing robust sustainability reports—a clear indicator that ESG is maturing into a mainstream requirement among listed enterprises.
Globally, embedding ESG information into annual reports is recognized as best practice, connecting sustainable development with operational efficiency and profitability. Investors—both domestic and international—are increasingly prioritizing ESG criteria when evaluating potential investments, making it imperative for companies to adapt.
#### Challenges in ESG Adoption
Despite progress, significant challenges remain in the implementation of ESG practices across the broader market. There is still a considerable gap between leading firms and the average company’s ESG disclosures. Many businesses continue to rely on qualitative data rather than providing the quantitative measures that are often decisive for responsible investment funds. These quantitative indicators—encompassing emissions, energy consumption, and supply chain management—are vital for informed capital allocation.
#### Transition to Higher Standards
The recent experiences from the VLCA 2025 underline a crucial reality: A market upgrade will not automatically grant access to international capital for all companies. As Việt Nam transitions to an emerging market phase, the fundamental requirements will include stringent standards in annual reporting, corporate governance, and ESG protocols.
Firms that fail to meet these evolving standards may struggle to attract foreign capital, while those that do will likely gain a competitive edge. This scenario places a premium on transparency and sustainability, demanding a cultural shift within companies to prioritize these areas.
#### Regulatory Support and Market Evolution
The SSC has reiterated its commitment to supporting the market through ongoing legal reforms, implementation of upgrade initiatives, and enhancement of investor base structures. Digital transformation in supervision and enforcement is on the agenda, as is strengthening market discipline and transparency, which are deemed essential objectives.
In this context, events like the VLCA 2025 have evolved beyond awards; they represent a movement for listed companies adjusting to the transitional demands of emerging markets. This transformation highlights the necessity for not just sound infrastructure but also the soft skills in governance and ESG that will ultimately define the success of Việt Nam’s capital-market development.