- FTSE Russell estimates Vietnam's index weight at 0.35%
- Index inclusion will be in four stages from September
- Foreigners sold $1.2 billion of Vietnam stocks this year
- Vietnam targets MSCI upgrade by 2030
HANOI, April 8 (Reuters) - Vietnam's stock market regulator expects FTSE Russell's long-awaited confirmation of the country's emerging market status will help draw foreign capital back to a market that has suffered from steady selling this year.
"It contributes to attracting large-scale international investment flows, enhancing liquidity, and strengthening Vietnam's position in the global financial system," the State Securities Commission said in a statement on Wednesday.
FTSE Russell announced on Tuesday it will upgrade Vietnam to emerging market status from frontier status in September, when it will start adding the country to its global equity indexes in phases.
The index provider estimates the change could redirect up to $6 billion into Vietnam, which has since 2018 been on the watchlist for entry into the category that also includes China and India.
"Foreign capital is expected to build progressively ahead of and during index inclusion", with "passive inflows, alongside significantly larger active allocations" totalling as much as $8 billion, Maybank Securities analysts wrote in a research note.
"The phased implementation should enable orderly absorption while supporting a steady improvement in market liquidity and depth."
Foreign investors have sold Vietnamese equities this year, with net outflows from the Ho Chi Minh Stock Exchange totalling approximately $1.2 billion to date, following $5 billion in net outflows in 2025, according to official data.
FTSE Russell said adding $6 billion in foreign capital would give Vietnam a weighting of as much as 0.35% in its emerging market index, with conglomerate Vingroup, Masan Group, FPT Corp and Hoa Phat among potential inclusions.
The index compiler expects around $1.5 billion in passive inflows, with 10% of that added in September, an additional 20% in March, and 35% each in June and September of next year.
Despite being on the watchlist for eight years, Vietnam only became serious about the reforms needed to merit the upgrade in 2022, when turbulence in the bond and property sectors exposed the limits of credit-led growth, said Hoang Huy, an equity strategist at Maybank Securities Vietnam.
Initiatives since then include scrapping equity pre-funding, moving toward centralized clearing by 2027 and allowing foreign investors direct access through global brokerages.
As a next step, the Vietnamese government is aiming for an upgrade to emerging market status at MSCI as well, with a target of 2030.
"Being upgraded by MSCI would help Vietnam access much larger capital inflows, although the current main hurdle remains foreign ownership limits," said Nguyen The Minh, head of research and development at Yuanta Securities Vietnam.
"But with the FTSE upgrade and the current reforms by the finance ministry, MSCI upgrade may be even sooner than 2030. It could be in 2028."
($1 = 26,305 dong)
Reporting by Khanh Vu and Phuong Nguyen; Editing by John Mair and Kevin Buckland
Source: Reuters