FTSE Raises Vietnam’s Status to Emerging Market from Frontier

Vietnam Achieves Emerging Market Status

(Bloomberg) – Vietnam has successfully upgraded to emerging market status as recognized by FTSE Russell.

The country’s stocks will now be part of FTSE Russell’s Intermediate Emerging Markets group, aligning with nations such as China, India, and Indonesia. This upgrade from Frontier status will officially take effect on September 21, 2026.

David Sol, head of global policy at FTSE Russell, remarked that “Vietnam’s reclassification reflects the implementation of key market infrastructure enhancements.”

Vietnam was first placed on FTSE Russell’s watchlist for potential reclassification back in September 2018. Since then, the government has introduced significant reforms to align its market with global standards. An interim review is scheduled for March next year, with FTSE suggesting that the upgrade could lead to as much as $6 billion in redirected foreign investments.

Interestingly, there was a notable net selling of Vietnamese stocks by foreigners in August, indicating a monthly outflow. However, HSBC Holdings Plc previously forecast that this upgrade could attract $3.4 billion in inflows. Currently, about 38% of Asian funds and 30% of global emerging market funds hold shares in Vietnam.

Tyler Mandan Nguyen, Chief Market Strategist at Ho Chi Minh City Securities, highlighted that Vietnam’s benchmark VN Index had surged 33% by Tuesday, buoyed by optimism regarding the upgrade as local investors increased their activities.

Brendan McKenna, a strategist at Wells Fargo in New York, noted that the upgrade is likely to introduce fresh capital into the country. He emphasized the importance of sustaining these inflows, stating it’s “certainly a step in the right direction for the economy and the currency.”

Nonetheless, not all aspects of upgrades are overly positive. As of September, Vietnam held the highest weighting in the FTSE Frontier Index, at around 32%, followed by Morocco at nearly 20%. Transitioning to an emerging market index means Vietnam will now compete with more established economies.

“FTSE Russell’s upgrade of Vietnam to emerging market status marks a watershed moment in Southeast Asia’s fastest-rising economy and equity story. Still, celebrations are cautious,” is how some observers see the situation.

The Vietnamese dong has depreciated over 3% against the US dollar this year as authorities continue to ease the currency’s controls to mitigate the impact of American tariffs on exports. Presently, the VN Index is trading at 12.2 times forward earnings, surpassing the three-year average of 10.2 times.

Among the key reforms leading to this upgrade, one involved removing the caps on foreign ownership imposed by public companies that were stricter than legal requirements or international standards. Another reform eliminated the need for foreign investors to pre-fund their capital fully, addressing a significant barrier to entry.

In May, Vietnam launched its long-anticipated KRX trading system, a technical upgrade aimed at improving market transparency and infrastructure.

Last month, the government also unveiled a plan to achieve MSCI Inc.’s emerging market status by 2030, fully aligning with FTSE Russell’s criteria for this year’s upgrade.