FTSE Russell Outlines Stock Selection Criteria for Index Inclusion and Highlights Investment Opportunities in Vietnam

In the context of Vietnam’s stock market steadily upgrading to meet higher listing standards, remarks by Wanming Du, Asia-Pacific Policy Director at FTSE Russell, and Pham Luu Hung, Chief Economist at SSI Research, at a recent webinar outlined how stringent index and watch-list criteria are shaped by international capital flows.

FTSE Russell’s stock screening: liquidity and free float

According to Ms. Wanming Du, the core basis for a stock to enter FTSE Russell’s watch list goes beyond market capitalization. The screening places particular emphasis on liquidity and the free float ratio, which together serve as the foundation for assessing a stock’s investability.

The free float is treated as a direct measure of tradable supply depth, helping ensure foreign investors can execute long and short positions transparently and consistently. These principles also underpin the construction and assessment of index quality, where an index is considered strong when it meets clear criteria for size and investor access.

Based on these standards, the market will ultimately determine how many Vietnamese stocks qualify for inclusion.

Domestic versus international index construction: foreign room

Ms. Wanming Du also highlighted a key difference between domestic and international indexes: foreign ownership limits, often referred to as “foreign room.” For international investors, these restrictions affect the share of each stock that can be accessed and traded.

When foreign room is constrained, the “headroom” available to foreign investors shrinks, which can reduce the appeal of stocks to global funds. By contrast, for domestic investors, foreign room is not a major barrier. As a result, the VN30 index is described as reflecting domestic investor access rather than meeting international investor criteria.

This creates a gap between domestic indices such as VN30 and those constructed under FTSE Russell’s approach. International indices typically place greater emphasis on transparency, foreign investor access, and the freedom to trade.

“Thus, companies with large market capitalization, high liquidity, a sufficiently large free float and remaining foreign room will have a clear advantage. Conversely, stocks restricted by foreign ownership limits or with low liquidity will face disadvantages in screening,” the FTSE Russell representative noted.

Near-term and long-term effects of market upgrading

From an operational and market-analysis perspective, Mr. Hung said Vietnam is gradually becoming more attractive to global investors as reforms to policy and market infrastructure progress.

In the near term, upgrading the market can translate into tangible effects on stock prices, supported by strong foreign capital inflows. Over the long term, he said the more important change is structural—moving from the integrated development of equity and bond channels toward the expansion of new financial products. This, in turn, is expected to boost liquidity, improve market quality, and create a basis for attracting sustainable capital inflows.

Sector outlook and examples of potential beneficiaries

Mr. Hung noted that the banking sector, despite having roughly 10% allocation in the VN30 index out of 30% total weight, still faces foreign room constraints. However, experts believe this is not a major impediment if international investors are supported with suitable investment vehicles.

Looking ahead, funds are likely to favor sectors linked to real-economy growth, including Net Zero and public investment. Examples cited include STB and SGB.

In consumer-related stocks, Masan (MSN) and Vinamilk (VNM) were viewed positively due to domestic market expansion. In finance, Vietcombank (VCB) drew attention for its solid operating base and leading service quality.

Overall, the discussion framed these sectors as beneficiaries of foreign capital while also aligning with Vietnam’s longer-term economic growth story.