FTSE Russell upgrade of Vietnam's stock market to secondary emerging status could attract up to $6 billion in foreign flows, VNDirect says

FTSE Russell has confirmed its plan to upgrade Vietnam’s stock market from frontier to a secondary emerging market, effective Monday, September 21, 2026.

FTSE Russell’s phased implementation

FTSE Russell will use a multi-stage weight allocation mechanism designed to reduce market volatility. Starting with the September 2026 review, Vietnam will be added to the FTSE Emerging Markets index system while being gradually removed from the FTSE Frontier Index. The transition will be implemented through a synchronized shift between the two index baskets rather than a single withdrawal event.

VNDirect: a structural milestone for global capital flows

VNDirect Research said the formal upgrade is a historic and structurally meaningful milestone, reflecting long-running reform efforts that have been recognized. The upgrade is expected to help reposition Vietnam’s market on the global financial map and marks a shift in international assessments of capital flows—from a “story of hope” to a “story of reality.”

Expected capital inflows

VNDirect estimates that, after the upgrade to FTSE’s Secondary Emerging Market group, Vietnam could attract about $1–1.5 billion from ETFs and mutual funds tracking the FTSE index. Total foreign capital, including actively managed funds, could be higher—around $3.4–6 billion—depending on scenarios and estimation methods used by international institutions such as HSBC and FTSE.

Pathway to an MSCI emerging market upgrade

VNDirect expects regulators to maintain reform momentum, which could create conditions for Vietnam to be upgraded by MSCI to emerging market status in the 2028–2030 window.

To move toward FTSE’s High-Quality Emerging Market status and MSCI’s Emerging Market status, VNDirect said Vietnam needs to accelerate reforms including:

• Implementing intraday trading (T+0)
• Allowing the sale of margin securities
• Clarifying the legal framework for securities lending and short selling
• Shortening settlement cycles
• Loosening foreign ownership limits in restricted sectors
• Increasing market transparency

VNDirect also highlighted that regulators sustaining reform momentum would support an MSCI upgrade in the 2028–2030 baseline scenario.

VNDirect’s timeline and potential market effects

VNDirect outlined a specific timetable linked to the upgrade process:

• 2026: The milestone is tied to FTSE Russell’s official upgrade of Vietnam to the secondary emerging market.
• 2027: Vietnam could remove foreign ownership limits in sectors where they are not needed and raise foreign ownership to align with international commitments, which may lead MSCI to add Vietnam to its watchlist for a potential emerging market upgrade.
• First half of 2028: A new mechanism could increase the freedom of VND conversion, reduce foreign exchange intervention, and develop OTC FX trading—factors that could support an MSCI upgrade to emerging market status.

Capital inflows under an MSCI upgrade scenario

If MSCI upgrades Vietnam, VNDirect estimates the Vietnamese stock market could attract about $2–5 billion of foreign capital from open-ended funds and MSCI-tracked ETFs, a scale that it said would be well above the estimates associated with Vietnam’s earlier FTSE secondary emerging market upgrade.