Market upgrade helps Vietnam attract long-term capital and accelerate market institutionalization.

Vietnam’s upgrade to emerging market status is expected to help attract long-term “sticky” passive capital and accelerate the institutionalization of its stock market, according to speakers at a webinar held on 13 April 2026.

FTSE Russell: Vietnam meets criteria for primary emerging market

Ms. Wanming Du, Policy Director for Asia-Pacific at FTSE Russell, said the mid-term assessment in March confirmed Vietnam met all criteria to achieve primary emerging market status within FTSE’s framework. She added that implementation is scheduled for September 2026.

Ms. Wanming also highlighted the testing of FTSE’s “global broker” model, which allows foreign investors to trade through an international broker rather than completing local KYC (Know your customer) procedures. She said the process is progressing well and that FTSE’s Index Governance Board (IGB) has confirmed deployment will proceed on schedule in September 2026 using a phased approach.

Phased rollout is designed to reduce market pressure

FTSE’s approach, Ms. Wanming said, mirrors other markets that have moved to emerging status. She cited China (A-shares) in 2019, which was included at 25% and implemented in three stages, and Saudi Arabia, which planned four stages of 25% each. The rationale is to give investors time to open accounts and adapt to trading, margining, and settlement processes, while testing the operational pathway and reducing market pressure.

Long-term passive capital expected to increase

Ms. Wanming said the upgrade is not assessed for short-term performance impact, but that in the long term, additional capital can help firms develop. She described “sticky” passive capital as tending to stay for longer and potentially growing if Vietnam adds more investable products or loosens foreign ownership limits.

On market scale, she noted that there is currently very little passive money tracking frontier market indices. By contrast, for emerging markets, the figure is much larger. She said a single fund in the system could manage more than $100 billion, and if Vietnam accounts for 0.4% of that total, roughly $400 million could flow in quickly.

Liquidity, investor base shift, and institutionalization

Mr. David Rabinowitz, Director of Global Index Analysis and Asia-Pacific Market Structure at UBS, described Vietnam as a promising and novel entrant. He said foreign investors are surprised by the fact that 12% of the population has a stock account, the second-highest level in the region after Indonesia.

He also cited market liquidity, which averages more than $1.2 billion per day and has at times exceeded $2 billion. More than 30 stocks trade above $10 million per day.

Net selling seen as supporting liquidity

Asked why foreign investors have been net sellers of Vietnamese stocks, Mr. David said net selling can create healthy liquidity. He noted Vietnam has been on the watch list since 2018 and that the market has risen 114% over eight years.

He said the market is also shifting from short-term investors toward more persistent and stable capital from index funds. He pointed to examples including Iceland, where after an upgrade in September 2022, market liquidity rose fourfold. In his view, institutional money can provide stability and help offset volatility from individual investors and high-frequency trading algorithms.

Benchmark indices as a catalyst for global institutional investors

Mr. David added that the upgrade is expected to promote market institutionalization. He cited China in 2014, when personal ownership exceeded 80% and later fell to just over 50%. He said bringing benchmark indices is the strongest catalyst for attracting global institutional investors and supporting long-term stability.

He concluded that Vietnam’s market appears to be following a similar path to China about 10–15 years ago, during a period of strong international inflows. However, he said achieving that outcome depends on ensuring foundational elements such as market access, ease of investment operations, and improvements to market structure.