Stocks poised for FTSE upgrade test as capital flows return?

VN-Index marked the second consecutive week of recovery, but the rebound’s momentum remains muted and is still heavily dependent on a handful of heavyweight stocks. Analysts said the market’s focus for the coming week will be the mid-year assessment results by FTSE Russell, which could trigger a new wave of gains—or leave the index drifting cautiously within a consolidation range.

Second week of rebound

VN-Index extended its recovery for a second consecutive week after retreating below the 1,600-point level previously. The index at times advanced toward around 1,715 points, supported by large-cap stocks, but selling pressure toward the end of the week narrowed gains significantly.

For the week ending 30 Mar–3 Apr, VN-Index closed at 1,684 points, up 0.67%, though it remained below the key resistance level around 1,700.

Main market drivers came from select heavyweight names, particularly real estate stocks within the VinGroup ecosystem. Dividend information of VHM helped draw strong cash inflows, lifting the stock sharply and providing meaningful support to the index. In addition, several chemicals, insurance, and securities stocks also posted gains.

However, the rebound did not broaden across the market. Of 21 sectors, 14 closed in the red. Pressure for correction was concentrated in fertilizer, electricity, port, oil and gas, textiles, and technology groups. Overall, the market remained highly differentiated: index gains were led mainly by a few large-cap stocks, while many other stocks continued to face selling pressure.

Liquidity and foreign flows

Market liquidity stayed around the 20-week average. Average daily trading value was near VND 24.9 trillion per session. Money flow did not show a clear improvement, reflecting cautious investor sentiment.

Foreign investors continued to net sell on HOSE, with net selling of more than VND 1.7 trillion.

Next week: FTSE mid-year assessment results

Nhất Việt Securities (VFS) analysts said the near-term approach should be gradual capital deployment, prioritizing fundamentally solid stocks that have discounted to attractive prices. They advised investors to avoid an “all-in” strategy while the index has not fully broken out and established a solid base above MA200.

The recommended equity exposure is 50–60%, citing risks including deposit rates that could exceed 8% and uncertainty around volatile global oil prices.

Sector and portfolio focus

On sector selection, cash could favor companies less affected by energy costs and FX volatility, or groups with upgrading narratives as a supportive pillar (VN30).

Two scenarios for April

Analysts outlined two scenarios with equal probability:

• Positive scenario (50%): If Vietnam receives favorable information related to FTSE upgrading progress and foreign capital returns to net-buy, VN-Index could decisively break above MA200 and move toward around 1,750 points.
• Cautious scenario (50%): If geopolitical tensions escalate and oil prices rise sharply, the market could retest around 1,520 points. If that level is breached, it would signal a longer-term downtrend.

SSI Research: upgrade expectations and passive inflows

SSI Research said Vietnam is on the right track to be upgraded to an emerging market status by FTSE this year. It noted that an MSCI upgrade is expected to be the next medium- to long-term target. SSI Research also said Vietnam is expected to pass FTSE’s mid-year assessment, which is scheduled to be announced on the morning of 8/4 (PV), after which passive fund inflows would begin from September.

Estimated passive fund inflows into Vietnam could reach up to $1.7 billion. SSI Research added that these funds are unlikely to be deployed in a single wave; instead, they are more likely to be allocated in three to five rounds, similar to Saudi Arabia’s upgrade in 2019. Each tranche is expected to be implemented on a quarterly cycle to reduce market disruption.

Outlook: structural and cyclical support

SSI Research expects the stock market to be supported by structural and cyclical drivers. A two-digit GDP growth target is viewed as a foundational pillar, while currency stability could provide additional room to support the market.

Compared with other investment channels, equities are becoming more attractive. After a strong growth phase in the past two years, the real estate market and gold show signs of cooling. SSI Research also said tighter cryptocurrency oversight could redirect speculative capital back into equities, supporting domestic money into stocks.

Finally, upcoming IPOs of Highlands Coffee, CP, Dien May Xanh, HDBS and LPBS are expected to add quality stock supply and attract more investor attention.