Upgrade achieved; why foreign investors remain net sellers.

Despite clear upgrade prospects for Vietnam’s equity market, foreign investors have continued to record net selling in the near term. UBS said this pattern is not necessarily negative, pointing instead to the normal portfolio reallocation that often accompanies market development and index inclusion.

Vietnam’s market trajectory mirrors earlier stages of other countries

Speaking at a webinar titled “FTSE Inclusion - Structural Changes and Investment Opportunities” organized by SSI Securities, David Rabinowitz, UBS’s Global Index Analysis Director and APAC Market Structure at UBS, said Vietnam is showing “a lot of positive data” and that its path resembles earlier phases seen in China 10–15 years ago.

Rabinowitz highlighted the growing role of individual investors. About 12% of Vietnam’s population currently has a stock account, a figure that has risen sharply compared with other Southeast Asian markets such as Indonesia. He also cited new policies aimed at improving transparency and enabling broader participation across investor segments.

Liquidity has also changed markedly. The market has moved from roughly $10 million per session previously to much higher trading volumes over the past decade. UBS noted that market capitalization was $52 billion about ten years ago, and has since increased many times. Vietnam’s current stage is being compared with benchmarking examples including Saudi Arabia, China, India, and Taiwan.

Free-float and “entry points” for international investors

UBS pointed to the Free-float ratio as a sign of diversification potential for investors. In developed markets, strategic shareholders typically hold around 88%, and UBS said Vietnam’s structure offers room for international portfolio diversification.

For markets seeking “Emerging Market” designation, UBS said key pillars to watch include accessibility and investability. Rabinowitz said Vietnam’s focus is on practical issues such as whether procedures and account-opening time are convenient, whether market access is easy, and—particularly—the Non Pre-funding model, which does not require investors to post 100% of funds before trading.

He described the shift away from upfront capital requirements as a “watershed” in market structure that can strengthen confidence for international investors. UBS characterized this as a “launchpad” and “lever” that supports higher progress after Vietnam’s official upgrade, emphasizing that the result reflects more than a decade of persistent reforms rather than an overnight change.

Why foreigners are still net sellers after the upgrade

UBS acknowledged that foreign investors have continued net selling in the near term even as upgrade prospects remain clear. However, it said multi-billion-dollar trading volumes indicate foreign participation is broad across Vietnam.

UBS framed the near-term net selling as a normal feature of a developing market, reflecting portfolio reallocation. It said the core objective of the upgrade is to attract international capital to stay longer, reducing vulnerability from reliance on retail investors alone.

To support that goal, UBS said Vietnam must continue improving “entry points” for international investors and build a “stay-friendly environment,” covering liquidity, operating mechanisms, and diversification of investment products. UBS also cited lessons from developed markets such as Japan.

Upgrade implementation timeline and expected index weight increases

UBS expects Vietnam’s upgrade process to unfold in multiple stages, with weight increases of around 30% per phase. After each official announcement, the market is expected to take time to implement practical steps to ensure criteria are met.

UBS said the process may take time, but it is grounded in more than a decade of reforms. If current momentum is sustained, it expects Vietnam could evolve from a niche market into a more significant destination for international capital.