Vietnam awaits FTSE mid-cycle review as upgrade to emerging market could attract passive funds

Three days remain until Vietnam’s stock market receives important information as FTSE releases its mid-cycle review results, expected on the morning of April 8, 2026. The update is widely viewed as a crucial checkpoint in Vietnam’s path to upgrade to an emerging market.

FTSE mid-cycle review: potential upgrade timeline and fund inflows

According to SSI Research, Vietnam is on track to receive a FTSE upgrade to an emerging market in 2026. The firm estimates passive fund inflows of about $1.67 billion from global ETFs if the review is approved. If Vietnam passes, passive funds could begin allocating to the market starting in September 2026.

SSI Research notes that these funds are unlikely to be deployed all at once. Instead, allocations are expected to be made in 3–5 tranches, similar to the upgrade experience in Saudi Arabia in 2019. Disbursements are expected to occur on a quarterly basis to curb volatility and reduce disruption to the market.

Evidence from prior FTSE upgrades

SSI Research also conducted a comparative study of returns in markets that FTSE upgraded from frontier to emerging. The study found that these markets typically deliver superior returns in the mid term, supporting positive expectations for Vietnam.

MSCI upgrade pathway: market infrastructure and trading reforms

Beyond FTSE, MSCI is seen as the next strategic milestone as Vietnam’s market reform process accelerates. SSI Research highlights that the no-margin trading mechanism (NPF) has been operating steadily, while the Central Counterparty (CCP) system is being implemented on schedule.

These improvements are expected to help Vietnam meet three MSCI criteria: settlement and clearing, securities lending, and short selling. While short selling of individual stocks is not yet permitted, investors can take short positions through VN30 and VN100 index futures contracts.

Disclosure and foreign ownership limits

Disclosure standards are also being strengthened. The regulator and listed companies are increasing English-language disclosures to improve transparency and access for foreign investors.

A key bottleneck remains foreign ownership limits (FOL). The government is considering expanding foreign ownership in some sectors such as aviation, while many enterprises are actively removing or loosening ownership limits. As a result, the effective FOL on HOSE rose from 41.71% to 44.64% in 2025, supported by newly listed firms with foreign ownership up to 100%.

MSCI criteria outlook and remaining challenge

SSI Research says that if reforms continue to be implemented effectively, Vietnam could meet 17 of MSCI’s 18 criteria. The remaining obstacle is the degree of liberalization of the foreign exchange market, described as the biggest challenge requiring more time. The firm also notes that some emerging markets—such as India, Indonesia, and Korea—have not fully met this criterion, suggesting it is not an absolute prerequisite.

Expected market impact

The potential upgrade is expected to attract large foreign institutional capital, strengthen domestic investor confidence, and improve market liquidity. SSI Research adds that upgrade expectations often trigger capital inflows ahead of the official announcement, providing momentum during the preparation phase.