Vietnam could meet 17 of MSCI's 18 criteria.

Vietnam is on track to be upgraded by FTSE to an Emerging Market in 2026, with MSCI upgrades expected to be the next milestone over the medium to long term. SSI Research, with technical input from FTSE Russell, said Vietnam could surpass FTSE’s mid-cycle review due on the morning of April 8, 2026, and start receiving inflows from passive funds from September 2026.

Path to FTSE and MSCI upgrades

SSI Research said the reform process is accelerating and that, beyond FTSE Russell, MSCI is viewed as the next strategic milestone. The report highlighted the stable operation of the non-collateral required (NPF) trading mechanism. It also noted that the Central Counterparty (CCP) framework is being implemented on schedule to support improvements in three MSCI criteria: Clearing & Settlement, Stock Lending, and Short Selling.

While single-stock short selling is not yet allowed, investors can take short positions through index futures on VN30 and VN100. SSI Research also pointed to continued improvements in information disclosure standards, including regulators and listed companies enhancing English-language disclosures to support MSCI requirements on transparency, disclosure, and equal access for domestic and foreign investors.

Foreign ownership reforms and market access

Reforms to foreign ownership limits (FOL) were described as a major bottleneck, with the government considering relaxing foreign ownership in sensitive sectors. One example cited was aviation, where foreign ownership could be increased from 34% to 49%.

SSI Research said some companies have already reviewed or removed foreign ownership caps, citing LPB as an example. It added that further loosening of FOL restrictions remains under study and subject to policy refinement.

The report said these changes have helped improve the effective FOL ratio on HOSE from 41.71% to 44.64% in 2025, supported by the listing of several large-cap firms with foreign ownership up to 100%. If reforms are implemented effectively, SSI Research expects Vietnam could meet 17 out of 18 MSCI criteria.

Key constraint: FX liberalization

Despite progress, SSI Research said challenges remain, with FX liberalization identified as the biggest constraint. It noted that achieving full currency flexibility and unlimited risk management tools may take more time. The report also observed that some other emerging markets—such as India, Indonesia, Korea, the Philippines, Taiwan, Egypt, Brazil, and Colombia—have not fully met this criterion either, suggesting FX liberalization may be important but not necessarily an absolute prerequisite for inclusion on a watchlist or for official recognition as an emerging market.

Expected capital flows and market impact

SSI Research expects upgrades by FTSE Russell and MSCI to drive sizable foreign investment inflows, strengthen domestic investor confidence, and improve market liquidity. It said expectations of these events have already begun influencing investor behavior and could accelerate capital inflows ahead of the official upgrade.

For the FTSE timeline, SSI Research expects Vietnam to surpass FTSE’s mid-cycle evaluation on the morning of April 8, 2026, and to begin receiving passive fund inflows from September 2026. The report estimated that passive fund inflows into Vietnam could reach up to $1.7 billion, though it said disbursement is unlikely to occur in a single tranche. Instead, it is more likely to be spread across three to five installments on a quarterly basis to minimize market disruption.