Vietnam's stock market upgraded: Opportunity to welcome capital flows from US ETF funds

VTV.vn - Mr. Sam Stovall said that Vietnam's upgrade to an emerging market will help attract strong international capital flows, especially from US ETF funds.

Vietnam's stock market meets all criteria for upgrading

At 3:00 a.m. today (October 8) Hanoi time, market rating organization FTSE Russell announced that Vietnam's stock market has met all official criteria and has been upgraded from a frontier market to a secondary emerging market.

This event is an important milestone marking the strong development of the Vietnamese stock market, recognizing the comprehensive reform efforts in recent times of the entire Securities industry in accordance with the Party and State's policies to develop a transparent, modern, and effective stock market according to the highest international standards.

The results were achieved thanks to the strong direction of the Government, the Prime Minister, the Ministry of Finance ; the close coordination of the State Bank and relevant ministries and branches; the support of the Stock Exchanges, the Vietnam Securities Depository and Clearing Corporation (VSDC), market members, news agencies and the press; as well as the valuable support from the World Bank, FTSE experts and global investment institutions.

The upgrading of Vietnam's stock market to secondary emerging market status marks the beginning of a new development phase, requiring deeper and broader reforms to achieve long-term goals in the future.

Responding to VTV reporters about FTSE's decision, as the state management agency for securities and the stock market, the State Securities Commission (SSC) said it will continue to closely coordinate with FTSE Russell to ensure the official transition process follows the roadmap.

The State Securities Commission is committed to continuing to implement comprehensive solutions to create maximum conditions for domestic and foreign investors to access the market; at the same time, perfecting the legal framework, modernizing and digitizing the infrastructure, aiming to develop the Vietnamese stock market to be increasingly transparent and effective, promoting deeper integration into the global financial market.

The upgrade is the beginning of a new phase of development.

VTV reporters also interviewed expert Sam Stovall - Head of Investment Strategy Consulting, CFRA Consulting Company. Mr. Sam Stovall gave positive assessments on the prospects of the Vietnamese stock market being upgraded by FTSE Russell, especially from the perspective of investors in the US.

"I think this is very important and supportive. The demand for investing in frontier markets in the form of ETFs from US investors is still very limited. There have been nine frontier market-focused ETFs launched in the US and all have closed, except for two ETFs focused on Vietnam. So, I think, Vietnam's upgrade to emerging market status is very important.

In the US, there are currently $125 billion in emerging market ETF assets linked to the FTSE Russell index. These ETF managers will now need to allocate a portion of their portfolios to Vietnamese stocks added to the FTSE emerging market index. This will help the Vietnamese market receive more international capital flows in the coming time," said Mr. Sam Stovall.

A boost to international stock markets

Vietnam has officially entered the path to emerging market status. This is assessed by experts to attract passive capital flows, which are expected to reach about 600 million USD from ETF funds, not to mention cash flows from active funds. International experience shows that, in parallel with reform efforts to be recognized as emerging markets, many economies have witnessed more sustainable and substantial growth in capital markets.

In the Middle East, the stock markets of Qatar and the United Arab Emirates achieved double-digit growth immediately after being upgraded to emerging market status in 2014. More recently, in the period 2018-2020, being upgraded to emerging market status by MSCI and institutional reforms also helped the stock markets of Saudi Arabia and Kuwait record strong growth and attract capital flows of more than 10 billion USD, respectively.

Malaysia was announced by FTSE Russell to be upgraded to advanced emerging market status in 2010. Immediately following the announcement, the market’s main index recorded a gain of more than 19% that year, thanks to foreign investment inflows and improved investor confidence.

In 2009, FTSE Russell upgraded South Korea from an emerging market to a developed market, contributing to the KOSPI stock index rising nearly 50% that year. The upgrade improved liquidity, reduced volatility and promoted the participation of international investment funds, creating a solid foundation for the sustainable development of the Korean capital market.

Markets will need more continuous reforms to ensure sustainable market development in the long term.

According to international experts, after the short-term positive boost from the upgrade, the markets will need more continuous reforms to ensure sustainable market development in the long term.

Mr. Heron Lim - Economist, ESSEC Business School said: "With the successful market upgrade, Vietnam's image will become more attractive to international investors and capital will flow strongly into listed enterprises. This will help develop Vietnam's financial industry sustainably. This is a milestone in a long journey. Because besides the upgrade, previous reforms are also important factors to help attract more capital flows into the economy. When the reforms are completed, the upgrade title will be a step to affirm that Vietnam has reached its destination".

There are many expectations from the market upgrade. That is to help attract more foreign capital, improve transparency, as well as standardize market operations according to global standards. And for the Vietnamese stock market itself, the upgrade will contribute to promoting listed corporate governance standards, increasing liquidity and improving the quality of stocks on the market.

Source: https://vtv.vn/chung-khoan-viet-nam-nang-hang-co-hoi-don-dong-von-tu-quy-etf-my-100251008093202493.htm