Vietnam's capital market under the lens of FTSE Russell

Securities experts Wanming Du (FTSE Russell expert) and Mr. Thomas Nguyen - Director of Foreign Markets, SSI Securities Corporation believe that upgrading to Primary Emerging Market is not just a technical milestone that has been "graded A", but is the starting point of a new generational capital cycle, requiring the Vietnamese market to go through a 12-36 month journey of preparation in terms of infrastructure, products and how to tell its own story to the world.

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Vietnam reaches technical finish line, begins implementation phase

From FTSE Russell’s perspective, Ms. Wanming Du affirmed that Vietnam’s upgrade status is no longer a “under review” story but has been technically confirmed. If 12 months ago, Vietnam only met 7 out of 9 criteria, then by the time of the announcement in October, all 9 criteria had been completed. This means that Vietnam has fully passed the requirements to be classified as a Secondary Emerging Market in the FTSE classification framework.

In terms of position, according to Mr. Thomas Nguyen’s analysis, Vietnam can be considered to have “reached the finish line” on the ranking map. However, a large number of domestic investors are still wondering because the concept of “temporary phase”, “checkpoint”, or the time frame until September to officially be included in the index basket still appears in the market. The question is: is this a form of “additional challenge” due to Vietnam’s weaknesses, or just a step in the standard implementation process that is already familiar to other markets?

From operational practice, Ms. Wanming Du emphasized that the one-year period from announcement to official implementation is the FTSE standard applied to many previous upgrade cases. The reason does not lie in “holding” or “suspending” the market, but comes from the nature of the group change: removing a market from the Frontier basket and integrating it into the Primary Emerging basket in the global benchmark index system.

At that time, the investor structure associated with each index basket was forced to shift. Funds specializing in tracking Frontier markets needed time to gradually divest, while funds following Emerging indices began to prepare infrastructure, procedures and operational processes to approach Vietnam as a new market in their portfolio. Along with that was a very specific requirement: the brokerage, custody and operational systems must allow funds to simulate the Vietnamese trading index through the global broker model they are using for other Emerging markets, instead of having to go through a separate complex “onboarding” process locally.

From the perspective of institutional investors, this requirement is very clear: do not want to design an additional set of specialized processes just to trade a market that still accounts for a small proportion of the global portfolio. The less “process friction”, the higher the ability to attract capital flows. Therefore, the 12-month period announced by FTSE is essentially an infrastructure and operational preparation step for the entire related ecosystem, from funds, global brokers to local securities companies - in which units such as SSI have been participating in providing intermediary bridges for many years.

So, in name, Vietnam has been upgraded; what remains is the technical implementation to make that upgrade work smoothly in the global capital system. This is the important distinction between “not upgraded” and “upgraded but in the implementation phase”.

From "small pond" to "ocean of capital"

One of the major concerns of individual investors is the short-term price reaction. After the news of the upgrade, the Vietnamese stock market did not explode as many people expected, even going sideways or making slight adjustments. With the mentality of “waiting for this moment all my life”, many investors asked the question: why is the good news accompanied by a lackluster price movement?

Here, Mr. Thomas Nguyen gives a principled perspective: a healthy market is a mechanism for discounting the future. When the market has increased by 25-30% in a year, part of the expectation related to the upgrade story is likely to have been reflected in the price in advance. The period after the upgrade announcement thus becomes a period of "digesting" information, similar to the body needing time to digest after a hearty meal. In terms of risk management, the fact that the market does not increase continuously but enters a state of accumulation after a year of strong growth is considered healthy for long-term investors.

On a deeper level, the core story lies not only in the short-term fluctuations but in the scale of the “capital ocean” that Vietnam is entering. Ms. Wanming Du analyzed: the capital flow tracking Frontier indices in the world is actually only a very small part compared to the amount of assets under management (AUM) linked to Emerging Market indices. When upgraded, Vietnam moves from the “small pond” of Frontier to the “capital ocean” of Emerging, where the amount of capital chasing can be dozens of times larger.

According to estimates discussed in the program, the money chasing Emerging markets can be about 15–20 times that of Frontier markets; if we consider 1 dollar operating in the Frontier basket, it can be 20–25 dollars in the Emerging basket. This explains why upgrading is not just a story of attracting a few specialized capital flows but a process of “opening the door” to a whole new class of investors of a completely different scale.

However, that capital did not “come in” in just a few weeks after the announcement. The FTSE implementation mechanism was outlined quite clearly by Ms. Wanming Du. For the next 12 months, the key points are:

• There will be a “checkpoint” in March to confirm the progress of the implementation and announce a specific roadmap, including the number of tranches.
• September 2026 is the expected time to officially start implementing the inclusion of Vietnam in the index basket as previously confirmed.

About a month before September, FTSE will announce the list of stocks expected to be added to the index. This information has a big impact on the market, because it is the group of stocks that will receive passive capital from index-simulating funds. On “rebalance day”, the actual money will flow into these stocks according to the rules that have been publicly announced and transparently to avoid shocking the market.

Notably, according to Ms. Wanming Du, FTSE does not stop at upgrading and “leaving”. The cooperative relationship with the management agency and the exchange also aims to develop more diverse financial products in the Vietnamese market. Currently, the products are still considered relatively monotonous, while the requirement for product depth – from the number of listed stocks, new IPOs to index products, derivatives – is very urgent if Vietnam wants to take full advantage of the opportunities from the “tsunami” that is expected to form in the next 12-36 months.

The year 2025 is described as an extremely favorable time for this turning point: political stability, region-leading liquidity, positive GDP growth, along with milestones such as the 80th anniversary of National Day and the 25th anniversary of the formation of the capital market. In that “jigsaw”, upgrading the capital market is the complete piece that helps strengthen investors’ confidence that Vietnam is on the right track, not just in a short-term price cycle, but in a generational vision.

The “Ferrari” named Vietnam and the story that needs to be told to the world

Another important content of the discussion was the image and media story of the Vietnamese market in the eyes of global investors. Ms. Wanming Du commented that Vietnam is a "gem" with many favorable factors that have been verified in the past two years: improved infrastructure, political stability, benefits from supply chain shifts, liquidity and GDP have improved significantly. However, the global financial world is still distracted by "hot spots" such as the US, China, and the EU, while Vietnam has not received strong enough media coverage outside of Asia.

From the securities business side, Mr. Thomas Nguyen uses the image of a “Ferrari” to describe Vietnam’s potential: a high-quality asset that is not yet known to many people because the majority of global investors are busy looking at “Teslas” – that is, the large, familiar markets in the portfolio. As a professional, he has the privilege to tell the story of this “Ferrari”, but if he were in the position of a large portfolio manager in New York or Hong Kong, the attention would still be focused on the markets that account for a large proportion of the index.

The takeaway message is: Vietnam needs to market itself consistently, accurately, and persistently, rather than just taking a “happy” approach in the short term. The upgrade is a milestone, but for large-scale capital flows to really stick, the story of Vietnam must be told and retold in a language that global investors understand and are familiar with: transparent rules, an operating model consistent with international standards, an accessible investment environment, and a sustained institutional reform roadmap.

On a softer level, Wanming Du’s sharing about Hanoi also adds another layer of meaning to Vietnam’s appeal. The fact that an international expert described Hanoi as “surreal”, a place that both gathers international brands and maintains its traditional identity in every street corner and sidewalk restaurant, shows that Vietnam’s cultural and social appeal is not only on the electronic stock price board. It is a vibrant context in which the capital market is developing, a less talked about background that contributes to shaping the emotions and beliefs of foreign investors when deciding to stay long-term.

Source: https://thoibaonganhang.vn/thi-truong-von-viet-nam-duoi-lang-kinh-ftse-russell-174624.html