Morgan Stanley Capital International (MSCI) on June 25 announced the results of the 2019 annual market classification review for 85 markets, in which Vietnam failed to make its way to the watch list for reclassification.
Following the announcement, the MSCI Kuwait index would be included in the emerging market index beginning June 2020, a move that could trigger billions of dollars of inflows from passive funds.
MSCI’s decision for Kuwait inclusion came as no surprise, given its improvements compared to the previous review on June 2017, especially the removal of foreign ownership cap in the banking sector. Vietnam, meanwhile, remains a work in progress.
However, as Kuwait moves to emerging market status, Vietnam’s weights could be increased in the MSCI Frontier Market Index and MSCI Frontier Market 100 Index to 25.8% and 30%, respectively, said Viet Dragon Securities Company (VDSC).
The passive fund Ishares MSCI Frontier 100 ETF alone could invest an additional of US$65 million in Vietnam, while active funds with at least US$3 billion in investment capital are monitoring the MSCI Frontier Market Index, including the US$800-million in investment capital in Kuwait and Argentina.
SSI Securities Corporation, the largest brokerage house in the country, said the revised Securities Law, which is on track for ratification and set to take effect in early 2021, could put Vietnam in the front for being included in MSCI’s watch list and later upgraded to emerging market status.
Every June, MSCI announces the results of its evaluation of the equity markets for countries around the world, to determine each country’s classification as a developed, emerging, frontier or standalone market.
An important component of MSCI’s decisions is investors’ experience of market accessibility, rather than merely an abstract analysis of regulatory language. Hanoitimes
One year after failing to enter MSCI’s watchlist for a market status upgrade, it is still uncertain if Viet Nam will make it this year despite efforts made to improve market conditions.