In its latest report reviewing market developments after January 2026, SSI Research noted that macroeconomic data continued to reflect sustained growth momentum.

Recent liquidity fluctuations were largely technical and seasonal, rather than indicative of systemic risk.

At the same time, capital market reforms have been implemented consistently, reinforcing prospects for an upgrade by FTSE Russell and laying the groundwork for MSCI to consider placing Vietnam on its Watchlist.

On February 3, 2026, the Ministry of Finance issued Circular 08/2026/TT-BTC, amending Circulars 96, 120 and 121, which govern information disclosure, trading and securities company operations.

The Circular took effect immediately.

Its objective is to create more favorable conditions for foreign investors while tightening settlement discipline and enhancing operational standards, serving the roadmap for FTSE Russell to reclassify Vietnamese equities into the Secondary Emerging Market basket from September 2026.

A key reform introduces a new trading method allowing foreign investors to place orders through global securities firms without opening a trading account at a domestic brokerage.

Investors must still register for a trading code and maintain a custody account with a depository member.

Cash and securities settlement will continue to be processed through the VSDC system as currently structured.

This approach significantly reduces time, procedures and contractual burdens, especially for large funds already working with global brokerage firms.

It also brings Vietnam closer to international practices.

To support the new mechanism, the Circular clarifies legal and operational responsibilities among foreign intermediary brokers, domestic securities companies and related service providers.

It raises standards for order receipt and control, risk management, data governance and segregation between proprietary and client accounts.

The Circular also refines the non-prefunding (NPF) mechanism, seeking a balance between investor convenience and market discipline.

Settlement violations under NPF by institutional investors will no longer be publicly disclosed, but must be reported the same day to the State Securities Commission, VSDC and VNX.

Sanctions, however, are tightened.

Violators will face suspension from NPF trading for between seven and 180 sessions and must fully prefund 100% of purchase orders during that period.

Another notable improvement is the removal of stock code restrictions for NPF transactions, eliminating a major obstacle for index-tracking investment strategies.

The Circular further supplements risk-handling mechanisms for settlement through agreements among securities companies and coordination with custodian banks, ensuring ownership transfer and cost recovery in cases where investors fail to fulfill payment obligations.

According to SSI experts, Circular 08/2026/TT-BTC represents a substantial upgrade to Vietnam’s capital market infrastructure.

Although primarily designed to meet FTSE Russell’s upgrade criteria, the changes directly address several long-standing MSCI concerns regarding market accessibility, settlement reliability and operational transparency.

The MSCI story remains a medium-term narrative.

However, the investable universe has clearly expanded, and Vietnam now approaches upcoming reviews from a more proactive position.

MSCI’s recent review of free-float calculation methodology in Indonesia has heightened risks of index-related capital outflows and raised the possibility of a downgrade to Frontier Market status for that country.

This development underscores the growing sensitivity of emerging markets to ownership structures and free-float transparency.

In this context, Vietnam stands out with a relatively healthy and clearer free-float structure, reflecting distinctive corporate ownership characteristics and significantly reducing the likelihood of facing similar systemic risks.

“For Vietnam, the next key milestone is potential inclusion in MSCI’s Watchlist in June 2026.

Fundamental drivers are increasingly converging.

Vietnam now meets most of MSCI’s market accessibility criteria, supported by the increasingly stable operation of the NPF mechanism, progress in implementing a central counterparty clearing model (CCP), expansion of hedging and short-selling tools via index futures, significant improvements in English-language disclosure, and ongoing enhancements to foreign ownership limits,” SSI assessed.

Notably, the overall foreign ownership limit ratio across the market, particularly on HoSE, improved markedly in 2025 and early 2026.

This was driven by the addition of large-cap stocks offering 100% foreign room.

The expansion meaningfully broadens the investable universe for index funds and enhances the representativeness and depth of Vietnam within international index baskets.

Remaining challenges are largely related to the degree of foreign exchange market liberalization, a key component in MSCI’s evaluation framework.

However, this is not necessarily a decisive bottleneck, given that several emerging markets within MSCI indices have yet to fully meet ideal conditions regarding exchange rate regimes and capital flow mechanisms.

Overall, SSI concludes that Vietnam will enter 2026 with its most advantageous structural position ever for MSCI reclassification.

The upgrade path is no longer merely a long-term expectation.

It is increasingly becoming a tangible objective with a clearer and trackable timeline.

Nguyen Minh