In the early hours of October 8, FTSE Russell announced that Vietnam’s stock market (VN-Index) will be upgraded to "Secondary Emerging Market" status, effective from September 21, 2026, after a mid-term review scheduled for March 2026.

This marks a historic milestone for Vietnam’s capital market, with long-term benefits expected thanks to robust capital market reforms.

On October 8, the announcement prompted cautious trading, leading several sectors to weaken unexpectedly.

Although the market opened with enthusiasm, the VN-Index dipped below its reference level before recovering to close 12.53 points higher at 1,697.83.

Foreign investors returned with a net buy of nearly VND 234 billion (approx. USD 9.6 million), boosting sentiment and liquidity, which surpassed VND 33 trillion (around USD 1.36 billion) - an improvement from recent sessions.

While retail investors remained cautious, financial experts and securities firms expressed optimism.

Gary Harron, Head of Securities Services at HSBC Vietnam, hailed the long-awaited upgrade as a clear sign of Vietnam’s rising international status.

Despite conditionality, the move opens up long-term opportunities thanks to Vietnam’s ongoing market reforms.

According to Harron, Vietnam has emerged strong against doubts, reaffirming its standout position among frontier and emerging markets.

He highlighted Vietnam’s Q3 GDP growth of 8.23% - the highest since 2011, excluding the 14.38% rebound in 2022 following the pandemic.

The HSBC expert noted that the upgrade will become effective after the mid-2026 review, which will assess Vietnam’s progress in enabling access for global brokerage firms - a key condition for supporting index replication.

Hoang Viet Phuong, Director of Research and Investment Advisory at VNDirect, called FTSE’s announcement a “historic milestone” after seven years on the watchlist.

He said this reflects Vietnam’s strong commitment to comprehensive reforms that enhance transparency and align local standards with international practices, ultimately making the market more accessible for global investors.

A leap in quality

Gary Harron emphasized that the reclassification, though conditional, places Vietnam just two levels below the "Developed Market" group.

It is also a recognition of efforts by the government, regulators, and market participants.

He noted that Vietnamese authorities have announced plans to meet MSCI’s Emerging Market criteria by 2030, which could unlock even greater investment flows.

Harron stressed that the upgrade is not just symbolic - it will impact how analysts, the media, and investors view the market and influence global asset allocation decisions.

For Vietnam, shedding the “frontier market” label is a form of validation and assurance.

It can significantly shift investor sentiment and behavior, reshape Vietnam’s long-term economic trajectory, and reduce dependency on any single trade partner.

Vietnam’s capital market has grown substantially in both scale and depth.

Market capitalization and the number of trading accounts have risen more than sevenfold over the past decade, now nearing 11 million accounts.

This year alone, the VN-Index has surged by a third, surpassing its previous peak during the COVID-19 recovery, amid strong optimism over Vietnam’s role in global supply chains.

According to HSBC, the upgrade will further fuel reform momentum.

The Vietnamese stock market has come a long way and has even greater potential ahead.

The participation of long-term institutional investors - such as pension funds that play a key role in developed markets - can enhance stability and improve capital access for listed firms.

HSBC’s Global Investment Research Division estimates that foreign capital inflows could reach USD 3.4–10.4 billion from active and passive investment funds post-upgrade.

VNDirect forecasts an initial inflow of USD 1–1.5 billion from mutual funds and ETFs tracking FTSE indices.

Stocks likely to benefit directly include VIC, VHM, VCB, SSI, MSN, VNM, FPT, and HPG.

Regarding market performance, VNDirect notes that much of the recent optimism surrounding the upgrade has already been priced in.

Since the start of the year, the VN-Index has risen approximately 33%, with valuations now approaching the MSCI Emerging Market average.

Although foreign inflows are expected to rise, large-scale allocations may not happen immediately.

Only a few active funds are likely to invest ahead of the official upgrade in September 2026.

Therefore, the market may react briefly to FTSE’s announcement before shifting focus back to fundamentals - such as Q3 earnings reports, government growth policies, macroeconomic stability, and Vietnam’s medium-to-long-term growth story.

Maybank Investment Bank (MSVN) anticipates that, after a consolidation phase in October, the VN-Index will resume its upward trend, potentially hitting 1,800 points.

The rise would be driven by expansionary fiscal and monetary policies, stronger Q4 corporate earnings, and renewed foreign capital inflows.

Manh Ha