Sharp market swings

Vietnam's stock market entered the Sept. 21 session at a significant milestone: the day its upgrade by FTSE Russell from frontier to secondary emerging-market status officially took effect.

But instead of the positive session some investors had expected, the VN-Index came under selling pressure and finished below the 1,800-point mark.

Selling emerged from the start of the session and intensified toward the close. The VN-Index ended down 15.99 points, or 0.88%, at 1,799.67. Trading liquidity on the Ho Chi Minh Stock Exchange was relatively low, with turnover exceeding VND17.3 trillion ($655 million).

The VN30 blue-chip basket was sharply divided, with 12 stocks advancing, one unchanged and 17 declining.

The most notable move came from SeABank's SSB, which unexpectedly hit its daily floor, dropping VND1,650 to VND22,450 per share. More than 2.3 million SSB shares changed hands, while sell orders for around 1.92 million shares remained unmatched at the floor price at the close. Foreign investors net sold around 440,000 SSB shares.

Among other large-cap stocks, Vingroup's VIC, whose chairman is billionaire Pham Nhat Vuong, fell VND6,200 to VND235,000. VHM dropped VND2,900 to VND68,100, while VRE lost VND750 to VND24,750. VPL was unchanged at VND81,200.

Several other major stocks, including HPG, MSN, MWG, VNM, SAB, VCB, STB, SSI and SHB, also posted sizeable losses.

On the other side of the market, FPT, GAS, GVR and BSR gained, alongside several banking stocks. TCB, VPB, ACB, BID, CTG and HDB all advanced.

Vietjet's VJC was a standout performer, hitting its daily ceiling after gaining VND9,000 to VND138,000 per share.

A notable feature of the session was that most of the 27 Vietnamese stocks selected for inclusion in the FTSE Global All Cap Index declined.

Among the Large Cap names, VCB, VIC and VHM fell. Small Cap stocks MSN, SHB, STB, SSB, SSI, TCX, VNM and VRE also declined. Only a number of constituents, including BID, HPG, VPB, FPT, HDB and VJC, gained.

SSB's drop to the floor came as the government had just approved a plan to continue modernizing the banking system and address weak credit institutions.

The plan calls for an end to excessive lending concentrated among certain companies, large customer groups or projects within corporate ecosystems or affiliated networks where such exposure could create risks for credit institutions.

Foreign investors also failed to provide support during the first session following the upgrade, recording net sales of more than VND680 billion ($25.8 million).

VHM, VIC, FPT and SSI were among the stocks facing strong foreign selling, while VPB, CTG, BSR and MBB recorded significant net foreign buying.

Upgrade opens the door to capital, but does not guarantee higher prices

FTSE Russell's official upgrade of Vietnam marks an important milestone for the country's capital market, broadening its potential access to international investment flows.

More than $22 trillion in global assets use FTSE Russell indexes as benchmarks, meaning Vietnam's inclusion in the secondary emerging-market category could provide greater access to international capital.

At an event on Sept. 17, screens at the New York Stock Exchange displayed Vietnam's national flag and a message congratulating the country on its move from frontier to emerging-market status.

Representatives of several major international financial institutions attended the event. Vanguard's emerging-market index funds were also announced as adding Vietnamese equities to their portfolios from Sept. 21.

Agribank Securities estimates that Vietnam could attract around $7-9 billion in foreign capital over the next one to two years, including about $2-3 billion in mandatory passive flows.

That would represent a significant source of capital for Vietnam's market.

But an upgrade does not mean investment will immediately pour into the market, nor does it guarantee that share prices will rise on the effective date.

Some expectations surrounding the upgrade had already been priced into stocks.

Kafi Securities said market valuations remained attractive, with the price-to-earnings ratio below its 10-year average, while after-tax profits across the market were forecast to grow 14-21% in 2026.

Experience in other markets that have undergone upgrades - including Kuwait, Saudi Arabia, Qatar, the United Arab Emirates, Romania and Pakistan - also suggests that much of the rally can occur before an upgrade formally takes effect.

In Vietnam's case, investors had anticipated an upgrade for years. Passive capital is also allocated in stages rather than being deployed all at once, meaning initial flows may not be large enough to overwhelm selling pressure across the broader market.

More importantly, Vietnamese stocks remain exposed to both global and domestic macroeconomic conditions.

The US Federal Reserve recently raised its benchmark rate by 0.25 percentage point to a target range of 3.75-4%.

Higher international interest rates can reduce the relative appeal of assets in emerging markets.

At home, deposit rates for terms of six to 12 months have been rising, reaching around 8-10% a year at some banks. Inflation risks, higher global oil prices and exchange-rate volatility are additional factors facing the market.

Sept. 21 may therefore mark the beginning of a new chapter for Vietnam's stock market in terms of its structure and access to global capital, but it does not resolve the market's underlying challenges.

The upgrade creates additional opportunities. Whether capital stays, which stocks attract it and how far valuations can rise will continue to depend on corporate earnings growth, valuations, interest rates, exchange rates, the quality of listed assets and investor confidence.

The VN-Index's 0.88% decline on the first day of the upgrade underscores that Vietnam's new status may open the door to a wider pool of international capital, but turning that opportunity into a sustained growth cycle will depend on many other conditions.

Manh Ha