Vietnam has been added to FTSE's reconsideration watchlist on the secondary emerging market

Vietnam has been added to FTSE Russell’s reconsideration watchlist on the secondary emerging market.

“If Vietnam is added to the group of emerging markets together with India and China, the market will be able to attract billions of dollars worth of foreign capital, especially from international investment funds,” said Tran Truong Manh Hieu from KIS Vietnam.

With large scale and an important position in Asia, experts estimate that the Chinese market may amount to 5.5 percent of the FTSE Emerging Index basket, equivalent to about $10 billion of passive investment capital from investment funds operating on the basis of FTSE tracker.

Vietnam, with its modest scale, will see a small proportion in the FTSE Emerging Index basket. However, 1-2 percent would be high enough to help bring more capital to Vietnam.

According to Phan Le Thanh Long from AFA Research & Education, the conditions in Vietnam are mature. 

“FTSE and MSCI won’t miss a market with huge volume of goods like Vietnam, a market equal to 70-80 percent of GDP and stable macroeconomic environment,” Long said.

However, experts stressed that the presence in the watchlist doesn’t indicate official upgrading. Vietnam will still be in the watchlist for at least 12 more months before it gets an official upgrade. 

According to Hieu, Vietnam can satisfy nine requirements to become a secondary emerging market. If Vietnam can improve the others, it will surely be able to get an upgrade in one or two years.

The upgrading will have a positive impact on listed companies. Unlisted companies would also, to some extent, get benefits thanks to the higher interest of foreign investors. 

More importantly, as analysts commented, Vietnam would have one more ‘weapon’ to fight against the risk caused by greenback appreciation, which causes capital flow to the US.

Banking will get biggest benefits if Vietnam becomes an emerging market. Vietnam’s banks will have to observe the standards in Basel II Accord by 2020, which means that they have to raise regulatory capital to ensure the CAR (capital adequacy ratio).

Vietcombank has approval to seek foreign investors to sell 10 percent of shares, while BIDV (the Bank for Investment and Development of Vietnam) is planning to transfer 15 percent of shares to partners from South Korea.

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