Morgan Stanley Capital Investment (MSCI) is to release the 2019 Annual Market Classification Review on May 13. According to VNDirect Securities, it is highly possible that Vietnam will not be shortlisted for reclassification from the current status of a frontier market to emerging.
However, if Argentina is upgraded, Vietnam’s proportion in MSCI Frontier Markets Index and MSCI Frontier Markets 100 Index may increase by 3 percent, and Vietnam’s shares with large capitalization value would be able to receive VND1.5 trillion more foreign capital.
It is estimated that the total assets of the funds making passive investments based on MSCI indexes is $3.75 million.
It is estimated that the total assets of the funds making passive investments based on MSCI indexes is $3.75 million. These include Schroder International Selection, Templeton Frontier Markets Fund and iShares MSCI Frontier. By the end of March, the funds had allocated $493 million to the Vietnamese stock market, $671 million to Kuwait and $501 million into Argentina.
If Argentina shifts to the group of emerging markets, the amount of $501 million would be re-allocated to the remaining frontier markets, including Vietnam. Vietnam is expected to get the biggest benefit because it accounts for a large proportion in MSCI Frontier Markets Index and MSCI Frontier Markets 100 Index.
As MSCI stated last June, Vietnam’s proportion in the two indexes may increase by 3 percent from the current 16-17 percent.
“The shares with large capitalization value will benefit the most,” VnDirect Securities commented. The shares expected to catch the eyes of frontier investment funds include VNM, VIC, VHM, VCB, SAB, MSN, HPG and GAS.
The continued capital flow into the market will serve as important support to the market in the second quarter of 2019 in the context of the lack of good information.
“2019 won’t be a smooth year for the global stock market. In such conditions, Vietnam is not likely to swim against the current,” VDSC commented.
In addition to the capital from the funds making passive investments based on MSCI Frontier Markets Index and MSCI Frontier Markets 100 Index, estimated at $66 million, Vietnam will also receive capital from active funds, and funds based on other benchmarks such as MSCI Frontier Emerging Index and S&P/BNP Mellon New Frontier Index.
Vietnam’s stocks are being held mostly by Schroder Fund ($113 million) and Magna Fund ($127 million).
VNM accounts for the largest proportion in iShares MSCI Frontier 100 ETF (3.56 percent), followed by VIC (3.55 percent), VHM (2.29 percent), MSN (1.47 percent), HPG (1.25 percent) and VRE (1.23 percent).