Vietnam joins FTSE Russell emerging market benchmark

The index provider estimates the ‌inclusion could redirect up to US$6 billion into Vietnam, which has been on the watchlist since 2018 for entry into a category that also includes China and India.

Vietnam's benchmark stock index opened up 0.54% on Monday, led by banks, before retreating slightly.

Anticipation of the upgrade helped revive foreign interest in Vietnamese equities. According to data from the Ho Chi ⁠Minh Stock Exchange, overseas investors bought a net VND2.7 trillion ($104 million) worth of shares last week, but they remain net sellers by about VND91 trillion.

After the initial excitement, however, interest is likely to fade, said Thomas Nguyen, chief global markets officer at SSI Securities Corporation, the country's second-largest broker by market share.

"I expect the market to remain relatively subdued until we approach 2027," Nguyen said.

The transition will take place in four stages through 2027, with 10% added in September, an additional 20% in March, and 35% each in June and September ‌of ⁠next year.

"As we get closer to the next inclusion tranche in March, attention should pick up again, and because the allocation will be larger, local investors are likely to see a more noticeable impact," Nguyen added.

Following the upgrade, asset management firm Vanguard plans to boost investment in Vietnam to about $2.5 billion over ⁠the next few years.

Some concerns remain, including foreign ownership limits and free-float constraints for some companies.

The milestone has also revived expectations of a future upgrade by MSCI. Investors say the introduction of a central ⁠counterparty clearing mechanism, expected in 2027, could help Vietnam move closer to meeting MSCI's market-access requirements.

Nguyen said the rollout of a central counterparty clearing mechanism would be crucial to Vietnam's efforts ⁠to secure a future MSCI upgrade.

"FTSE is about access into the market. MSCI is about scale," he said. "That's why central counterparty clearing is such an important thing," he added.