(Bloomberg) — Vietnam clinched a long-awaited upgrade to emerging-market status from FTSE Russell, a shift that could attract billions of dollars in fresh capital for its financial markets.
The country’s stocks will be included in FTSE Russell’s secondary emerging markets grouping, joining the likes of China, India and Indonesia. The upgrade from frontier status will be effective on Sept. 21, 2026, according to a statement.
Most Read from Bloomberg
“The reclassification of Vietnam reflects the implementation of key market infrastructure enhancements,” David Sol, global head of policy at FTSE Russell, said in a statement.
Vietnam was first added to FTSE Russell’s watchlist for potential reclassification in September 2018, and authorities have undertaken sweeping reforms to align the market with global standards. The country will now be subject to an interim review in March next year. FTSE had predicted an upgrade would add up to $6 billion in redirected foreign inflows to Vietnam.
Foreigners have been net sellers of the country’s stocks year-to-date and notched record monthly outflows in August. HSBC Holdings Plc projected last month that an upgrade would lead to inflows of $3.4 billion, adding that about 38% of Asia funds and 30% of global emerging market funds already hold Vietnamese stocks.
“Such a magnitude of capital inflows would be sufficient to reverse the persistent foreign net selling seen in recent years, reaffirming a turning point for the market,” said Tyler Manh Dung Nguyen, chief market strategist at Ho Chi Minh City Securities.
Vietnam’s benchmark VN Index climbed 33% this year to fresh highs through Tuesday, driven by strong economic growth and hopes for the upgrade as retail traders piled in. It rose as much as 3% on Wednesday before paring gains.
The upgrade should bring new capital inflows to the nation, which could boost the Vietnamese dong, said Brendan McKenna, a strategist at Wells Fargo in New York. Sustainability of those flows is key, and it’s “certainly a step in the right direction for the economy and currency,” he added.
Not every factor about an upgrade is positive. As of September, Vietnam held the largest weighting of about 32% in the FTSE Frontier Index, followed by Morocco at nearly 20%. Moving into an emerging market index would mean competing with bigger, more established countries.
