Vietnam has been upgraded to a Secondary Emerging Market from a Frontier Market status by FTSE Russell, as the global index provider recognises the progress Vietnam has made in developing its equity market, ready for increased foreign investment.
The reclassification marks a major step in Vietnam’s continued economic development, with the country meeting all the criteria set out by FTSE Russell
“The official recognition and upgrade of Vietnam’s securities market is clear evidence of the country’s sound development path and its growing capacity to integrate deeply into the global financial system,” said Mr. Nguyen Van Thang, Minister of Finance of Viet Nam.
“The Ministry of Finance remains committed to advancing deeper and broader reforms, maximising accessibility for both domestic and international investors, while accelerating the modernisation and digitalisation of its market infrastructure – with the objective of establishing an increasingly transparent and efficient market.”
The actions implemented by Vietnam to achieve Emerging Market status included removing the prefunding requirement for Foreign Institutional Investors and establishing a formal process for handling failed trades.
Vietnam will officially be recognised as an Emerging Market in September 2026, conditional on an interim review in March 2026.
The upgrade has been on the cards for several years, but it was widely expected that the reclassification would be confirmed this time around.
Vietnamese stocks have surged in the run-up to the decision, with the leading VN Index gaining 33% over the past year.
Looking to the future, the upgrade opens the doors to fresh external capital, which will undoubtedly boost Vietnamese stocks. However, experts have explained that the flows will be more gradual than one might think.
“The anticipated upgrade of Vietnam to emerging market status represents a significant milestone, though the immediate impact may be more modest than some expect,” said Craig Martin, Chairman of Dynam Capital, the manager of Vietnam Holding.
“While approximately 30% of frontier investors already have positions in Vietnam, the transition will prompt emerging market investors to evaluate whether to allocate capital to the country. Vietnam will represent around 1-2% of the broader emerging market universe initially, and initial capital inflows are projected to be relatively measured, ranging from $1-10 billion over the subsequent 12 months as investors gradually reallocate their portfolios.
“Although we don’t expect a wave of capital to hit Vietnamese stocks on day one, we are looking forward to fresh interest from international investors. Passive funds tracking emerging market indices will likely make the initial allocations, with active managers potentially following as they assess the opportunity.”
Martin continued to explain that the upgrade should be viewed in the wider context of Vietnam’s open-door policies that have positioned the country as one of the world’s leading export economies.
“However, the true benefit extends far beyond immediate capital flows,” Martin said.
“The regulatory reforms Vietnam has implemented to meet emerging market criteria represent the most significant achievement. These improvements create a more level playing field for foreign investors and enhance overall market readiness, benefiting both international and domestic participants alike.
“Ultimately, the upgrade will represent a positive first step in Vietnam’s continued market evolution, with the reform process itself being more valuable for the long-term trajectory of Vietnamese stocks than any single reclassification event.”