Vietnam Special Equity Market Note | FTSE Emerging Market Upgrade

FTSE EM Upgrade - Meaningful Impact if  Upgraded, Though Decision Remains Uncertain

This report provides a comprehensive update on Vietnam’s path toward the FTSE Emerging Markets (EM) upgrade and the implications for capital flows and further market development. Below are the Key Highlights:

• Vietnam has met 7 out of 9 FTSE Emerging Market (EM) criteria and introduced a technical mechanism for non-prefunding (NPF) through brokerage firms under Circular 68/2024/TT-BTC.
• The government has made numerous efforts, including the issuance of Decree 245/2025, which lays the foundation for a Central Counterparty (CCP) model and streamlines account opening for foreign investors. However, CCP is a complex market infrastructure requiring dedicated technical systems, mechanisms, and legal frameworks. It is targeted to be completed in 1H 2027, hard deadline on December 2027.
• The FTSE Russell Index Governance Board will meet late September to make a final decision. The Vietnamese government has shown clear commitment and determination, yet it is difficult to predict whether Vietnam is upgraded until the final announcement is made.
• The VN-Index has corrected ~5% from its all-time high at 1,711 points. Many large-cap stocks adjusted 5%-10%, while mid-cap stocks down 10%–30% in the broad market. This partly reflects uncertainties regarding the FTSE EM upgrade outcome. We view the market status upgrade is more of a sentiment catalyst in the near term. We do not expect meaningful inflows soon even if the market upgrade is granted this September 2025. The majority of flows and positive market impacts shall be happening from 2026 onward.

We emphasize both the substantial reforms already implemented and the critical steps still required, noting that historical experience shows market rallies tend to be gradual and tied to actual inclusion phases rather than the announcement date. Regardless of the outcome, Vietnam’s macro backdrop and policy momentum should help position the market well for sustained development.