MSCI upgrade hopes fuel momentum in Vietnam's stock market

MSCI upgrade hopes fuel momentum in Vietnam's stock market

Following its FTSE Russell promotion, Vietnam is now focusing on securing a place on MSCI’s watch list, a key step towards attracting larger foreign investment flows into the country’s capital markets.

According to the presentation of State Securities Commission (SSC) chairwoman Vu Thi Chan Phuong at a working session with Minister of Finance Ngo Van Tuan on May 26, total capital raised through the stock market in the first four months of 2026 reached nearly $3.4 billion, while corporate bond issuance amounted to almost $2.42 billion, representing increases of 52 per cent and 42 per cent, respectively, compared with the same period last year.

“Based on reviews of shareholder meeting resolutions from listed companies, approximately $16.82 billion is expected to be raised through the stock market in the rest of 2026. A number of major businesses are preparing capital increase plans and initial public offerings accompanied by listings this year,” Phuong said.

In terms of market reclassification, FTSE Russell has confirmed the upgrade of Vietnam’s stock market to emerging market status, effective from September, with around 30 Vietnamese stocks set to be added to its benchmark indices.

According to the SSC chairwoman, international institutions have also begun opening accounts to deploy capital into the Vietnamese market. Among them, Vanguard Group, one of the world's largest investment management companies based in the US, is estimated to invest at least $1.5 billion.

Improving product quality, upgrading technological infrastructure, and increasing the supply of listed securities remain key priorities in attracting additional capital flows into the stock market.

Investors continue to await a new catalyst from market reclassification, particularly the prospect of an MSCI upgrade.

Previously, many securities company executives and market analysts projected that Vietnam would have a strong chance of being added to MSCI’s upgrade watch list as early as June this year.

Under its schedule, MSCI will publish its 2026 Global Market Accessibility Review on June 19 and its 2026 Annual Market Classification Review on June 24.

Truong Quang Binh, director of Retail Client Research at Yuanta Securities Vietnam, said that market reclassification would represent an important milestone, especially in attracting foreign investment flows into Vietnam’s capital market.

“Foreign investors are still net sellers. In addition to international market volatility, Vietnam’s stock market is entering a pre-upgrade phase, prompting some frontier-market funds to gradually withdraw capital. However, positive impacts are expected to return,” Binh noted.

Vietnam’s stock market has made significant progress in recent years, including the launch of the KRX trading system and the implementation of pre-funding exemption mechanisms for foreign investors.

In addition, the Ho Chi Minh City Stock Exchange has encouraged listed companies to disclose information in English starting in 2026, enhancing market transparency.

The planned introduction of a Central Counterparty clearing model in 2027 is another noteworthy initiative that is expected to attract foreign capital and help satisfy MSCI requirements.

Binh forecasts that Vietnam’s goal of achieving 10 per cent GDP growth by 2030 is attainable, provided both the debt market and capital market operate efficiently.

Foreign capital remains a crucial driver of the stock market, with overseas investors currently holding 14.25 per cent of total market capitalisation.

Retaining foreign investment contributes to improving the balance of payments, stabilising exchange rates, and creating greater flexibility for monetary policy.

From a longer-term perspective, Binh explained the significance of an MSCI upgrade. Given that the number of investment funds using MSCI benchmarks substantially exceeds those tracking FTSE indices, capital inflows into Vietnam’s stock market could become considerably more abundant.

The implementation of the Central Counterparty clearing system in 2027 will serve as an important stepping stone for advancing this process.

As of May 2026, Vietnam had fulfilled 10 out of 18 MSCI criteria and was close to meeting 17 out of 18 qualitative requirements needed for watch-list inclusion. However, before any actual upgrade occurs, the market must first undergo a watch-list period lasting approximately two to three years.

Importantly, Binh stressed that Vietnam’s sovereign credit rating remains another critical factor. Further credit-rating upgrades could move the country into the 'investment-grade' category, opening the door to potentially massive capital inflows into the country’s capital markets.

VIR