Foreign investors buy Vietnam stocks ahead of FTSE market upgrade

HANOI - Foreign investment in Vietnamese stocks has increased this week in anticipation of the country's anticipated reclassification to secondary emerging market status by FTSE ‌Russell on Monday. This upgrade could potentially attract up to $6 billion into Vietnamese equities as funds tracking their indexes adjust their portfolios.

FTSE estimated the influx to be around $240 million in the first tranche on September 18 when the index changes take effect. Brokerage SSI Research reported that overseas investors bought a net 1.42 trillion dong ($54.63 million) worth of shares this week, though they remain net sellers by over $3.6 billion this year. FTSE identified 27 Vietnamese stocks eligible for its FTSE Global All Cap Index, including Vingroup, FPT, and Hoa Phat Group.

However, Vingroup might experience net outflows of $28 million as selling by existing ETFs surpasses upgrade-related buying. Craig Martin, chairman of Dynam Capital, noted that the market remains relatively cheap and earnings growth remains strong. Despite the optimism regarding the upgrade, Vietnam's benchmark VN-Index has only risen by about 1.4% this year, trailing behind Thailand and Singapore.

Concerns still persist, such as foreign ownership limits and free-float constraints for certain companies. The upgrade has also reignited discussions about a potential future upgrade by MSCI. Investors believe that the introduction of a central counterparty clearing mechanism, expected as early as 2027, could assist Vietnam in meeting MSCI's market-access requirements.