Vietnam joins FTSE Russell emerging market benchmark

Vietnam added its stocks to FTSE Russell's emerging market index on Monday, signaling a major milestone for the country's stock market following years of reforms to attract foreign investment. The FTSE Russell, which also includes China and India, estimates the inclusion could inject up to $6 billion into Vietnam. The national benchmark index opened 0.54% on Monday, boosted by banks.

Anticipation of the upgrade reignited foreign interest in Vietnamese equities. Overseas investors bought $2.7 trillion worth of shares last week, though they remain net sellers by about $91 trillion. However, interest is expected to wane after the initial excitement, said Thomas Nguyen, the chief global markets officer at SSI Securities Corporation, Vietnam's second-largest broker.

The transition will occur in four stages by 2027, with 10% added in September, another 20% in March, and 35% each in June and September. As the next tranche approaches in March, attention will likely revive, with local investors potentially experiencing a more significant impact. The upgrade has also reignited hopes for a future upgrade by MSCI, the asset manager Vanguard planning to invest an additional $2.5 billion in Vietnam over the next few years.

However, concerns remain, including foreign ownership limits and free-float constraints for certain companies. A central counterparty clearing mechanism, expected in 2027, could help Vietnam meet MSCI's market-access requirements.