Vietnam stocks fall 2.2pct in first week after FTSE market upgrade

Hanoi, Vietnam experienced a 2.2% drop in its benchmark stock index in the first week following its inclusion in FTSE Russell's secondary emerging market index, according to LSEG data. This decline counteracted the previous week's 1% gain, as foreign investors sold more shares than they bought, anticipating the Sep 21 reclassification.

Foreign investors netted a selling of 2.8 trillion dong worth of shares on the Ho Chi Minh Stock Exchange, after purchasing 2.7 trillion dong in the prior week. The index's decline shaved off approximately US$7.4 billion off its market value until Sep 24, HoSE data revealed. Since the beginning of the year, foreign investors have reduced their exposure to Vietnamese stocks by nearly US$37 billion.

While the upgrade is a key factor, it does not guarantee immediate capital inflow into Vietnam, stated Hoang Huy, equity strategist at Maybank Securities Vietnam. Interest rates remain the most significant factor for the equity market, Huy added. The transition will unfold in four stages through 2027, with 10% of Vietnam's weighting added in September, followed by additional 20% increases in March, June, and September of the following year.

FTSE Russell estimates that the inclusion could funnel up to US$6 billion into Vietnam over time. Despite the optimism surrounding the upgrade, Vietnam's benchmark VN-Index has lost about 0.5% this year, trailing gains of roughly 27% in Thailand and 23% in Singapore, per LSEG data. However, last year, Vietnam ranked among Southeast Asia's top-performing stock markets, as investors prepared for the anticipated FTSE reclassification.