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FTSE Russell is set to announce its Interim Country Classification results on April 8, 2025. Since 2018, Vietnam has remained on FTSE’s watchlist for an upgrade from frontier market to secondary emerging market status, primarily due to pre-funding requirements. However, with proactive regulatory reforms—most notably the issuance of Circular 68/2024 in November 2024—this issue has now been resolved and is undergoing final testing.
On Track for Emerging Market Upgrade in September 2025
FTSE Russell is currently gathering investor feedback to assess the implementation process. While some operational concerns remain, upcoming reports are expected to underscore the significant progress made by Vietnam’s regulatory authorities. Meanwhile, the long-awaited KRX trading system is entering final testing in mid-March, with a potential launch by early May. KRX will expand trading capacity and lay the foundation to introduce a Central Clearing Counterparty (CCP), further aligning Vietnam’s capital markets with global standards.
Potential Inflows and Key Market Beneficiaries
At the Bloomberg Businessweek Vietnam Summit in December 2024, Wanming Du, Director of Index Policy at FTSE Russell, estimated that an emerging market upgrade could attract $5-6 billion in foreign inflows. Some large-cap stocks with high weightings in the FTSE Vietnam Index—such as Hoa Phat Group (HPG), Vingroup (VIC), Vinhomes (VHM), and Vinamilk (VNM), etc—stand to be the primary beneficiaries. Given the expected upgrade in September 2025, we anticipate funds will begin reallocating ahead of the effective date, supporting market momentum.
Sovereign Credit Rating Upgrade: A Further Catalyst
Vietnam is also progressing toward a sovereign credit rating upgrade. Prime Minister Pham Minh Chinh recently met with S&P Global Ratings’ Chief Commercial Officer, Lynn Maxwell, to reinforce Vietnam’s strong economic trajectory. Notably, S&P’s acquisition of a 43.4% stake in FiinRatings—one of Vietnam’s four domestic credit rating agencies—reflects growing confidence in the country’s capital markets. With Vietnam’s current sovereign credit rating (BB+) just one notch below investment grade (BBB-), a potential upgrade could further accelerate foreign capital inflows.
Foreign Inflows Near a Turning Point
Vietnam’s structural improvements and regulatory advancements make an upgrade to secondary emerging market status increasingly likely within the next 6-12 months. While global trade uncertainties may weigh on short-term foreign inflows, we see key factors supporting a reversal in the months ahead:
- The risk of reciprocal tariffs on Vietnam remains low. According to the World Integrated Trade Solution (WITS), Vietnam imposes lower tariffs on U.S. imports compared to the tariffs the U.S. applies to Vietnamese goods. Additionally, Vietnam’s proactive approach in addressing concerns over its trade surplus enhances its ability to negotiate and mitigate trade risks.
- The U.S. Dollar Index (DXY) has started to weaken, following a pattern similar to what was observed during Trump’s first term. This trend is expected to persist as the Federal Reserve moves into an easing cycle and uncertainties around Trump’s policies gradually subside.
Why Vietnam Belongs in Your Portfolio
We continue to see Vietnam as an attractive destination for international investors seeking diversification and long-term growth opportunities. Strong corporate earnings growth and compelling valuations reinforce its investment appeal. For 2025, our active portfolio is projected to deliver EPS growth of 17.8% while trading at a P/E of 11.4x, offering a highly favorable risk-reward profile.
Source: TIM, Bloomberg
