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Vietnamese stock market remains on FTSE Russell's upgrade watchlist
Việt Nam has been on the watchlist since September 2018, with a potential reclassification to emerging market status. However, the market still falls short of certain criteria, particularly regarding its 'Settlement Cycle', which is currently rated as 'Restricted' due to the pre-funding requirement that mandates available cash before a trade is executed.
A customer conducting transactions at a branch of Bảo Việt Securities. — VNA/VNS Photo
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FTSE Russell, the global index provider, has released its October 2024 report, confirming that Việt Nam remains on its watchlist for a potential upgrade to Secondary Emerging Market status.
In addition, the process for foreign investors to open trading accounts remains complex and time-consuming. Establishing an effective mechanism to facilitate foreign investor transactions, especially in securities that have reached or are nearing the foreign ownership limit, is also deemed crucial.
On February 28, 2023, Prime Minister Phạm Minh Chính committed to removing the barriers preventing Việt Nam from meeting FTSE's upgrade criteria by 2025. The measures include regulatory amendments, improving access for foreign investors, reviewing foreign ownership limits, and streamlining the account-opening process.
In response, the Ministry of Finance issued Circular No. 68/2024/TT-BTC on September 18, 2024, which removes the requirement for foreign institutional investors to have pre-funded accounts for purchases, and updates several regulations on securities trading, settlement and clearing.
FTSE Russell emphasised that for Việt Nam to achieve the upgrade by 2025, it must maintain the pace of reforms and quickly finalise and publicly announce the amended regulations.
FTSE Russell's Index Governance Board decided to keep Việt Nam on the reclassification watchlist during its September 2024 review. The country’s status will be reassessed during an interim review in March 2025.
According to estimates by SSI Securities Corporation, an upgrade to emerging market status could attract capital inflows of up to US$1.7 billion from exchange-traded funds (ETFs) alone, excluding potential investments from active funds, which, according to FTSE Russell, manage total assets five times larger than ETF funds.
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