Missing the MSCI upgrade watchlist does not impact Vietnam

As anticipated by investors following the 2026 Global Market Accessibility Review by Morgan Stanley Capital International (MSCI), the global financial index and market classification provider released its annual 2026 Market Classification Report.

The Vietnamese stock market has not yet made it onto MSCI's watch list for the Emerging Markets group in the June 2026 review cycle. Experts expect that with distinct reform progress, this long-term story could unfold by June 2027. (Illustrative photo)

In the report, MSCI continues to classify Vietnam as a Frontier Market and has not yet initiated the consultation process for an upgrade to an Emerging Market. Although this outcome was largely anticipated by the market, the report continues to convey an important message: Vietnam's reform roadmap is increasingly recognized, but effective implementation in practice remains the deciding factor for any future upgrade.

Compared to previous years, MSCI acknowledged progress in several areas, including the non-prefunding settlement mechanism, the global broker model, the establishment of a Central Counterparty (CCP), and measures to improve market accessibility and transparency regarding foreign investor ownership. However, these reforms are not yet sufficient to improve Vietnam's scores in MSCI's core market accessibility criteria, indicating that the organization still requires more time to observe the practical operational efficiency of these changes.

This year's report also shows that MSCI is placing greater emphasis on market accessibility and investor experience. Indonesia was downgraded in the "Information Flow" criterion due to transparency concerns, while Turkey remains under surveillance due to market restrictions. This highlights that market classification is increasingly a two-way street, where both upgrades and downgrades depend on maintaining appropriate standards of market access and governance. In this context, Vietnam's reform progress is viewed relatively positively compared to many countries in the region.

The main hurdles for Vietnam generally remain unchanged. Foreign ownership limits continue to restrict investment capabilities across many listed companies. Additionally, the CCP framework—expected to roll out by 2027—is considered a necessary condition to fully resolve settlement and clearing issues.

MSCI also introduced a new observation regarding the low free-float ratios of certain listed enterprises in Vietnam. This indicates that the organization is increasingly prioritizing market investability and depth alongside accessibility factors.

Commenting on the results and MSCI’s assessments, analysts from Maybank Investment Bank noted that, overall, this review cycle does not significantly alter Vietnam's upgrade prospects. While progress is becoming clearer, MSCI appears to be focusing on the successful execution of reforms rather than just reform announcements.

In the short term, according to Maybank Investment Bank, the potential market upgrade by FTSE to Emerging Market status remains a more crucial catalyst for foreign capital flows and market sentiment, whereas gaining recognition from MSCI remains a longer-term narrative.