Opportunities to attract foreign capital in 2025

Vietnam's Efforts

During its yearly assessment in September 2024, FTSE Russell opted to keep Vietnam on its watchlist because the nation still didn't meet two of the eight requirements.

Delivery vs. Payment (DvP), one of the remaining criterion, hasn't been discussed since the review in March 2024. The market's demand for pre-trade verification currently results in the DvP criterion being evaluated as "constrained". This indicates that before making orders, investors are required by law to have enough money in their accounts.

Additionally, Vietnam's stock market needs to improve the account registration process and facilitate transactions for foreign investors regarding securities that have reached or are nearing foreign ownership limits in listed companies. Enabling transactions among foreign investors in stocks that are fully or nearly fully owned would open opportunities for foreign capital inflow into Vietnam's stock market.

However, in contrast to earlier assessments, Vietnam's stock market has advanced in 2024, according to Mr. Duong Van Chung, Northern Regional Director of MBS Securities. By issuing Circular No. 68/2024/TT-BTC on September 18, 2024, with effect from November 2, 2024, FTSE Russell recognized the work of the State Securities Commission, the Ministry of Finance, and the Vietnamese Government. This circular permits foreign institutional investors to buy shares without pre-funding for the first time. These are regarded as the last steps to get Vietnam ready for an upgrade the following year.

A "Turning Point" for the Market

Circular No. 68/2024/TT-BTC's implementation prior to the periodic review in March 2025 makes it easier for Vietnam to meet the requirements and notify international investors of the new policy. As a result, it is anticipated that Vietnam's stock market will meet the index's requirements and might be upgraded during FTSE Russell's review in March 2025. The upgrading would take effect in September 2025. This makes 2025 a crucial year for the stock market in Vietnam.

Mr. Dominic Scriven, Chairman of Dragon Capital, believes that resolving these bottlenecks will encourage foreign investors to seek opportunities in emerging markets like Vietnam. Furthermore, the acceleration of divestments and equitization of state-owned enterprises, being the final year of the 2021–2025 roadmap, will increase the supply of high-quality stocks to attract foreign institutional investors. This will also add pressure on rating agencies to fast-track Vietnam's inclusion in the emerging market list.

Foreign Capital Magnet

According to financial analysts, Vietnam's stock market will gain a lot from the market update, which will help the country's capital market grow into one that is secure, open, effective, and sustainable. It is anticipated that the renovation will draw both direct and indirect investment from major international funds, investors, and esteemed international organizations. Furthermore, a better market classification will increase institutional and domestic investor trust, broadening Vietnam's investor base.

According to FTSE Russell, an upgrade to emerging market status could attract approximately USD 23 billion in capital from index-tracking funds, of which USD 23 billion is directly tied to FTSE’s market classification indices. While this amount may seem modest, it would significantly enhance liquidity in Vietnam’s stock market, where the average daily trading volume is currently between VND 15–30 trillion per session—a figure deemed modest compared to other Asian markets.

Most significantly, the market upgrade provides momentum for future growth and represents the caliber of Vietnam's stock market. Investors are better able to comprehend the nature of the market, evaluate risks, spot opportunities, and decide how best to allocate their assets because to this reclassification. Furthermore, as many funds utilize this classification as a standard for establishing capital allocation scales, it has a significant influence on global capital flows.