Vietnam in waiting list for market upgrade to secondary emerging

Vietnam remains in the watch list for a possible reclassification from frontier to secondary emerging market status, according to FTSE Russel’s Country Classification review in March.

The UK stock analytics provider said Vietnam was added to the watch list in September 2018 for possible reclassification to secondary emerging market status. However, the country has yet to meet the “Settlement Cycle (DvP)” criterion, which is currently rated as “restricted” due to the market practice of conducting a pre-trading check to ensure the availability of funds prior to trade execution.

By default, the market does not experience failed trades, the “Settlement – costs associated with failed trades” criterion is unrated.

Furthermore, improvements to the process for the registration of new accounts are required as market practice can result in the extension of the registration process. The introduction of an efficient mechanism to facilitate trading between non-domestic investors in securities that have reached, or are approaching, their foreign ownership limit is also seen as important.

FTSE Russell also hailed Vietnam’s resolve to achieve the emerging market status since the September 2023 annual announcement.

Most recently, the Prime Minister committed the Vietnamese market to the removal of various obstacles that may prevent Vietnam from meeting the FTSE Equity Country Classification criteria by 2025. The list included the amendment of relevant legal regulations and the creation of more favourable conditions and the removal of barriers for foreign investors to access the market.

The proposed settlement model by the State Securities Commission of Vietnam (SSC) is being further refined with the participation of market members. FTSE Russell continues to encourage meetings between the local Vietnamese entities and the international investment community to assist in better understanding the current difficulties encountered when accessing the Vietnamese equity market.

To achieve the reclassification target in 2025, it is imperative that the settlement model be confirmed and widely communicated, including finalisation of the required roles and responsibilities within the settlement model and a roadmap with key milestones, setting out the path towards implementation.

FTSE Russel continues to maintain a constructive relationship with the SSC, other market authorities and the World Bank Group who is supporting the wider market reform programme.

According to BIDV Securities Joint Stock Company, if the Vietnamese stock market is upgraded, it will welcome some 1.3-1.5 billion USD in investment from open-ended funds and exchange-traded funds (ETFs) that track the FTSE Russel indices. The mount will include up to 800 million USD from the ETFs, which is equivalent to the Philippine security market.