Vietnam’s stock market is approaching a pivotal moment. On October 8, 2025, FTSE Russell will release the results of its September 2025 semi-annual market classification review (after U.S. markets close on October 7). Investors are closely watching whether Vietnam will be upgraded from Frontier Market to Secondary Emerging Market status.
Expectations of a potential upgrade have created both anticipation and anxiety among institutional and retail investors. The VN-Index has traded sideways over the past month, while liquidity dropped sharply—from VND 55.6 trillion ($2.2 billion) in August to VND 39.7 trillion ($1.6 billion) in September. Brokerage house Vietcap remains confident that FTSE Russell will deliver a positive outcome for Vietnam.
Key FTSE Russell Criteria Still Under Review
Settlement Cycle (DvP): Currently rated “Restricted” (must reach “Pass” for upgrade). The barrier has been the requirement for foreign institutional investors to fully pre-fund trades at T+0. Vietnam’s Ministry of Finance addressed this in Circular 68 (November 2024), introducing a Non-Pre-Funding (NPF) settlement process. Over the past 11 months, FTSE Russell has been monitoring its effectiveness. Vietcap believes this criterion now meets the “Pass” level.
Settlement Costs for Failed Trades: Upgraded from “Unrated” to “Restricted” in March 2025. Since NPF implementation, Vietnam has established clear procedures for trade failures, including timelines and costs. Only one failed trade has been recorded (December 2024), which was successfully resolved, serving as a stress test for the system. Vietcap expects this criterion to also reach “Pass.”
Remaining Concerns
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Capacity of NPF Providers: Of 82 securities firms in Vietnam, only 10 currently offer NPF services. Their maximum combined capacity is VND 132 trillion ($5 billion). The top three brokers serving foreign investors—led by Vietcap—have a combined capacity of VND 40 trillion ($1.5 billion). This is sufficient to handle the estimated $1 billion inflows from index-tracking funds, which are expected to invest in tranches of $200–250 million over 4–5 phases rather than in a single block.
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Cash Settlement Timing: Index funds often need to sell assets in T+2 markets to fund Vietnam purchases. The key safeguard is Auto-FX arrangements between investors and custodian banks, ensuring timely funding. Without Auto-FX, funds still have until 3:00 pm T+3 to transfer capital domestically, reducing settlement risk.
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Account Opening Process: Foreign investors have long cited administrative burdens. The State Bank of Vietnam has since streamlined procedures under Circulars 03 and 25, removing the requirement for consular legalization. Account opening now typically takes only two weeks, depending on investor–custodian cooperation.
Has FTSE Made Its Decision?
Not yet. Despite market rumors, no decision has been finalized. FTSE Russell’s process involves multiple layers:
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FTSE Equity Country Classification Advisory Committee (Sept 2, 2025): technical experts in trading, custody, and portfolio management.
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FTSE Russell Policy Advisory Board (Sept 18, 2025): senior figures from investment management and asset ownership.
Recommendations from these groups are reviewed by the FTSE Russell Index Governance Board, which makes the final decision this week. Membership and views of the advisory committees remain confidential.
What Happens if Vietnam Is Upgraded?
If confirmed, Vietnam’s upgrade will be published in FTSE Russell’s September 2025 Annual Market Classification Review, along with an FAQ detailing:
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Implementation schedule (likely 4–5 tranches, first as early as March 2026)
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List of 10–15 Vietnamese stocks to be included initially
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Vietnam’s projected index weightings across FTSE benchmarks
Index funds will begin account registration and trading code applications immediately after the announcement.
Expected Capital Flows
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Passive inflows: at least $1 billion during implementation
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Total net foreign inflows: $6–8 billion, with potential for $10 billion in an optimistic scenario, combining both passive and active funds
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Index weight: Vietnam projected at 0.3% in the FTSE Emerging Markets All Cap China A Inclusion Index, with ~30 Vietnamese stocks qualifying based on size, liquidity, and foreign ownership limits
The upgrade would provide a powerful counterbalance to persistent foreign net outflows—estimated at over $9 billion since 2023.
Outlook
Vietnam’s possible elevation to Secondary Emerging Market status marks a transformative step in its capital market development. If confirmed, it could unlock billions in foreign inflows, enhance market depth, and bolster Vietnam’s role in global emerging market portfolios.
For investors, the FTSE decision on October 8, 2025 will be a defining moment to watch.
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