Foreign interest in Vietnamese stocks has picked up this week ahead of the country’s expected reclassification on Monday to secondary emerging market status by index provider FTSE Russell, a move expected to boost inflows.
FTSE previously estimated the upgrade could redirect as much as $6 billion into Vietnamese equities as funds tracking its indexes gradually adjust their portfolios.
The transition will be implemented in four stages through 2027. Brokerage SSI Research estimates passive funds tracking FTSE indexes will buy about $240 million worth of Vietnamese shares in the first tranche on September 18, before the index changes take effect.
Anticipation of the upgrade has helped revive foreign interest in Vietnamese equities, with overseas investors buying a net 1.42 trillion dong ($54.63 million) worth of shares so far this week, although they remain net sellers by over $3.6 billion this year.
FTSE identified 27 Vietnamese stocks in August eligible for its FTSE Global All Cap Index, including heavyweight names such as conglomerate Vingroup, technology firm FPT and steelmaker Hoa Phat Group.
SSI Research estimates the biggest first-round ETF inflows will target private bank VPBank, developer Vinhomes, FPT and Hoa Phat. Vingroup, however, could see net outflows of $28 million as selling by existing ETFs outweighs upgrade-related buying, the brokerage added.
“The FTSE upgrade is a signpost on the journey to greater awareness and involvement by foreign investors,” said Craig Martin, chairman of Dynam Capital, a Vietnam-focused equity fund. “The market remains relatively cheap and earnings growth is still strong,” he said.
Despite the optimism over the upgrade, Vietnam’s benchmark VN-Index has risen only about 1.4% this year, lagging gains of roughly 24% in Thailand and 21% in Singapore, LSEG data showed. Last year, however, Vietnam was Southeast Asia’s best-performing stock market as investors positioned for the expected FTSE reclassification.
Some concerns remain, including foreign ownership limits and free-float constraints for some companies.
The milestone has also revived expectations of a future upgrade by MSCI. Investors say the introduction of a central counterparty clearing mechanism, expected as early as 2027, could help Vietnam move closer to meeting MSCI’s market-access requirements.
($1 = 25,994.0000 dong)
Reuters
