Foreign Investors Return Ahead Vietnam Upgrade

Foreign investors are moving back into Vietnamese equities as the country edges closer to a long-awaited upgrade in global market status. The shift is giving fresh momentum to a market that has spent much of the year dealing with persistent overseas selling.

Investors bought a net 2.7 trillion dong, around $104 million, of shares on the Ho Chi Minh Stock Exchange in the week to 18 September. That reversal comes after foreign investors sold roughly $3.5 billion of Vietnamese stocks earlier this year, underlining how quickly expectations around the market are changing.

The catalyst is FTSE Russell’s expected reclassification of Vietnam as a secondary emerging market. Once implemented, the change would place Vietnamese equities inside a wider range of global benchmarks, encouraging index-tracking funds to increase their exposure. FTSE has estimated that the upgrade could eventually channel as much as $6 billion into the market through portfolio adjustments running into 2027.

Large asset managers are already preparing for that transition. Vanguard plans to lift its Vietnam exposure to about $2.5 billion over the coming years, from roughly $1.5 billion today. Active managers could add further demand if the upgrade improves liquidity and makes the market easier to access.

The opportunity is significant, but the market still has work to do. Foreign ownership limits, restricted free floats and trading infrastructure continue to complicate investment, while Vietnam is also pursuing reforms that could support a future MSCI upgrade.

Even with those constraints, the direction is becoming clearer. Greater index inclusion could deepen Vietnam’s capital markets, widen its international investor base and strengthen the flow of long-term foreign capital into one of Asia’s fastest-growing economies.