Confidence in a new cycle for Vietnam’s stock market

Financial expert Huynh Hoang Phuong believes that Vietnam’s market status upgrade from "frontier" to "second emerging", set to be effective from September 2026, will provide an important foundation for the stock market to enter a new development cycle - one filled with many opportunities but also challenges.

What do you expect from a new development cycle after the market status upgrade?

The new cycle will not rely solely on the status upgrade story. From a broader perspective, the new classification is only the starting point. Alongside this are the development of the private sector, domestic economic growth, and the roadmap for the Vietnamese capital market through 2030. This new cycle brings many expectations:

First, a more transparent financial market. With the upgrade and the need to maintain this classification, regulators will require higher standards for information disclosure and financial reporting, including IFRS adoption. Greater transparency reduces unnecessary investment risks.

Second, a shift in investor structure. After a prolonged period of net selling by foreign investors, individual investors now account for 85-90% of trading value and 99% of accounts. With the upgrade, I expects an increase in both the quantity and quality of institutional investors and funds, leading to a more stable and sustainable market.

Third, transparency is a foundation for expanding market products. With higher transparency and expectations of stronger foreign inflows, market liquidity will improve. Combined with the upgrade effect, I expect more IPOs, listings, and state divestments, diversifying industry representation in the market.

Fourth, a boost to new financial products. The upgrade also sets the stage for products such as VN100 futures; those that are now under research like gold derivatives; green bonds; and international bond offerings. This marks the beginning of the next cycle of financial product development.

Overall, in this new phase, the market is expected to become more sustainable, with higher-quality instruments and better structure. Capital markets will play an increasingly important role, not only for regulators but also for new investors.

Before and after the upgrade, the Government, the Ministry of Finance, and the State Securities Commission (SSC) have announced a series of important policies, such as the Law No. 56/2024/QH, Decree 245/2025/ND-CP, Stock Market Upgrade Project, and Investor Restructuring Project. How do you assess the policy actions?

Ahead of FTSE’s September review, the Government, Ministry of Finance, SSC, and related agencies acted swiftly and decisively to increase the probability of an upgrade. These steps were essential. Beyond short-term goals, regulators have also taken significant measures to address medium- and long-term challenges in Vietnam’s capital market.

The country's credit-to-GDP ratio is already around 134% and is expected to rise to 140% by end-2025. FiinRatings estimates it could reach 160% this year. Global institutions have warned that such levels are unsustainable and pose future risks.

To achieve Vietnam’s target of double-digit GDP growth over the next five years, private enterprise expansion will require substantial capital. This cannot rely solely on bank credit, or the credit-to-GDP ratio will become dangerously high. Therefore, a transparent and sustainable capital market is essential, and regulators’ recent rapid actions reflect this reality.

In late 2023, the Government issued Decision 1726, which targets equity market capitalization to reach 100% of GDP by 2025 and 120% of GDP by 2030. Achieving this requires both breadth and depth: more listed companies, more financial products, and greater investor confidence.

Opportunities always come with challenges. What risks accompany the upgrade?

Every development brings both opportunities and challenges. FTSE’s secondary emerging classification is not the final goal - FTSE advanced emerging and especially MSCI emerging market status are the next, more demanding targets.

MSCI’s standards are stricter, especially regarding transparency, and meeting them will help attract significantly more foreign capital. However, listed companies, especially small-caps, may face difficulties adapting to higher disclosure and reporting requirements. Many still have poor-quality financial disclosures.

Another concern is competition. Some investors worry that Vietnam will have to compete with larger companies within the broader Emerging Markets (EM) basket. In reality, competitiveness will be reflected in Vietnam’s weight within EM indices. If the country continues producing strong companies in growing sectors, competition becomes an opportunity, not a threat.

Foreign investors are still net sellers. Will the upgrade trigger a return to net buying?

It’s a reasonable expectation, but timing is uncertain. Foreign investors have sold heavily throughout 2025, not only in Vietnam, but across Southeast Asia. They are groups like SK Group which has offloaded shares of VIC and MSN. Mainland China and Taiwan investors have also sold many Vietnamese stocks.

This capital flow has withdrawn quite a lot from the Vietnamese stock market in the past few years, but it is difficult to estimate whether they have withdrawn completely or not.

We can only expect clear changes after the March 2026 FTSE review, when index weightings and inclusion lists are announced. Only then may we see a meaningful uptick in foreign investor participation.

What advice do you have for investors entering this new era?

Most retail investors in Vietnam favor short-term trading - often for emotional excitement rather than rational investing. Investors should reduce trading frequency, step back, evaluate performance, and build a clear long-term strategy. Only then can they achieve sustainable returns.

With the upgrade, equities will increasingly become a transparent asset class aligned with Vietnam’s economic growth. Over the next five years, stocks will be an attractive asset class, especially for young people who cannot easily enter the property market.

Therefore, new investors, especially F0 investors, should deepen their knowledge and gain real experience so that equities can fulfill their role as an effective asset class.