Vietnam stock market may see $4 bln in foreign buying with upgrade

Foreign funds may purchase $3.5-4 billion worth of Vietnamese shares if the country’s stock market status is upgraded by two global index providers MSCI and FTSE.

A BIDV Securities JSC (BSC) report says this estimate is based on the assumption that the average weight of Vietnamese stocks to be bought stands at 0.7%, equivalent to that of the Philippines, which is classified as a secondary emerging market by FTSE Russell, a subsidiary of the London Stock Exchange Group (LSEG).

Vietnam has been included on the FTSE Russell watch list for upgrading to a secondary emerging market since 2018, but not on MSCI, a New York City-based provider of equity indices. It is anticipated that FTSE Russell will soon move Vietnam’s stock market to a higher rank.

The BSC report quotes officials of the State Securities Commission (SSC), the country’s stock market watchdog, as saying that the finance ministry, SSC and market participants have made great efforts to remove hurdles to the upgrade, such as identifying possible solutions to pre-funding requirements and working on putting the new trading system KRX into operation.

It anticipates Vietnam’s stock market to get upgraded by FTSE Russell in September 2024 or March 2025. Meanwhile, MSCI may put Vietnam on its watch list in June 2025 and upgrade its stock market status three months later, the report adds.

Once FTSE grants the expected upgrade, the Vietnamese stock market is forecast to receive $1.3-1.5 billion in investments from open-ended funds and exchange-traded funds (ETFs) that track FTSE’s underlying indices. The amount would include at least $700-800 million in funding from ETFs, the same level as that of the Philippines, according to BSC.

When the upgrade happens, the brokerage house suggests paying attention to the VN30-Index (comprising the 30 most liquid and largest stocks tickers listed on the Ho Chi Minh Stock Exchange), and those meeting requirements of liquidity, market cap, and room for foreign ownership.

Filtering stocks with largest weights being held by foreign-run ETF, BSC analysts pick up 15 VN30-Index tickers that are worth watching: HPG, VHM, VNM, VIC, MSN, SSI, VCB, VRE, VJC, SHB, POW, BID, STB, SAB and BVH.

Overseas traders can indirectly own stocks that have their foreign ownership quota already filled up via VN-Diamond ETF fund certificates or future Non-Voting Depository Receipts (NVDRs), the report says.