Vietnam joins FTSE Russell emerging market benchmark

HANOI, Sept 21 (Reuters) - Vietnamese stocks ‌were added to ​FTSE ​Russell's emerging market indexes on Monday, marking a milestone for the country's stock market after years of reforms aimed at attracting foreign investors.

The index ‌provider estimates the inclusion could redirect up to $6 billion into Vietnam, which ⁠has been on the watchlist since 2018 for entry into a category that also includes China and ‌India.

Vietnam's benchmark stock index opened up ‌0.54% on Monday, led by banks, before retreating slightly.

Anticipation of the upgrade helped revive foreign interest in Vietnamese equities. According to data from the Ho Chi Minh ​Stock Exchange, overseas investors bought a net 2.7 trillion dong ($104 million) worth of shares last week, but they remain net sellers by about 91 trillion dong.

After the ⁠initial excitement, however, interest is likely to fade, said Thomas Nguyen, chief global markets officer at SSI Securities Corporation, ​the country's second-largest broker by market share.

"I expect the market to remain relatively subdued until we approach 2027," Nguyen said.

The transition will ​take place in four stages through 2027, with ‌10% added in September, an additional 20% in March, and 35% each in June and September of next year.

"As we get closer to ⁠the next inclusion tranche in March, attention should pick up again, and because the allocation will be larger, local investors are likely to see a more noticeable impact," Nguyen added.

Following the upgrade, ⁠asset management firm Vanguard plans to boost investment in Vietnam to about $2.5 billion over the next ​few years.

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 in 2027, could help Vietnam move closer to meeting MSCI's market-access requirements.

Nguyen said the rollout of a central counterparty ‌clearing mechanism would be crucial to Vietnam's efforts to secure a future MSCI upgrade.

"FTSE is ⁠about access into the market. MSCI ‌is about scale," he said. "That's ​why central counterparty clearing is such an important thing," he added.

($1 = 26,019 dong)

(Reporting by Phuong Nguyen; Additional reporting by Khanh Vu; Editing by ‌Xevi Fontdegloria)

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• US Supreme Court denies surrogate's bid to block California parentage ruling
• Iraq suspends Iranian flights to Baghdad after US sanctions threat, sources say
• NY Fed's Perli says monetary policy toolkit working very well