Vietnam Joins FTSE Emerging Markets, but Banks Take the Prize

Vietnam's upgrade to FTSE Russell's emerging market index on Sept. 21 could channel $6 billion from foreign investors into Vietnamese companies—but 15 of the 27 newly included names are banks or securities firms, not the manufacturers driving the country's economy.

The upgrade caps a years-long effort to meet the index provider's criteria and places Vietnam alongside four other Southeast Asian economies Thailand, Malaysia, Indonesia and the Philippines classified as "emerging" by FTSE. Investors often rely on FTSE's and MSCI's benchmarks to guide allocations.

"Vietnam's upgrade to emerging market status is an important milestone," says Anh Tran, a finance professor at the Bayes Business School at City St George's, University of London. "It serves as external validation of the country's economic development and financial market reforms, and places Vietnam within the universe of institutional investors that either benchmark against or track FTSE emerging market indices."

The stakes are strategic. Vietnam hopes to raise $76 billion a year through its capital markets by 2030, reducing its dependence on bank credit. "General Secretary To Lam once said that a global financial hub cannot rely solely on domestic liquidity or traditional administrative frameworks," explains Nguyen Luong Hai Khoi, a researcher and academic at the University of Oregon. "Instead, it requires a modernized capital market as its foundation."

Reforms that won the upgrade

Hanoi had to rework its market rules to secure FTSE's approval. The Ho Chi Minh Stock Exchange worked with South Korea's stock market to launch a new trading system. Vietnam also eased some foreign ownership limits and pushed companies to disclose more information in English.

"The FTSE upgrade is an important opportunity, rather than an endpoint," says Thu Phuong Pham, an associate professor of finance at Australia's Curtin University. "Its longer-term benefits will depend on the continued development of market infrastructure and arrangements that support efficient and transparent trading."

A mismatch with the real economy

As part of the upgrade, FTSE added 27 Vietnamese companies to its global index, including Masan Group, VietJet Aviation and Gelex Group. Their inclusion makes some of Vietnam's largest companies more visible to global asset managers.

Yet visibility may not translate into investment. "Index money follows the rules of the index, not the shape of the economy," says Hanh Le, a finance lecturer at Vietnam's RMIT University.

Vietnam reported 8.2% growth in the first half of 2026, its strongest performance in 15 years, driven primarily by export-oriented sectors like electronics and metals. Exports rose more than 20% in the first seven months of the year, despite a 20% U.S. tariff on Vietnamese goods.

"Vietnam grows on foreign-invested manufacturing and exports, but very little of that is listed," Le continues. "What passes FTSE's tests for size, liquidity and free float is overwhelmingly financial: 15 of the 27 companies in the basket are banks or securities firms."

Only six of the 27 names—Vietcombank, Vingroup, Vinhomes, BIDV, VP Bank and Hoa Phat—made it into the FTSE All-World Index, one of the most widely tracked benchmarks. Even there, access is constrained. "Even within those six, ownership caps and thin free float limit how much foreigners can buy: only banks that absorbed weaker lenders can now go to 49%, and state-controlled Vietcombank is excluded," Le adds.

A muted market reaction

For all the fanfare, the VN-Index dropped 0.9% on Sept. 21, and trading turnover on the Ho Chi Minh City Stock Exchange plunged 33% from the previous Friday. The benchmark is down about 2% for the week.

To capture and retain foreign investors, experts say Vietnam still needs to improve market infrastructure, transparency and quality. Nguyen points to corporate reporting in English, clearing frameworks aligned with international standards, and policies steering capital into high-tech manufacturing as areas where Vietnam lags more mature emerging markets.

Concentration poses the bigger risk. "Six companies carry the foreign story, and Vingroup and Vinhomes alone accounted for most of the index's gains last year," says Le. "That is a market that is easy to exit." Foreign investors have in fact been net sellers of Vietnamese stocks since 2022.

MSCI, the other major index provider, still classifies Vietnam as a frontier market, citing continued limits on foreign ownership.

"The MSCI's requirements are distinctly more stringent," concludes Nguyen. "The FTSE is a crucial psychological and operational stepping stone, but an MSCI upgrade would require a separate, heavier set of institutional reforms."