Le Anh Tuan, CEO of Dragon Capital Vietfund Management JSC (DCVFM). Photo courtesy of Dragon Capital.

How do you feel about the milestone of Vietnam’s stock market status being upgraded?

The upgrade from a frontier market to an emerging market is clear evidence that FTSE Russell acknowledges more than a decade of continuous effort by the Vietnamese government, the State Securities Commission (SSC), regulators, and other market participants.

This marks a significant and meaningful milestone in Vietnam’s journey to join the global financial market. In reality, foreign investors prefer to allocate funds to emerging markets rather than frontier market indices.

For the past 20 years, Vietnam’s stock market was not included in benchmark indices tracked by many global funds, meaning it was often excluded from investment agreements between funds and investors. As a result, many funds that wanted to invest in Vietnam had to request approval, which was time-consuming. Now, as we move into the emerging market category, these investors can participate more proactively.

Because of that, some investors expect the upgrade to act as a catalyst for market growth or a strong return of foreign capital inflows. However, such shifts do not happen overnight.

The performance of Vietnam’s stock market depends on multiple factors, including macroeconomic conditions, corporate earnings prospects, financial product diversity, and investor protection policies. Likewise, although the upgrade is positive, foreign capital will not immediately flow in with net purchases of $5-10 billion.

However, the upgrade is still a critical precondition, showing that Vietnam has met FTSE Russell’s technical and institutional criteria – a recognition that carries substantial weight.

Becoming an FTSE Emerging Market is not the final end, but rather the starting point for a long-term journey of capital market development. The government, the Ministry of Finance, and the SSC already have plans to maintain and advance this status.

For the first time, Vietnam has announced a comprehensive national strategy targeting FTSE Advanced Emerging Market and MSCI (Morgan Stanley Capital International) Emerging Market status by 2030, backed by specific and in-depth reforms.

I believe that during this process, especially in the pursuit of MSCI status, Vietnam’s stock market will experience deep growth. The next five years of development could equal the progress made in the past 10-15 years combined.

To achieve this goal, regulators have outlined five key groups of solutions.

First, regarding improving the legal framework, it is necessary to review foreign ownership limits, increase allowable caps, remove unnecessary restrictions, and strengthen legal and regulatory supervision to ensure security and safety for investors.

The second is upgrading market infrastructure. We must enhance clearing and settlement systems; implement central counterparty clearing (CCP); reduce margin requirements; introduce securities lending, short-selling with oversight, and new derivative products; modernize trading platforms that accommodate big transactions and use new technologies.

The third is enhancing transparency and governance. We should adopt International Financial Reporting Standards (IFRS) to improve audit quality and corporate governance standards, and enhance oversight of auditing activities and listed firms to bolster investor confidence.

The fourth is increasing liquidity and diversifying investors. It is necessary to develop new order types and new trading mechanisms, and diversify products such as green bonds; enhance investor education, and promote institutional participation.

The fifth is maintaining macro-financial stability. We should ensure close coordination between fiscal, monetary, and macroeconomic policies to maintain macroeconomic stability.

What opportunities and challenges will the market status upgrade bring to listed companies?

The upgrade will create many opportunities for Vietnamese enterprises. With greater foreign investor participation via both active funds and index-tracking funds, stocks will likely be revalued with higher price-to-earnings (P/E) ratio, due to stronger demand and lower equity risk.

Historically, Vietnam’s market P/E ratio has averaged 11-12 times. After the upgrade, I believe it could rise to 14-16 times. While investors often take pride in Vietnam’s “cheap” valuations, which are not good in the long term, a higher valuation actually brings greater long-term benefits for listed companies.

Research by Dragon Capital shows that inclusion in global indices can reduce the cost of capital for Vietnamese companies, leading to higher and fairer valuations, as reflected in improved P/E ratios.

With broader analyst coverage and global vision, Vietnamese firms can be more accurately assessed for their growth potential, rather than being overlooked as part of a small frontier market index.

Increased buying from new investors can have a positive impact on stock prices. For example, both the UAE and Qatar saw their average P/E ratios rise after being upgraded to MSCI Emerging Markets in 2014. Similarly, Saudi Arabia experienced a valuation re-rating after its 2019 inclusion, driven by strong foreign inflows and improved investor perception of market governance and quality.

What advice would you give to individual investors in this new era of the Vietnamese stock market?

Many investors expect the market upgrade to spark major transformations but an upgrade is not a miracle for stocks. Instead, it signifies that Vietnam’s stock market has become a transparent, reliable, and sustainable investment destination for both domestic and foreign capital.

Therefore, even after the upgrade, individual investors should not engage in speculative trading without understanding the fundamentals of listed companies. They should remain disciplined, focusing on fundamentally strong, transparent, and sustainably growing businesses, and adopt medium- to long-term strategies rather than chasing short-term volatility.

The VN-Index closes at 1,642.64 points on November 6, 2025, down 0.74% from the previous session. Photo courtesy of VietNamNet.

Given that over 99% of trading accounts in Vietnam belong to individual investors, investor education requires joint efforts from regulators and all market participants.

Indeed, in its decision approving the investor restructuring and fund industry development plan, the Ministry of Finance proposed various solutions such as the building and implementation of the investor education and implementation plan for 2025-2030, and financial literacy programs, and training on products and services of securities companies.

Dragon Capital, in collaboration with the State Securities Commission, is also running educational programs to share investment knowledge and experience with investors, especially new and young ones.

What do you think about the fund management industry amid this new market phase?

I have several concerns about the development of Vietnam’s fund management industry in this new period.

First, the number of investors who have opened and actively trade fund certificates in Vietnam is only about 300,000 and the number of active accounts with balances is likely even smaller. This represents less than 0.5% of the total workforce, far below other Southeast Asian countries.

This is unfortunate, given that Vietnam’s stock market has historically outperformed traditional bank deposits.

Second, many people remain hesitant or distrustful of indirect investment through fund management companies. This is something the industry must work together to address and improve public confidence.

Third, from a technological standpoint, the conversion rate from eKYC registration to actual investment is relatively low. While banks achieve conversion rates of 70-80%, Dragon Capital’s rate is 50-60%, and other funds average 30-40%.

After the first fund purchase, the proportion of investors making a second or third investment is significantly lower whereas in open-ended fund investing, the duration of participation is key to achieving meaningful returns.

Fourth, a process is needed to help investors better understand fund products and make investments easier. Many fund purchase applications are still complicated, while e-commerce apps allow seamless transactions with just a few taps.

Finally, the application of artificial intelligence (AI) will play a major role in the fund management industry. AI can enhance investment performance by analyzing data, predicting market trends, detecting opportunities, spotting fraud, and managing risks more effectively. Beyond improving portfolio performance, AI can also enhance customer service by helping investors better understand fund products.