According to the bank, effective from November 2024, Viet Nam has scrapped the pre-funding requirement for stock market transactions, clearing a significant criterion to upgrade its designation from a frontier market to an emerging market, potentially later this year.

Viet Nam has been on the watchlist since 2018. If implemented, FTSE Russell, a major index provider, estimates that an upgrade in designation could bring US$6 billion or over 1 percent of GDP in foreign investment inflows into the country, told HSBC.

Regarding investments in Viet Nam, the bank highlighted that developments to improve capital markets should not only be seen as catching up to market peers but also in terms of diversifying and expanding capital mobilization channels to build financial resilience.

Fortunately, the government has been taking steps to address various challenges and risks surrounding capital markets. Following the challenging market environment for corporate bonds in late 2022, the authorities have introduced more safeguards to allay investor concerns, such as allowing only professional investors to participate in the trading of corporate bonds via private placement, told the report.

Regulatory changes in the 2024 Land Law, 2023 Housing Law, and 2023 Real Estate Business Law have supported newly registered foreign direct investment to flow into the sector, registering US$4 billion in 2024, up from US$1 billion in 2023.

Notable changes, such as land prices better reflecting market values, easing land-related rights for overseas Vietnamese, and more stringent information disclosure by real estate businesses, will continue to support a recovery in sentiment.

Beyond increasing foreign participation in capital markets, expanding and diversifying the domestic investor base will be key in helping to sustainably achieve the official targets of a stock market capitalization of 120 percent and corporate bonds outstanding of 25 percent of GDP, respectively, by 2030, suggested HSBC.

In term of Viet Nam's January economic performance, the bank said, the retail sales rose 10 percent year-on-year, with both goods and services posting strong growth. That said, the consumption trend suggests that Vietnamese consumer spending has more room to recover, as retail sales were still 8 percent below what trend growth would suggest.

Viet Nam's attractiveness as a tourism destination has certainly increased. Its tourism sector broke a monthly record of welcoming more than two million international visitors, jumping close to 40 percent year-on-year.

In particular, the number of mainland Chinese tourists has more than doubled compared to January 2024, narrowing the gap with its pre- pandemic high from 36 percent in 2024 to only 10 percent in January 2025.