The Ministry of Finance on Tuesday issued Circular No. 08/2026/TT-BTC, marking a key milestone in removing remaining technical barriers for the market to be included in the FTSE Russell Emerging Markets Index, with a potential upgrade scheduled for September this year.

Circular 08 introduces four major changes. First, by allowing connectivity via global brokers, foreign investors can now place orders through international brokerage firms without being required to open trading accounts directly at local securities companies, streamlining cross-border trading processes.

Second, new rules governing the non-prefunding (NPF) mechanism remove the practice of publicly naming failed trades. Instead, violations will be subject to internal reporting and penalties ranging from temporary suspension of NPF trading privileges for seven to 180 days for foreign investors that fail to meet settlement obligations.

Third, local securities firms are now permitted to accept NPF orders for their own shares or those of related parties, a move expected to facilitate index-tracking funds in closely replicating benchmark portfolios.

Fourth, foreign fund management companies are allowed to open two accounts simultaneously - one proprietary trading account and one client asset management account - in line with the Government's Decree No. 245/2025/ND-CP.

Analysts said Circular 08 not only addresses issues highlighted by FTSE Russell in its September 2025 review, but also creates conditions that could trigger stronger foreign inflows into Vietnam’s equity market.

Analysts at broker SSI said the new legal framework allowing global brokerage firms to execute trades directly for clients would help align Vietnam’s market practices more closely with international standards, reduce counterparty risk, and boost investor confidence through the involvement of reputable intermediaries.

Maybank analysts said Circular 08 should be seen as more than a technical regulation, calling it a strong signal of the Government’s commitment to market status upgrading. They added the regulation is particularly positive for securities firms, which are expected to benefit directly from higher liquidity and increased foreign trading activity.

Market reaction was swift. In Wednesday morning trading, a day after the circular was announced, stocks of several securities firms rose sharply even as the benchmark VN-Index fell more than 20 points. SSI gained more than 3%, while MBS, VCI and BVS rose over 2%, and HCM, DSE and VND advanced more than 1%.

J.P. Morgan said an upgrade decision could unlock a sizeable wave of passive inflows into Vietnam. Global index funds could channel around $1.3 billion into the market, equivalent to a weighting of about 0.34% in the FTSE Emerging Markets All Cap Index, it said. Based on current market capitalization, around 22 Vietnamese stocks could be added to the index.

J.P. Morgan has raised its VN-Index target to 2,000 points under its base-case scenario and 2,200 points under an optimistic scenario, citing a solid macroeconomic backdrop and strong corporate earnings growth as key drivers.

According to ACBS Research, FTSE indices relevant to Vietnam’s upgrade include the FTSE All-World, FTSE Emerging All Cap, FTSE Emerging and FTSE Global All Cap. Once Vietnam market status is officially upgraded, exchange-traded funds tracking these indices are expected to allocate capital to the Vietnamese market in line with their respective weightings.

ACBS estimates that ETF inflows into Vietnam could exceed $435 million. The largest fund tracking the FTSE Emerging All Cap Index as of November 10, 2025 was the Vanguard FTSE Emerging Markets ETF, with net assets of $105.5 billion, implying a potential allocation of about $358.5 million to Vietnam based on a 0.34% weighting.

Vietnam's stock market will be reclassified from "frontier" to "secondary emerging" from September 21 this year, subject to an interim review in March 2026, FTSE Russell stated in a release on October 7, 2025.

The interim review in March 2026 aims "to determine whether sufficient progress has been made in enabling access to global brokers, which is essential to support index replication and meet the needs of the international investment community."