On September 21, Vietnam’s stock market was officially upgraded by FTSE Russell from frontier to secondary emerging market status, marking a step forward after years of reforms. However, the upgrade does not guarantee a sustained rise in the index or an immediate broad-based rally driven by international capital inflows.

Speaking at a seminar titled “30 Years of Vietnam’s Securities Industry: New Drivers, New Position, New Momentum”, organized on Thursday, Nguyen Son, chairman of the Members’ Council of Vietnam Securities Depository and Clearing Corporation (VSDC), said a market decline following an upgrade was entirely normal.

The key point, he said, was that an upgrade creates opportunities to access capital and raises the market’s standing, but does not guarantee short-term stock price gains.

Capital inflows do not automatically translate into market momentum

The upgrade creates opportunities to attract international institutional investors, but translating those opportunities into actual trading activity takes time. Capital allocation decisions also depend on investment strategies, market conditions, valuations and individual stocks’ ability to meet eligibility criteria.

Dinh Ngoc Dung, chairman and CEO of Bao Tin Capital JSC, estimated that passive investment inflows into Vietnam following the upgrade could reach around $1.5 billion. "This is a projection and does not mean the entire amount will be deployed immediately once the upgrade takes effect."

Notably, foreign investors have been net sellers for an extended period, yet the market has maintained liquidity thanks to domestic capital. This shows that market activity depends not only on foreign funds but also on domestic investors’ participation and capacity to absorb capital.

As a result, experts say short-term market movements may still be affected by stock supply and demand, portfolio rebalancing and investors’ trading decisions. A correction following the upgrade does not in itself undermine the significance of the milestone, nor is it sufficient to determine whether the upgrade will prove effective over the long term.

Corporate earnings and valuations should also be considered alongside stock price movements. According to data compiled by Bao Tin Capital, 403 of the 404 stocks listed on the Ho Chi Minh Stock Exchange (HoSE) had released their Q2/2026 financial statements at the time of compilation, with aggregate net profit rising 47.5% year-on-year.

The company also estimated that the market’s price-to-earnings (P/E) ratio, excluding the Vingroup group, stood at around 10.4 times, below its five-year average.

However, these figures do not mean that all stocks are undervalued or that the market is certain to rise. Stock prices still depend on individual companies’ earnings prospects, valuations and investor expectations.

The real test lies in market quality and resilience

Following the upgrade, the task is not simply to attract more foreign capital, but also to improve the quality of listed assets, diversify products, modernize infrastructure, and strengthen transparency to sustain investor confidence.

Luong Hai Sinh, chairman of the members’ council of the Vietnam Stock Exchange (VNX), highlighted three groups of measures: diversifying listed assets and developing new products; upgrading technological infrastructure and improving settlement and clearing mechanisms; and strengthening supervision to ensure stable and transparent market operations.

On product development, VNX cited plans to study depositary receipts and cross-border trading mechanisms, work with FTSE Russell to develop new indices, prepare VN30 index options contracts, and explore an exchange for innovative start-ups, gold derivatives and gold exchange-traded funds (ETFs).

VNX and the stock exchanges are also working with relevant stakeholders to study the implementation of a central counterparty (CCP) clearing mechanism and omnibus trading accounts (OTAs). Trade surveillance, cross-market monitoring and the handling of international index rebalancing exercises are also receiving attention to protect investors’ lawful rights and interests.

From a regulatory perspective, Hoang Van Thu, Vice Chairman of the State Securities Commission (SSC), said the regulator had identified six major strategic priorities for the coming period under Vietnam’s stock market development strategy through 2030.

The first priority is to improve the legal framework, reduce investment and business conditions, simplify administrative procedures, and unlock capital flows.

Other priorities include increasing market openness and accessibility and strengthening international integration; implementing a CCP mechanism for the cash equity market according to a 2027 roadmap; improving transparency, expanding foreign ownership limits in eligible sectors, and ensuring equal access to information for foreign investors.

The SSC also plans to modernize technological infrastructure and trading systems to ensure safe and stable operations in line with international standards.

To expand the market’s supply of investment products, the regulator will promote equitization and state divestments, link initial public offerings (IPOs) with listings or registration for trading, and attract large companies with sound financial positions and strong corporate governance.

Other product initiatives include allowing foreign direct investment (FDI) enterprises to register IPOs linked to listings in Vietnam, exploring infrastructure, green and sustainability bonds, developing new derivatives, and considering depositary receipts listed overseas.

The remaining two priorities focus on developing the investor base and strengthening regulatory and supervisory capacity. The SSC aims to expand institutional investment, diversify securities investment funds, and encourage individual investors to participate through professional institutions, while improving transparency and protecting investors’ lawful rights and interests.

These priorities show that the post-upgrade challenge goes beyond meeting the criteria of international index providers. Vietnam must also make substantive improvements to listed assets, market accessibility, the investor base and supervisory capacity.

These are essential to attracting international capital and strengthening the stock market’s role as a key source of medium- and long-term funding for the economy, reducing its relative dependence on bank credit.

Domestic capital flows also need to be strengthened. According to VSDC, Vietnam had more than 14.13 million securities accounts at the end of September 2026, including over 14.05 million held by domestic individual investors, equivalent to around 14% of the population.

More than two million domestic securities accounts were opened in the first eight months of the year alone. However, the number of accounts does not fully reflect how regularly investors participate or the amount of capital committed over the long term. Developing investment funds, expanding distribution channels and improving financial literacy would help strengthen domestic capital flows.

After 30 years of development, the upgrade recognizes the progress made by Vietnam’s stock market while raising expectations for its standards and competitiveness.

A market correction alone cannot determine whether the upgrade has succeeded or failed. The long-term measure of success will be the market’s ability to remain transparent and secure, offer a diverse range of products, maintain a solid investor base, and effectively meet the capital needs of businesses and the broader economy.