(Bloomberg) — Vietnam stocks rallied after FTSE Russell confirmed the country’s entry to emerging markets later this year, with sentiment also getting a boost from a two-week ceasefire between the US and Iran.
The benchmark VN Index rose 4.4% in pre-market trading before paring some of the gains at the open. The advance narrows the gauge’s losses for the year to 3.6%.
FTSE Russell, which had first indicated the upgrade from frontier status six months ago, confirmed Vietnam remains on track for reclassification following its latest review. The inclusion propels one of Asia’s fastest growing economies into the same league as China, India and Indonesia. The index compiler had estimated that the change may add up to $6 billion in redirected inflows to the country.
“This marks a major milestone for the market after nearly a decade on the watchlist, supported by key structural improvements such as the global broker mechanism, 2024 non-prefunding mechanism and the formalization of failed-trade handling,” said Tyler Manh Dung Nguyen, chief market strategist at Ho Chi Minh City Securities.
The addition will be done in a four-tranche phased implementation, beginning in September and concluding in 2027, FTSE Russell said in a statement. This phased approach is designed to ensure an orderly market transition, manage the anticipated capital inflows, and support liquidity throughout the inclusion process.
Vietnam has undertaken sweeping reforms in recent years to improve market accessibility. Authorities removed pre-funding requirements for equity trades, advanced plans for a centralized clearing system by 2027 and allowed foreign investors to trade via global brokerages, among other measures.
The upgrade will “contribute to attracting large-scale international investment flows, enhancing liquidity, and strengthening Vietnam’s position in the global financial system,” the State Securities Commission said in a statement Wednesday.
The development also comes after Vietnam’s National Assembly elected Communist Party chief To Lam as president on Tuesday, consolidating the country’s top party and state roles in a rare concentration of power. Lam said his top priority is to secure peace and promote “rapid, sustainable national development.”
FTSE Russell estimates Vietnam’s weight in its emerging market index at approximately 0.23%–0.35%, based on data as of March 27 this year. It listed Vingroup, Masan Group, FPT Corp. and Hoa Phat Group among potential joiners, with the final lineup of eligible firms to be published before the semi-annual index review in September. The shares rose by at least 2.7% each on Wednesday.