Vietnam Wins Emerging-Market Status From FTSE, Drawing Investor Optimism

By Kimberley Kao and Jason Chau

Vietnam has clinched a long-awaited upgrade to emerging-market status, a move expected to draw billions of dollars in foreign investment and deepen its financial markets.

Index provider FTSE Russell reclassified the Southeast Asian nation as a secondary emerging market, citing reforms that have brought its capital markets more in line with international standards.

The upgrade from frontier status puts Vietnam alongside peers such as China, Indonesia and India, and will likely heighten investors' interest in a market that has already been on a tear this year.

The benchmark VN Index jumped as much as 3.0% early Wednesday before paring gains. It remains up more than 33% year to date, ranking among the world's best performers.

While that rally may limit further upside, the upgrade serves as a fresh tailwind for investor sentiment and enhances Vietnam's access to capital, analysts said. FTSE typically consults investors before making reclassification decisions, adding weight to the move.

"The upgrade affirms that Vietnam has reached a key milestone in its development," Julius Baer equity research analyst Jen-Ai Chua said in a note. "This should drive more reforms."

DBS senior economist Chua Han Teng expects the change to help attract stronger foreign inflows.

HSBC strategists estimate the status boost could bring roughly $3.4 billion into Vietnam over time, including about $1.5 billion in passive funds inflows once the inclusion takes effect.

Vietnam has been on FTSE Russell's watchlist since 2018 and has spent years loosening foreign investment limits and improving transparency to qualify. Earlier this year, it adopted the Korea Stock Exchange's market infrastructure to modernize trading systems.

"This upgrade comes at a timely juncture," said Dragon Capital, a Vietnam-focused fund, noting that Vietnam continues to post robust economic growth. The fund forecasts corporate earnings growth of 21% in 2025 and 17% in 2026, with a pipeline of over $40 billion in IPOs through 2026-2028.

Markets will be watching how policymakers build on the milestone ahead of FTSE's next review in March 2026.

The government is committed to advancing deeper reforms by "maximizing accessibility for both domestic and international investors," Vietnam's finance minister Nguyen Van Thang said in a statement.

Analysts at Maybank Securities said the FTSE upgrade is part of Vietnam's broader effort to deepen its capital markets and fund its long-term growth ambitions. They added that achieving an investment-grade sovereign rating, which could come as early as 2028, would have an even greater impact.

While acknowledging Vietnam's progress, Dragon Capital said what matters most is that "Vietnam does not view this as the final destination."

Write to Kimberley Kao at kimberley.kao@wsj.com and Jason Chau at jason.chau@wsj.com