Vietnam moves closer to MSCI upgrade

According to SSI Research’s May 2026 strategy report, Vietnam has a strong chance of being added to MSCI’s Watchlist in the June 2026 review cycle.

At present, the market has met 10 out of MSCI’s 18 market accessibility criteria and continues to improve across all remaining areas.

Notable progress includes the effective implementation of the non-prefunding mechanism, the central counterparty clearing roadmap on schedule, and the expansion of short-position instruments through VN30 index futures contracts.

The VN30 Index is a benchmark index tracking the 30 largest and most liquid stocks listed on the Ho Chi Minh City Stock Exchange (HSX), representing Vietnam’s leading blue-chip companies across key sectors of the economy.

At the same time, the level of English-language disclosure by regulators and listed companies has improved markedly.

Foreign ownership on the HSX rose from 41.4 per cent to 46 per cent in April, mainly driven by newly listed large-cap companies offering 100 per cent foreign ownership room.

As a result, 17 out of 18 MSCI criteria are now considered close to meeting the baseline requirements.

The remaining challenge primarily lies in foreign exchange (FX) market liberalisation. Although this is a complex criterion, it is not viewed as an absolute barrier, as several current MSCI emerging markets have yet to fully satisfy the requirement.

Notably, recent discussions on allowing commercial banks to provide FX hedging instruments are seen as a positive signal, further reinforcing the prospects of Vietnam’s stock market being placed on MSCI’s Watchlist.

Reviewing the Vietnamese stock market’s performance in April, SSI Research said the market continued to demonstrate strong resilience, staging an impressive rebound and giving the second quarter of 2026 a favourable start.

After falling 11 per cent in March, the VN-Index posted gains for four consecutive weeks, rising 10.7 per cent in April – its strongest monthly increase since August 2025.

The market recovery was supported by a broader rebound across global equity markets, with many indices surpassing previous peaks in the face of an array of favourable factors domestically and internationally, including the ceasefire between the United States, Israel and Iran; confirmation from FTSE Russell that Vietnam would be upgraded to emerging market status effective from September 2026; relatively positive Q1’s earnings results; and new government support measures, such as efforts to lower interest rates and raising the tax threshold for household businesses to VND1 billion ($40,000).

In addition, Vietnam’s economy continues to maintain a positive growth outlook for 2026, increasingly driven by public investment and robust foreign direct investment (FDI) inflows, supported by efforts to resolve long-delayed projects.

The new government administration has also pursued aggressive administrative reforms, targeting at least a 30 per cent reduction in business conditions to improve efficiency and create additional room for growth. These factors have contributed significantly to improving investor sentiment.

Despite rising cost pressures from elevated oil prices, the government continues to prioritise coordination between expansionary fiscal policy and flexible monetary management to anchor inflation around 4.5 per cent, thereby laying a solid foundation for stronger acceleration during 2027-2030.

The breadth of the recovery, however, remains limited. Index performance has been concentrated mainly in large-cap real estate stocks, particularly the Vingroup-related group. Excluding these stocks, the VN-Index was broadly flat.

From a fundamentals perspective, Q1/2026 earnings results have played a key role in supporting the local stock market. Total revenue rose nearly 20 per cent on-year, while net profit increased by more than 34 per cent. Profit growth was driven primarily by the banking and real estate sectors.

Notably, consumer-related sectors – especially retail and technology – have begun to record clear signs of improvement, supported by market share gains and replacement demand.

Several cyclical industries, including construction materials, oil and gas, and electricity, also maintained positive performance, reflecting still-solid domestic demand.

In terms of valuation, the market is currently trading at a forward Price-to Earnings ratio of around 13.2x, close to its long-term average, and approximately 10.3x excluding Vingroup-related stocks. These valuation levels continue to provide room for selective investment strategies, particularly as Vietnam’s market upgrade remains a medium-term catalyst, including the possibility of being added to MSCI’s Watchlist.

MSCI Inc. is a leading global provider of stock market indexes, investment research and portfolio analysis tools for institutional investors. The organisation is best known for its MSCI equity indexes, which are widely used by investment funds and asset managers worldwide as benchmarks for portfolio allocation and performance measurement.

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