Việt Nam's stock market has expanded significantly in terms of liquidity, market capitalisation and investor participation. — VNS Graphic Doan Tung

HÀ NỘI — Việt Nam’s capital market has demonstrated impressive growth over the past decade, positioning itself as a strong candidate for an upgrade from a frontier market to an emerging market in the FTSE Russell classification.

The stock market has expanded significantly in terms of liquidity, market capitalisation and investor participation. The country’s benchmark indices, such as the VN-Index and HNX-Index, have shown resilience despite global economic fluctuations. With increasing foreign investor interest, Việt Nam has also made efforts to enhance market infrastructure, transparency and regulatory frameworks.

According to the Head of Securities Services at HSBC Vietnam, Gary Harron, the prospect of the nation achieving an emerging market status is a pivotal milestone. The upgrade could attract substantial foreign capital inflows, improve market confidence and further integrate Việt Nam into global financial markets.

Impressive growth journey

Vietnamese stock market expansion over the past decade has been substantial and quantified. The VN-Index has more than doubled - increasing 2.3 times - market capitalisation surged 6.4 fold and liquidity expanded 3.8 times. The number of trading account soared 6.7 times, while the Securities trading codes (‘STCs’) issued to foreign investors grew by a multiple of 2.8.

In 2024 alone, the VN-Index was up 12.9%, while the market capitalisation of the stock exchanges increased by 21.2%, reaching approximately 70% of GDP. Trading accounts surpassed nine million, covering 9% of the population. Nearly 50,000 STCs have been granted to foreign investors, with 12.4% held by foreign institutional investors (‘FIIs’).

Liquidity remained strong, with an average daily trading value of VNĐ21.1 trillion (844 million), a 19.9% increase from the previous year. Clearly, quantitative metrics and progress have not been the obstacles to an upgrade and the growth story has been substantial.

The qualitative factors on assessing a market are harder to measure, resulting in the index providers like FTSE Russell using a range of criteria developed in conjunction with the international investor community. The process has been transparent and well-communicated, with Việt Nam on the watchlist since 2018.

While recent reforms primarily focus on attracting FIIs, they ultimately benefit the entire capital market, especially domestic retail investors who account for nearly 90% of trading activity. A robust regulatory framework and increased transparency can reduce risks and foster trust among all investors.

A potential FTSE Russell upgrade could significantly enhance Việt Nam's ability to mobilise capital, expected to attract around $6 billion in foreign investment, equating to over one per cent of GDP. This influx would bring more stability to the market through long-term institutional investors, addressing the current challenges posed by a retail-dominated market.

Việt Nam's capital market is at a pivotal juncture, with the potential for significant evolution. Regardless of the outcome of the FTSE Russell review, the market is likely to continue its growth trajectory, building on over 25 years of development since its first trading session in July 2000, ultimately benefiting the broader Vietnamese economy. VNS