Vietnam unveils stock market reform plan to achieve 'Emerging Market' status

Vietnam accelerates stock market reforms with a 4-phase plan and the launch of the CCP mechanism to attract foreign investors, aiming for 'Emerging Market' status and US$5 billion in fund inflows.

Vietnam is progressing with financial market reforms aimed at elevating its status to an "Emerging Market" (EM), with the State Securities Commission of Vietnam (SSC) set to officially launch a "Central Counterparty Mechanism" (CCP) by early 2027. This move is designed to attract greater foreign investment into the country.

Currently classified as a "Frontier Market," Vietnam has been on the radar of global index providers, including FTSE Russell, for potential reclassification since 2018. 

The frontier market status restricts investment from institutional funds, family offices, and other investors seeking to invest in listed companies.

According to the World Bank’s assessment, a reclassification to an emerging market could rapidly attract up to US$5 billion in foreign capital into Vietnam's financial markets.

The Vietnamese government has outlined a four-phase plan to be implemented by 2027 to elevate the market’s status. This plan was revealed during the visit of Gerald Toledano, FTSE Russell’s Head of Global Equity and Multi-Asset Products, to Hanoi.

The strategy includes comprehensive improvements to the legal framework, along with the establishment of a subsidiary that will act as the Central Counterparty (CCP), regulated by the Vietnam Securities Depository and Clearing Centre (VSDC).The CCP mechanism will play a crucial role as an intermediary between buyers and sellers in the stock market, ensuring that securities transactions proceed smoothly, even if one party fails to meet the agreed terms.

Vietnam’s Stock Market Liquidity Outperforms Thailand and Singapore 

Vietnam has begun implementing several measures to enhance its financial market, including adopting a new settlement system and removing the requirement for foreign investors to fully pre-fund their purchases before trading shares. These changes aim to boost liquidity and attract more foreign investment.

Vietnam's Prime Minister, Pham Minh Chinh, expressed hope that FTSE Russell would support the country’s transition to an "Emerging Market" status. A report by Voice of Vietnam (VOV) highlighted that Gerald Toledano, of FTSE Russell, underscored the strong liquidity of Vietnam's financial market, which surpasses that of its regional neighbours, Thailand and Singapore.

However, despite its strong liquidity, Vietnam’s financial market remains relatively small compared to others in the region. According to data from LSEG, as of Thursday’s market close, Vietnam's VNINDEX had a market capitalisation of approximately US$245 billion, while Thailand’s SET index stood at around US$455 billion, and Singapore’s STI index at approximately US$490 billion.Criteria for Emerging Market Status

The path from "Frontier Market" to "Emerging Market" is not governed by a single set of criteria, but is generally based on guidelines established by major global stock index providers such as MSCI and FTSE Russell. Overall, the key criteria for upgrading a market’s status include: 1) economic development, 2) market size and liquidity, and 3) market accessibility.

Regarding Vietnam’s economic outlook, the Vietnamese government aims for a GDP growth rate of 8% in 2025, marking the highest growth in years. The country plans to continue restructuring the public sector and driving economic growth. The government has also outlined a long-term plan, targeting double-digit growth within the next five years, signalling strong support for economic expansion.

Vietnam has also consistently worked to upgrade its stock market, implementing the KRX Trading System to improve trading mechanisms, enhance market efficiency, and align the country’s financial infrastructure with international standards. Furthermore, the government recently relaxed regulations to allow foreign institutional investors to invest in Vietnamese stocks without the need for pre-funding.

(2025/07/18-00:00)