Dragon Capital Report: From Frontier to Emerging Market: Vietnam’s Upgrade Opportunity

For many years, asset managers have tried to assess the impact that an upgrade to Vietnam’s standing in major global equity indices would have on performance, liquidity and market maturity. This discussion – centred about a possible move from MSCI’s and FTSE Russell’s frontier equity indices to their more closely-followed emerging markets counterparts – has given managers a clear sense of the positive passive and active flows that such a graduation might trigger. But it has remained a theoretical exercise because index providers have wanted to see specific market reforms before approving an upgrade, and Vietnam has not introduced them.

Today, however, there are clear signals that an upgrade in FTSE Russell’s index hierarchy could be announced in September 2025, with official inclusion as early as March 2026, triggered by reform around previous sticking points such as pre-funding requirements for trading.

While an upgrade would deliver significant benefits to Vietnam’s stock markets – such as increased liquidity, valuation uplift and greater investor participation – there are broader and equally transformative implications for the country. Achieving EM status places Vietnam firmly on the global stage, giving it access to larger institutional investors, strengthening the country’s voice in regional trade negotiations, and raising its profile to parity among ASEAN and other emerging market peers. Although quantifying the precise GDP uplift from these structural shifts is challenging, the potential long-term benefits extend far beyond market-specific outcomes. While this report focuses on market implications, investors should be aware of these wider-reaching economic and geopolitical advantages.

In this report, we revisit the investment case for Vietnam in the light of General Secretary Tô Lâm’s modernisation agenda; look at the reforms that have made an upgrade more likely; and examine in detail what tends to happen to flows, performance and liquidity after an upgrade from frontier to emerging market status, drawing upon the evidence of countries that have previously made this transition such as Saudi Arabia and Kuwait.

We also consider likely knock-on impacts on areas such as corporate governance and IPOs; examine the challenges ahead for an upgraded market; and review the Dragon Capital products that will allow investors to invest wisely both before and after it occurs.

Download Full PDF: Dragon Capital Report: From Frontier to Emerging Market: Vietnam’s Upgrade Opportunity

Thanks @Source from Dragon Capital