A Turning Point for Viet Nam's Capital Markets

For more than 20 years, Viet Nam’s fast-growing economy promised opportunity, yet its stock market told a quieter story.  Global investors looked in but often stayed out. An unusual rule meant foreign fund managers could not place a single trade without first depositing the full value of the trade in cash — already committed before the transaction. Designed as a precaution to protect stability, it also signaled that the market wasn’t quite ready.

In late 2024, the State Securities Commission started phasing out the pre-funding requirement for foreign institutional investors, initially within agreed limits under arrangements with local brokers. The move opened the door for the world’s largest institutional investors to participate. Less than a year later came a turning point: London-based benchmarking firm FTSE Russell upgraded Viet Nam from “Frontier” to “Secondary Emerging Market,” placing it alongside China, India, and Indonesia — and setting the stage for deeper capital flows that can create jobs, expand businesses, and fuel economic growth. World Bank estimates suggest the upgrade could generate US$3 to 5 billion in portfolio flows in the first few years alone.

"This upgrade reflects the implementation of key market infrastructure enhancements," said FTSE Russell's Global Head of Policy David Sol, congratulating Viet Nam on its "progress made in aligning with international standards." For a country that has set itself the ambition of mobilizing private capital at scale to reach high-income status by 2045, the timing could not be more consequential.

On April 7, 2026, FTSE Russell's Interim Update confirmed that Viet Nam's upgrade to Secondary Emerging Market status from Frontier remains on track. Index inclusion will take place in four phases, from September 2026 to September 2027.

"The upgrade contributes to attracting large-scale international investment flows, enhancing liquidity, and strengthening Viet Nam's position in the global financial system," the State Securities Commission said in a statement following the interim update.

The reforms that made it possible

The upgrade was not the product of any single decision. It was earned through a sustained reform drive, coordinated across ministries, regulators, and market institutions, that enhanced Viet Nam's capital market infrastructure piece by piece. Alongside the partial phasing out of pre-funding came a new trading system, a lowering of limits on foreign ownership in listed firms, a requirement that financial disclosures be published in English for the first time, and reforms to allow institutional investors to transact through global brokers, rather than being required to go through local brokers and bear their credit risk.

Deputy Prime Minister Nguyen Van Thang, then the Minister of Finance, acknowledged the breadth of what it took. In an interview with the Vietnam News Agency about the FTSE reclassification, he credited the upgrade to "sound government policies and strong determination, close coordination among the State Bank and relevant ministries, the commitment of market participants, as well as the invaluable support of the World Bank, FTSE experts, and global investment institutions."

The World Bank Group's engagement with Viet Nam's capital markets spans more than a decade, covering bond market and equity market development, securities regulation, investor base building, and market infrastructure. Central to that work has been the Joint Capital Markets Program (J-CAP), a World Bank Group initiative supported by Australia’s Department of Foreign Affairs and Trade and Switzerland’s State Secretariat for Economic Affairs.  Working alongside the Vietnamese authorities over several years, J-CAP provided the technical and analytical groundwork that translated reform ambition into concrete change — including the design and implementation of the Non-Prefunding Framework that opened the market to foreign institutional investors. Out of that partnership grew an Investment Advisory Group, which for the first time gave global fund managers a direct and regular channel to engage with senior regulators, bringing international perspectives into the heart of the reform process.

What the upgrade unlocks

As a result of the reclassification by FTSE Russell, emerging market index-tracking funds worldwide will be required to include Vietnamese equities starting September 21, 2026, as a mechanical consequence of index inclusion.

Total flows are expected to rise to US$25 billion by 2030 if reforms continue.  Yet for Viet Nam, the upgrade is about more than the capital it will attract. "This upgrade is a statement of confidence in Viet Nam's economic ambition,” said Thomas Jacobs, IFC Country Manager for Viet Nam, Cambodia and Lao PDR. “By meeting international standards, Viet Nam's capital markets can now attract a broader and more diverse pool of global investors, deepening market liquidity and giving local businesses access to the long-term financing they need to grow, innovate, and create jobs. For the private sector, this is a significant step toward a more dynamic and competitive investment landscape."

Reaching high-income status by 2045 requires financing well beyond what public budgets can provide. According to World Bank analysis, Viet Nam’s infrastructure needs alone amount to US$30 billion per year, with a cumulative shortfall of US$94 billion forecast for the period of 2019 to 2040. Under Politburo Resolution 68, issued in May 2025, the private sector is tasked with contributing over 60% of GDP by 2045. But for years, private capital has come predominantly from banks, with minimal contribution from the stock market. Between 2019 and 2023, the economy mobilized an average of US$53.5 billion annually through the banking sector — compared to only about US$2.9 billion[1] from the stock market.

"Viet Nam has reformed its way into a new league of markets, and this is a testament to the country's resolve and ambition," said Mariam J. Sherman, the World Bank's Division Director for Viet Nam, Cambodia, and Lao PDR. "Now the stakes are even higher. Mobilizing the financing Viet Nam needs to reach high-income status by 2045, at the scale and speed required, is only possible with capital markets that command the confidence of investors worldwide. The World Bank Group stands ready to support every step of that journey.”

The road ahead

"The upgrade may bring a short-term inflow of capital, but it's the financial-sector reforms that will have the more lasting impact," said Le Hong Hiep, Senior Fellow at the ISEAS-Yusof Ishak Institute in Singapore. He places these changes within Viet Nam's Doi Moi liberalization arc, a decades-long economic opening that has, in capital markets, perhaps its most consequential frontier yet.

The FTSE reclassification establishes Viet Nam's credibility and sets the conditions for the larger ambition: recognition by MSCI, the world's largest equity index provider by assets under management. Analysis suggests MSCI reclassification could bring three to four times the portfolio flows of the FTSE upgrade — a transformational shift that would cement Viet Nam's place in the portfolios of the world's most significant index providers.

A country that built its modern economy on manufacturing, exports, and foreign direct investment is now adding a new engine to power its growth. After seven years on a watchlist, Viet Nam has earned its place on the global investment map. How quickly the country builds the capital market infrastructure to support that place and how effectively it channels the capital that follows will define the next chapter of its economic story.

[1] World Bank Group staff estimates based on figures from CEIC and Asian Bonds Online.