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Very Bullish +80

Vietnam moves closer to MSCI upgrade

📈 Vietnam is gaining momentum for potential inclusion on MSCI's Watchlist ahead of the June 2026 review cycle.

✅ The Vietnamese market has now met 10 out of 18 MSCI criteria, with most remaining areas showing continuous improvement.

💹 Foreign ownership on the Ho Chi Minh City Stock Exchange (HSX) increased from 41.4% to 46% in April, driven by new large-cap listings.

🌍 English-language disclosure by regulators and listed companies has improved markedly, aiding transparency requirements.

⚖️ The remaining FX liberalisation hurdle is viewed as non-absolute, with discussions on commercial bank FX hedging seen as a positive signal.

📊 The VN-Index rebounded 10.7% in April, its strongest monthly gain since August 2025, after falling 11% in March.

🔗 The market recovery is supported by the US-Israel-Iran ceasefire, FTSE Russell's emerging market upgrade for September 2026, and positive Q1 earnings.

💰 Government fiscal policy and new tax thresholds (VND1 billion household business) are anchoring inflation near 4.5% to support growth.

🏗️ Vietnam's economy is driven by public investment, robust FDI inflows, and aggressive administrative reforms targeting a 30% efficiency boost.

📉 Current valuations stand at ~13.2x forward P/E, offering room for selective investment strategies despite rising oil price costs.

🏦 Q1/2026 fundamentals showed revenue up ~20% YoY and net profit up >34%, primarily driven by banking and real estate sectors.

🛒 Consumer-related sectors like retail and technology are showing clear signs of improvement, while cyclical industries remain solid on domestic demand.

📉 The breadth of the market recovery remains limited, with performance concentrated mainly in large-cap real estate stocks linked to Vingroup.

🏢 Securities firms are intensifying competition for market share as liquidity surges, highlighting capital strength and technology as key advantages.

🤝 The State Securities Commission and FTSE Russell have discussed next steps following the market upgrade, focusing on index development.

Bullish Signals
  • Vietnam has met 10 out of 18 MSCI market accessibility criteria, with significant progress in regulatory reforms and foreign ownership improvements that strengthen its case for Watchlist inclusion by June 2026.
  • Foreign ownership on the Ho Chi Minh City Stock Exchange (HSX) rose from 41.4% to 46% in April, driven by newly listed large-cap companies offering 100% foreign ownership room.
  • The VN-Index posted a strong gain of 10.7% in April, marking its most impressive monthly increase since August 2025 and giving the second quarter of 2026 a favorable start.
  • Total revenue rose nearly 20% year-over-year while net profit increased by more than 34% in Q1/2026, supported by robust performance from banking and real estate sectors.
  • Consumer-related sectors such as retail and technology are showing clear signs of improvement with market share gains and replacement demand driving growth.
  • Cyclical industries including construction materials, oil and gas, and electricity maintained positive performance, reflecting solid domestic demand despite elevated oil prices.
  • The FTSE Russell confirmation that Vietnam would be upgraded to emerging market status effective September 2026 provides a major catalyst for institutional investor interest.
  • The new government administration is pursuing aggressive administrative reforms targeting at least a 30% reduction in business conditions to improve efficiency and create room for growth.
  • Valuation levels remain attractive with the market trading at a forward Price-to-Earnings ratio of around 13.2x, close to its long-term average, offering upside potential excluding Vingroup-related stocks.
Risk Factors
  • The breadth of the market recovery remains limited, with performance concentrated mainly in large-cap real estate stocks, particularly Vingroup-related groups. Excluding these specific sectors, the VN-Index was broadly flat.
  • Foreign ownership on the HSX is highly dependent on newly listed large-cap companies offering 100 per cent foreign ownership room, creating reliance on specific corporate actions rather than broad-based inflows.
  • The remaining major challenge for MSCI Watchlist inclusion lies in FX market liberalisation, which remains a complex criterion despite discussions on hedging instruments.
  • Operating costs are under pressure from elevated oil prices, complicating the government's efforts to anchor inflation around 4.5 per cent.
  • Aggressive administrative reforms targeting a 30 per cent reduction in business conditions may introduce short-term disruption risks during implementation.
Full Analysis
Vietnam’s stock market is gaining significant momentum for a potential inclusion in the MSCI Watchlist during its June 2026 review cycle, following a strong April performance where the VN-Index rose 10.7%. This surge marks the strongest monthly increase since August 2025, driven by global equity rebounds, positive Q1 earnings which saw revenue up nearly 20% and net profit increasing over 34%, and confirmation from FTSE Russell that Vietnam will be upgraded to emerging market status effective September 2026. The market has now met 10 out of 18 MSCI accessibility criteria, with foreign ownership on the Ho Chi Minh City Stock Exchange rising to 46% due to newly listed large-cap companies offering full foreign ownership, and notable improvements in regulatory reforms, non-prefunding mechanisms, and English-language disclosures. While the primary remaining hurdle is foreign exchange market liberalisation, recent discussions regarding commercial banks providing FX hedging instruments are viewed as positive signals that this complex criterion may not be an absolute barrier. The broad economic outlook remains positive with robust FDI inflows, aggressive administrative reforms aiming to reduce business conditions by 30%, and a government focus on maintaining inflation around 4.5% through coordinated fiscal and monetary policies to support growth in 2027-2030. However, the recovery so far has been concentrated mainly in large-cap real estate stocks, particularly Vingroup-related entities, leaving the index broadly flat when excluding these sectors, though valuations remain reasonable at a forward P/E of approximately 13.2x or 10.3x excluding the largest names, offering room for selective investment strategies as the MSCI upgrade acts as a medium-term catalyst.