Vietnam is entering a defining moment in its modern economic history and Analysts project US$5–8 billion in passive and active foreign inflows immediately after upgrade, with cumulative inflows of US$25 billion by 2030.
With the Vietnam stock market surging and consistently hitting new highs the question of emerging market and market economy status are important for institutional asset allocators and private clients alike.
After decades of export-led industrialization and rapid growth, the country under the leadership of Mr. To Lam, General Secretary of the Communist Party of Vietnamმ is now pursuing two intertwined milestones: reclassification from frontier market to emerging market in global finance, and full international recognition as a market economy. Together, these advances would boost Vietnam’s integration into the global system, unlock capital flows, and reaffirm its message to the world: “Nothing is Impossible.”
The United States dropped more bombs on Vietnam than on Adolf Hitler’s Nazi Germany.
USA ambassador Ted Osius, put it best in a classic book by the title of “Nothing Is Impossible”. Nothing Is Impossible: America's Reconciliation with Vietnam
Global capital & investors could reconcile with Vietnam when the market graduates from frontier market status to EM emerging market status as well as market economy status.
Financial markets run on narratives and often need a catalyst for significant "re-rating".
Stefan Zweig opined Brazil is the country of the future and the same might apply to Vietnam stock market and the question of whether it’s a frontier or EM emerging market?
The EM upgrade for Vietnam could be a major re-rating but like the future of Brazil it did not arrive in Vietnam yet but seems consistently delayed. But it is a question of when not if.
In the beginning of the 90s, the per capita income of Singapore was 125 times higher than Vietnam, now it is 24 times. Thailand used to be 16 times higher than Vietnam, now the figure is 2.5 times. Compared to Japan, the figure came down from 267 times to 16 times, or the U.S., the figure decreased from 252 times to the current 25 times.
Once deadly war enemies Vietnam and the United States are now strategic partners.
The Vietnam upgrade from frontier market status has not happened yet but would be a major catalyst for global capital to seek allocation to Vietnam. God’s delays are not necessarily God’s denials, and this most probably applies to the Vietnam EM upgrade too.
Liquidity in financial markets can be like a taxi on a rainy New York city night “it disappears just when you need it the most”.
Participants in Vietnam financial markets however have pointed out that Vietnam stock market liquidity has grown steadily in the last few years.
Expected timeline for Vietnam’s upgrading to Emerging Market
- The Emerging Market Upgrade
Current Position
Vietnam remains a frontier market under both FTSE Russell and MSCI. Despite strong fundamentals and a stock market valued at over US$200 billion, technical barriers have delayed reclassification.
Reform Momentum
Key reforms introduced in 2024–25 are now addressing these gaps:
- Circular 68/2024 removed pre-funding requirements for foreign investors.
- The long-awaited KRX south Korea trading system and Central Clearing Counterparty (CCP) have been rolled out in 2025 to modernize settlement.
- Enhanced disclosure, transparency, and investor access measures are in place.
Timeline and Impact
- FTSE Russell: Vietnam is on its Watch List, with a potential upgrade in autumn 2025 and index inclusion by 2026.
- MSCI: More cautious but could follow once reforms prove durable.
- Capital Inflows: Analysts project US$5–8 billion in passive and active foreign inflows immediately after upgrade, with cumulative inflows of US$25 billion by 2030.
Vietnam is still currently classified as a frontier market. The expected upgrade to EM status could lead to a re-rating of Vietnamese assets and result in a profitable investment opportunity. Vietnam's inclusion into some of the world's most influential equity indices could deliver a much-deserved boost in terms of interest from investors in the nation's stock market.
Although investors will find that most private banks and wealth managers are still unable to buy or sell Vietnamese equities directly, I would argue that this should be seen an encouraging sign because the market is still not yet on the radar of most investors, but the indications are that it will be in the future.
Vietnam's inclusion into some of the world's most influential equity indices would deliver a much-deserved boost in terms of interest from investors in the nation's stock market.
Vietnam could also be classified as an emerging market by MSCI if its free-float rate increases and the market infrastructure is adjusted to better accommodate foreign investors. Most of the concerns pointed out by MSCI about Vietnam’s upgrade are technical and can be addressed with new regulations. Probably the biggest obstacle to overcome would be the willingness of Vietnamese business owners to welcome foreign investment. This openness to foreign investment will form the biggest impression about Vietnam in investors’ eyes, besides the official market status by MSCI.
God delays might not always be god’s denials and when the VN market re-rating finally arrived it will be rather profitable for the patient & strategic investors in Vietnam’s capital market.
Capital markets and their ecosystem grow in cycles of boom & bust and higher medium-term volatility is a sign of a dynamic & free capital market.
Recognition as a Market Economy
Current Position
Vietnam is officially recognized as a market economy by the EU and many Asian partners. However, the United States and several others still classify it as a non-market economy, affecting trade defense cases like anti-dumping tariffs.
Reform Commitments
- Resolution 68 (2024) designates the private sector as the main driver of growth.
- Structural reforms include reducing SOE dominance, opening access to capital and land for private firms, and creating incentives for R&D and high-tech industries.
- Vietnam is actively lobbying for U.S. recognition, highlighting its commitment to WTO principles and transparent economic governance.
Strategic Importance
- Recognition as a market economy would lower trade frictions, especially with the U.S., its top export market.
- It would also reinforce investor confidence, aligning with the narrative of Vietnam as a trusted, rules-based partner in global supply chains.
In the final analysis and in the words of a Chinese proverb, fortune favors the brave & the prepared mind.
Vietnam’s ambition to graduate to emerging market status and achieve full market economy recognition represents more than technical reclassification. It is a signal of confidence, resilience, and transformation. The reforms being rolled out in 2025 show a clear intent: to move beyond a low-cost export model and position Vietnam as a dynamic, innovation-led economy.
If successful, these milestones will accelerate capital inflows, reduce trade friction, and give Vietnam a stronger voice in global economic governance, creating great investments return for private clients & investors.
True to its motto, Vietnam is proving that nothing is impossible.
Rien n’est impossible
Không gì là không thể
By Rainer Michael Preiss, Partner & Portfolio Strategist at Das Family Office in Singapore.
