CICC: The FTSE upgrade is about to be implemented, and the Vietnamese market is expected to usher in an inflection point in foreign capital allocation
The Zhitong Finance App learned that CICC released a research report saying that FTSE Russell announced the results of the September semi-annual index review on August 21, 2026, and 27 Vietnamese stocks were selected for the FTSE Global Stock Index system. Vietnam will upgrade from a frontier market (Frontier) to a secondary emerging market (Secondary Emerging Market) starting September 21. According to the official schedule, the consultation period for the list is until September 4. The position adjustment transaction is expected to be carried out around the position adjustment window on September 18 and officially take effect on September 21. The bank believes that this upgrade may bring in about US$19-20 billion in passive capital inflows.
CICC's main views are as follows:
I. Core events
FTSE Russell (FTSE Russell) announced the results of the September semi-annual index review on August 21, 2026. 27 Vietnamese stocks were selected for the FTSE Global Equity Index Series (GEIS). Vietnam will upgrade from a frontier market (frontier) to a secondary emerging market (Secondary Emerging) starting September 21. The review list was further expanded from the 23 in the April indicative list, including 3 large-cap stocks, 3 mid-cap stocks, and 21 small-cap stocks. Of these, 6 large and mid-cap stocks were simultaneously included in the FTSE All-World Index (Vietnam is the 49th market covered by the index). Together with about 90 micro-cap stocks, a total of 117 Vietnamese stocks entered the GEIS system. According to the official schedule, the consultation period for the list is until September 4. The position adjustment transaction is expected to be carried out around the position adjustment window on September 18 and officially take effect on September 21. The bank believes that this upgrade may bring in about US$19-20 billion in passive capital inflows.
II. Inclusion mechanism and estimation of capital inflows
After the review results were announced, the Vice Chairman of the Vietnam Securities Regulatory Commission (SSC) said that Vietnam's weight in the FTSE Emerging Markets Index series is expected to rise to 0.49%, higher than the FTSE official preliminary forecast based on data released at the end of March (FTSE Emerging All Cap Caliber 0.329%), an increase of about 0.16 percentage points, mainly due to the expansion of the list and changes in market capitalization. The bank believes this means that the actual investable scale and capital inflow may be higher than previous market expectations. According to FTSE, this inclusion follows the following framework:
Eligibility screening and accounting principles: Eligible individual stocks must meet at the same time: 1) The free circulation ratio is not less than 5%; 2) the foreign shareholding space is not less than 20%, that is (foreign shareholding limit - foreign shareholding ratio) /foreign shareholding limit ≥ 20%. If it becomes a constituent stock, the weight will be gradually reduced, and the foreign shareholding limit (FOL) is below the free circulation ratio; 3) Liquidity must meet the standards, and the median monthly turnover ratio is not less than 0.05% and satisfied for at least 10 months in 12 months; 4) By pressing Size-level screening for full market capitalization ranking.
The pace of phased inclusion: In order to reduce the impact on liquidity, the investable weight of individual Vietnamese stocks will be included in four batches: 10% will be added in the first batch on September 21, 2026, and 20%, 35% will be added on March 22, June 21, and September 20, respectively, to achieve 100% inclusion by September 2027. FTSE will further advance the evaluation and tracking of the replication of the fund after each batch is implemented. Vietnam's exclusion from the Frontier Index was completed in one go in September of this year, but due to the current limited funding to track the Frontier Index, the bank believes that the impact of the one-time exclusion is basically manageable.
Estimation of potential foreign capital inflows: Most of the passive funds tracking the FTSE index are concentrated in Vanguard's products. The total size of related funds exceeds 1.1 trillion US dollars, of which the Vanguard FTSE Emerging Markets ETF is about US$163.3 billion (as of June 30). Based on 0.49% of the weight, the bank estimates a total passive inflow of about US$1.92 billion, and the first batch (10%) of about US$19-200 million; the World Bank expects the recent combined capital inflow of about US$3-5 billion, cumulatively to reach US$25 billion by 2030. The volume of active capital is usually several times that of passive capital. In terms of pace, the bank expects that passive capital will be concentrated on opening positions around the effective date of each batch. Active capital is often placed ahead of schedule. Combined, Vietnam's current valuation is at a low level (as of August 24, 2026, according to Bloomberg's unanimous expectations, the VN Index's forward-looking price-earnings ratio is 12.6 times), which is attractive for foreign investment allocation.
Individual stocks with large market capitalization and high circulation market may benefit first: According to the review list published by FTSE, there are 8 banks, 7 brokerage firms, 4 Vingroup companies, 3 food and beverage companies, and sectors such as steel, information technology, and aviation. In terms of market capitalization, the 6 large and medium capitalization stocks together account for about two-thirds of the total market value of the 27. The leading concentration effect is remarkable. The bank expects that passive inflows will also be concentrated on individual stocks with large market capitalization and high circulation. The official investment weight at the individual stock level is subject to confirmation by FTSE's final review documents.
III. Other capital market benefits
Vietnam Exchange integration and trading infrastructure upgrade: Following the launch of the new KRX trading system in May 2025, Vietnam's Ministry of Finance issued Notice No. 139/2025/TT-BTC in December 2025, requiring all 299 Hanoi Exchange (HNX) listed stocks to migrate to the Ho Chi Minh City Exchange (HOSE) by the end of 2026. HOSE will become the only stock trading venue, and HNX will focus on bonds and derivatives. Additionally, the Central Counterparty Liquidation (CCP) target will be launched in the first quarter of 2027. The bank believes that the integration of exchanges may expand the investable pool and improve liquidity, laying the foundation for FTSE to increase Vietnam's weight in the future.
Implementation of the Global Broker (Global Broker) model: Vietnam's Ministry of Finance issued Notice No. 08/2026/TT-BTC in February 2026, allowing foreign institutions to place orders directly through global brokerage firms without opening a separate local trading account (the contracted local brokerage firm bears settlement responsibility). SSI and US Virtu Financial completed the first deployment on June 2. The bank expects that this model will substantially reduce the foreign investment participation threshold and transaction friction costs, and provide a channel guarantee for the continued inflow of foreign capital after the upgrade.
The withdrawal of state-owned assets is accelerating, and distribution market expansion is expected to open up room for upward weight: Vietnam State Capital Investment Corporation (SCIC, under the Ministry of Finance) reviewed and approved the 2026-2030 restructuring plan on August 14, and plans to completely withdraw 66 shareholding companies. State-owned holdings of Vietnamese listed companies are concentrated and free circulation is small. The foreign shareholding ratio in the entire market is about 13.3%, which is at an all-time low. The bank believes that the phased reduction, mixed reform, and dilution of state-owned assets will systematically increase the free circulation ratio and the space that can be invested by foreign capital, or that FTSE will be included in forming a positive cycle of “circulation market expansion - index weight increase - incremental capital inflow”, forming the main supply-side line of the medium term expansion of the Vietnamese market.
The MSCI upgrade can be expected: MSCI has approved reforms such as the implementation of Vietnam's Global Broker model and CCP promotion in the market access assessment in June 2026. Although Vietnam has not yet been included in the annual review (the next window is June 2027), with the completion of the CCP launch and exchange integration, the bank expects Vietnam to enter the watch list in mid-2027, and relay FTSE to become the next stage of catalysis. The amount of capital that tracks the MSCI Emerging Markets Index is several times that of FTSE. If finally incorporated, the bank believes that there is more room for medium- to long-term growth.
4. Investment Strategy: Focus on ETFs that are highly relevant to upgrading
Products linked to the FTSE index were adjusted simultaneously with the upgrade: on the overseas side, FTSE emerging market funds such as VWO under Vanguard are direct executors of this passive inflow; ETFs such as Xtrackers FTSE Vietnam and Fubon FTSE Vietnam directly track the FTSE Vietnam Index series, and Vietnam single market ETFs such as VanEck VNM track non-FTSE indices, or indirectly benefit from the upgrade due to overlapping positions.
Vietnam's local ETFs are highly consistent with the inclusion list: E1VFVN30 (tracking the VN30 index) is highly consistent with only 27 included in the list; FUEVFVND (tracking the VN Diamond Index) focuses on individual stocks that have hit the upper limit of foreign holdings, which is more in line with the upgraded foreign capital increase logic; FUESSVFL (tracking the VNFin Lead Index) focuses on the financial sector (8 banks and 7 brokerage firms) included in the list. The bank believes that these local products can be used as a combined tool to participate in upgrading the market, while paying attention to discount premiums and liquidity risks.
Risks: 1) The inclusion process or index weight falls short of expectations; 2) Foreign capital inflows fall short of expectations; 3) Short-term profits are settled; 4) Exchange rate fluctuations and global liquidity tightening.