Vietnam Eyes FTSE Upgrade as Catalyst for New Investment, Growth Cycle

HANOI – Vietnam’s stock market is approaching a significant milestone as the prospect of an upgrade to emerging market status by FTSE Russell becomes increasingly clear, fostering expectations of new capital inflows and providing momentum for a new phase of growth.

The potential reclassification is growing more tangible, said Nguyễn Thị Thu Huyền, a board member and CEO of Viet Dragon Securities Corporation (VDSC). She noted that an upgrade would not only bolster the market's reputation but also unlock opportunities to attract fresh investment, offering a key impetus for expansion.

However, Huyền cautioned that these opportunities are accompanied by challenges. Investors continue to navigate uncertainties surrounding inflation, exchange rates, interest rates, corporate input costs, and global geopolitical instability. Under these conditions, she stressed that flexibility, discipline, and clear investment strategies remain crucial for success.

Analysts are now focused on the characteristics of the next growth cycle. Nguyễn Thị Phương Lam, Director of Analysis at VDSC, said the economy is gradually entering a new cycle distinct from previous periods. While the 2011-2019 era saw stable annual growth of 6-7 per cent, and the 2020-2023 period was disrupted by the pandemic, the economy has been on a clearer recovery path since 2024.

Lam stated that growth targets for the 2026-2030 period will aim beyond maintaining recovery momentum, with ambitions for higher expansion and potentially double-digit growth in the longer term. To achieve this, government policies are targeting key bottlenecks through institutional reforms, accelerated public investment, and development in infrastructure, logistics, and industrial parks. A further focus is on upgrading Vietnam's position in high-value technology supply chains.

Despite ongoing business challenges, VDSC believes corporate earnings will be the fundamental pillar supporting the stock market. The firm’s research department estimates that market-wide earnings per share (EPS) could increase by 17 to 23 per cent in 2026 from the prior year.

Banks are expected to maintain a leading role, driven by sustained double-digit credit growth. The property sector, particularly companies within the Vingroup ecosystem, also has a positive outlook, benefiting from a low comparison base, progress on major projects, and favorable sales performance.

From a valuation standpoint, the market has become more attractive following a significant correction. According to Bloomberg data compiled by VDSC, the price-to-earnings (P/E) ratio of the VN-Index, excluding the impact of Vingroup-related stocks, fell by approximately 20 per cent from the start of the year, declining from 14.6 times to 11.4 times by the end of May 2026. In a scenario where corporate earnings expand and valuations improve, VDSC projects the VN-Index could approach the 2,100-point level.

VDSC analysts suggest the current market stage is better suited for accumulation and long-term investment rather than pursuing short-term rallies. The firm identified five key opportunity areas: companies able to pass higher input costs to consumers; businesses with healthy balance sheets and strong cash flows; sectors benefiting from public investment; banks with high asset quality and sustainable credit growth; and securities firms poised to gain from market reforms and the upgrade narrative.

Conversely, investors are advised to be cautious with companies that have high financial leverage, a heavy dependence on imported raw materials, or share prices driven primarily by speculation.

Hồ Quốc Tuấn, a senior lecturer at the University of Bristol in the UK, argued that while the upgrade is important, it is not the only factor determining Vietnam's ability to attract foreign capital. He noted that global funds are currently concentrated in the US, artificial intelligence, and highly liquid assets, meaning attractive valuations alone may be insufficient to draw international investors. Vietnam, he said, needs a compelling growth narrative.

Such a narrative could be built on large-scale public investment, infrastructure breakthroughs, deeper integration into global technology value chains, or significant improvements in corporate governance and market transparency. "An upgrade is the starting point, not the destination," Tuấn said.

Market insiders agree that the focus should be on identifying quality businesses capable of benefiting from the new growth cycle, rather than predicting a market-wide super rally. While opportunities are emerging from more attractive valuations, growing corporate earnings, and clearer upgrade prospects, investment outcomes will ultimately depend on careful stock selection, risk management, and long-term discipline.