Vietnam's Emerging Market Bid Stalls as MSCI Cites Ownership Limits

Global index provider Morgan Stanley Capital International (MSCI) has again excluded Vietnam from its watchlist for a potential upgrade, signaling that the country’s stock market has not yet met the criteria for reclassification to emerging market status.

The decision was detailed in MSCI's 2026 Annual Market Classification Review, released on Wednesday. Vietnam was not mentioned in the report's key sections, confirming its continued absence from the list of markets being considered for reclassification.

According to MSCI's Global Market Accessibility Review, published last week, foreign ownership limits (FOL) remain the most significant impediment to Vietnam's upgrade. The index provider noted that the issue currently affects more than 10% of the Vietnamese equity market's capitalisation, leading to a sustained negative assessment for the FOL criterion. Furthermore, MSCI stated that restrictions on foreign investor access continue to impact more than 1% of the weighting of the MSCI Vietnam Investable Market Index.

While MSCI maintained its assessments across all 18 market accessibility criteria, it flagged eight areas that still require improvement.

Another key concern is clearing and settlement. Although a non-prefunding mechanism has been in place since late 2024, MSCI views the measure as a transitional solution. The firm is awaiting the full deployment and proven operational stability of a central counterparty system before it will reconsider its assessment of this criterion.

The index provider did acknowledge several positive developments, including the implementation of trading through global brokers, progress on the roadmap for a central counterparty mechanism, and enhanced English-language disclosures by companies.

This year's review also highlighted a new area of scrutiny: the free-float ratio of Vietnamese stocks. MSCI has placed several large-cap companies with relatively low free-float ratios under observation, citing potential impacts on investability for funds, market transparency, and the efficiency of price discovery.