The reclassification would help Vietnam’s stock market become more attractive in the eyes of new investors, facilitating a new wave of capital into the country.

A potential reclassification of Vietnam’s stock market from the current status of a frontier market to emerging is projected to attract an additional of US$1.2 billion from exchange-traded funds (ETFs) tracking global index providers FTSE and MSCI, according to Bao Viet Securities Company (BVSC). 

Under the calculation of BVSC, there are 27 ETFs currently tracking FTSE Emerging Markets index for passive investment with combined market capitalization of US$76.4 billion. Among them, the largest ETF is Vanguard FTSE Emerging Markets with US$61.19 billion. 

In case of Vietnam, as the stock market could be upgraded to secondary emerging status in March 2020 by FTSE, combined with possibility of the revised securities law approved in the eighth session of the National Assembly's 14th legislature, it is estimated that at least US$375.34 billion from ETFs tracking would flow into the country’s stock market during the process of restructuring their respective portfolio beyond March 2020. 

For MSCI, the review process is much stricter than that of FTSE, due to its classification into four categories of developed, emerging, frontier or standalone market, instead of five of the latter, which includes developed, advanced emerging, secondary emerging, frontier or standalone.

A total of 94 ETFs tracking MSCI Emerging Markets for passive investment with combined market capitalization of US$200.26 billion, according to BVSC, while iShare Core Emerging Markets is the largest ETF among those with US$57.73 billion. 

Vietnam is predicted to attract US$857.76 billion from those ETFs tracking MSCI index, following its potential reclassification by MSCI. 

In addition to ETFs tracking FTSE and MSCI, the reclassification would help Vietnam’s stock market become more attractive in the eyes of new investors, facilitating a new wave of capital pouring into the country, stated BVSC. 

Hanoitimes