FTSE Russell has announced in its September 2019 Country-Classification Review that Vietnam will retain its Frontier Market status and will remain on the Watch List to become a Secondary Emerging Market.
Vietnam was added to the Watch List for a potential upgrade to Secondary Emerging Market status in September 2018, but has missed out in the latest country-classification review. FTSE has stated that it will be reviewed for possible reclassification in the September 2020 Annual Review.
The main sticking point for FTSE was that the Asian nation continues to fail the “Clearing & Settlement – T+2/T+3” criterion, which currently rates it as “Restricted” due to the current market practice of conducting pre-trade checking to ensure that funds are available before trade execution takes place. There’s also scope for improvement in registration of new accounts, as well as the foreign ownership limit for foreign investors in Vietnamese companies.
Despite these setbacks, FTSE have acknowledged the fact that Vietnamese market officials are taking steps to improve the capital market. Furthermore, Vietnam is one of the few countries marked as a “winner” in the ongoing US-China trade war and has recently received good news after foreign direct (FDI) inflows into the country reached $14.22 billion between January and September this year., as well as ratings agency Fitch upgrading the country’s credit outlook to “Positive” earlier in the year.
Vietnam will remain as the largest constituent in the FTSE Frontier 50 Index with six companies that currently make up approximately 23% of the index (as of 30th August 2019), with three of those six firms (Vinhomes, Vingroup and Vietnam Dairy Products) among the top five constituents in the index.
FTSE Russell have also announced the following:
- Argentina has been removed from the Watch List for possible reclassification from Frontier to Secondary Emerging Market status.
- Romania has been assigned Secondary Emerging Market status having previous been classified as a Frontier Market.
- Tanzania will be assigned Frontier Market status.