In its September 2020 Country Classification Review, FTSE confirmed that Vietnam will remain as a Frontier Market and retains its position on the Watch List for a potential upgrade to Secondary Emerging Market status in the future.
Vietnam was added to the Watch List in 2018 for a potential upgrade from a Frontier Market to a Secondary Emerging Market, but missed out in the 2019 Country Classification Review after failing to satisfy three criterion: Clearing & Settlement (T+2/T+3), Registration of New Accounts and Foreign Ownership Limits for foreign investors in Vietnamese companies.
FTSE confirmed in the 2020 Country Classification Review that Vietnam continues to not meet the three criterion mentioned above, but has acknowledged the “constructive interaction with the Vietnam market authorities over the last 12 months and recognises their efforts to develop the capital market”. FTSE are also “looking forward” to continuing the engagement and dialogue with these market authorities.
As a result, Vietnam is retained on the Watch List as a Frontier Market and its status for a potential upgrade to a Secondary Emerging Market will be reviews and announced next year in the September 2021 Review.
Vietnam has been making steady improvements by suggesting initiatives to boost its chances of an Emerging Markets upgrade for all three index providers (MSCI, FTSE and S&P). One of the more prominent announcements was the proposal by the Ministry of Finance to allow the short selling of equities on both the Ho Chi Minh and Hanoi exchanges. The draft proposal also suggested intra-day transactions after signing “day trading contracts” with securities companies that provide securities lending services.
Whether or not Vietnam will be able to implement policies to satisfy the outstanding criteria in time for the 2021 Country Classification Review remains to be seen. A recent Twitter poll by Frontier Market News (@frontiermktnews) saw 53.8% of respondents agreeing that Vietnam should be promoted to an Emerging Markets, while the alternative voters selected “No” and “Not Yet” with a share of 23.1% each.
FTSE’s September 2020 Review also confirmed the following:
- Argentina’s downgrade from “Frontier Market” to “Unclassified Market”.
- Romania officially upgraded from “Frontier Market” to “Secondary Emerging Market”.
- Peru officially downgraded from “Secondary Emerging Market” to “Frontier Market”.
- Tanzania officially upgraded from “Unclassified Market” to “Frontier Market”.
- Russia added to the Watch List for potential upgrade from ” Secondary Emerging Market” to “Advanced Emerging Market”.