On September 21, 2026, Vietnam officially became an emerging market when FTSE Russell's reclassification of the country to Secondary Emerging market status took effect, with 27 Vietnamese stocks entering the FTSE Global All Cap Index. As we outlined in our August article, index inclusion is phased in over four tranches through September 2027, and the passive capital tied to it will arrive on a fixed schedule.
The following day, our Hanoi team participated in the Vietnam Fund Awards 2026 (VFA 2026), where regulators, market infrastructure operators, fund managers, brokers, and custodian banks discussed what Vietnam's stock market needs to attract long-term capital beyond the index-tracking funds now entering the market. In this article, we place key takeaways from the forum alongside our own views to examine the structural changes behind the upgrade and Vietnam’s broader integration into global capital markets.
The main panel at the seminar represented the full investment chain in Vietnam, reflecting the steps capital typically passes through before it reaches a listed company: the State Securities Commission (SSC) as regulator, the Vietnam Securities Depository and Clearing Corporation (VSDC) for settlement and custody infrastructure, Vietcombank Fund Management (VCBF) and SSI Asset Management (SSIAM) as fund managers, Smart Invest Securities (AAS) as broker, Financial Planning Group (FIDT) as financial advisor, and HSBC Vietnam as custodian bank, with FiinGroup's chairman moderating.
The forum also shifted away from the recent market upgrade milestone to look at the bottlenecks in Vietnamese capital markets and how they are being addressed. The SSC set out priorities for the fund industry, including restructuring the investor base, improving the competitiveness of fund managers, facilitating international integration, and attracting long-term investment from global funds and financial institutions in addition to index-tracking capital.
The panelists agreed that Vietnam has no shortage of products, because investment funds across the main risk profiles already exist – although some noted that the market could use more underlying assets, and alternative products, such as thematic funds focused on energy and technology. Instead, the problem is that the market is dominated by individual investors, the domestic fund industry is too small to balance them, and the constraints on its growth are investor trust, distribution, and tax incentives. The discussion also covered what foreign allocators require before committing capital, and the standards domestic managers and market infrastructure still need to meet. This is increasingly relevant as Vietnam targets MSCI emerging-market classification before 2030.
According to the vice chairman of the SSC, individual investors account for about 85% the total number of investors in Vietnam's stock market, a concentration that has contributed to high volatility and a predominance of short-term trading (Vietnam.vn). Many treat equities as a short-term place for idle cash and trade on news flow, rumors, and momentum, so prices can move away from company earnings for extended periods. For investors holding a company for its long-term earnings, this means entry and exit prices depend heavily on sentiment, and liquidity can thin out quickly during sell-offs.
Vietnam's fund industry, which would normally channel household savings into long-term, professionally managed portfolios, remains small relative to the economy. According to the SSC, by the end of June, 43 fund management companies and 141 funds managed VND 846 trillion (around USD 32.5 billion), including entrusted portfolios. Data from FiinGroup shows that fund net asset value (NAV) currently equals around 0.7% of GDP, and just over 700,000 investors hold fund certificates. Panelists attributed this gap mainly to low awareness and trust, as many households do not yet see the role funds can play in a long-term financial plan. This reflects both the immaturity of the industry and the large room for growth it still offers.
From a domestic standpoint, real estate has long been the main alternative for household savings. A panelist from a financial planning firm noted, from their own experience working with retail investors, that most Vietnamese people tend to keep long-term money in property and use equities for short-term trading. That preference is now being tested by government measures to curb property speculation, including proposed new tax policies (The Investor) and a Ministry of Finance proposal to replace the flat 2% tax on property transfers with a 20% tax on actual profits (VIR). As we noted in our article on real estate from a few months ago, the property market is shifting toward end-user demand. If short-term property gains become harder to earn, more household savings will look for another long-term channel, and a trusted fund industry would direct more of that money into listed equities through professional managers.
Remaining gaps in market access also concentrate foreign capital in a limited number of stocks. According to MSCI, which still classifies Vietnam as a frontier market, foreign ownership limits affect more than 10% of Vietnam's equity market capitalization (Vietnam News). English-language disclosure is being phased in for listed companies between 2025 and 2028, central counterparty clearing is not yet in place, and foreign investors have limited tools to hedge currency risk. When foreign investors can access only part of the market and information is uneven, their capital crowds into the same names, adding to price swings on the way in and the way out. This type of price volatility is not something that can be fixed by an index upgrade of the market, but it should be eased with changes to the market structure in the longer term.
Decision 3168/QD-BTC on Vietnam’s investment fund industry, issued by the Ministry of Finance in September 2025, sets specific targets for rebalancing the market by 2030: individual investors at around 70% of trading volume and institutional and foreign investors at around 30%, moving toward a 60/40 split in later years. The decision also targets 500 funds, 2.5 million fund investors, and 200,000 foreign investor accounts by 2030, around four times the current number, and encourages pension funds and insurers to invest in the stock market.
Decision 1413/QD-TTg on the overall financial market, approved by the Government in July 2026, extends the development horizon to 2045. Its 2030 targets include foreign investors' holdings in the capital and securities markets of around 15% of GDP, fund NAV of 5% of GDP, and average annual growth of 11.5% in pension fund assets over 2026–2030 (Vietnam.vn). Both decisions were drafted with the market upgrade in view, and both run well past the final FTSE tranche in September 2027.
Industry participants focused on bringing household savings into funds. Their proposals included certifying commercial banks to distribute fund certificates, digital platforms for smaller savers, and standardized certification for fund managers, brokers, and advisors. Panelists also called for individual tax incentives on fund investments within the next 12 to 18 months, citing Japan's Nippon Individual Savings Account (NISA) program and similar schemes in India and Thailand. Of these proposals, a tax incentive would likely have the most direct effect on household behavior, especially in the context of Vietnam's record-high state budget revenue.
These reforms would also increase the standards domestic managers need to meet to attract foreign institutional capital. One panelist noted that foreign allocators investing through master-feeder structures, which pool investors from different jurisdictions into a single master portfolio, screen domestic managers on track record, governance, risk management, NAV reporting, and custody, and that institutional investors with stricter selection criteria are more likely to allocate to Vietnam as these standards rise. FiinGroup's chairman, who moderated the panel, made a related point, noting that in previously upgraded markets, the durability of foreign inflows depended on the pace of reforms and the availability of products that meet investors' needs. These selective, long-term institutional investors typically place greater weight on company fundamentals.
Three of our portfolio companies, FPT Corporation (FPT), Masan Group (MSN), and Vincom Retail (VRE), are now in the FTSE Global All Cap Index and will receive index-related demand through September 2027. For most of our other holdings, the reforms discussed at VFA 2026 are more relevant than index inclusion. Mobile World Corporation (MWG), for example, sits outside the index because its foreign ownership is already near the statutory ceiling. Domestic funds, pension funds, and insurers are not subject to that ceiling, so a larger domestic institutional base would add long-term buyers for companies whose foreign room is largely used up. At the same time, regulators plan to remove foreign ownership restrictions in 43 sectors, which would give foreign investors more room to buy Vietnamese stocks more broadly (The Investor).
More importantly, we expect a market with more institutional participation to price companies closer to what their earnings justify. Institutional investors typically hold positions longer and base decisions on earnings, balance sheets, and governance, which is likely to reduce the sentiment-driven swings described above and narrow the discount that well-run Vietnamese companies can carry during retail-driven sell-offs. We select companies on the same basis, and we follow developments in the domestic fund industry and retail investor behavior closely, since they shape how the market values our portfolio businesses.
The FTSE upgrade is a significant milestone for Vietnam and places the country on the radar of a wider group of global investors. In our view, the changes that accompany the milestone, including a broader institutional investor base, higher standards of market access and disclosure, and a deeper domestic fund industry, will do more to strengthen Vietnam's standing in global markets. These are the changes we expect to attract discretionary, long-term capital that places greater weight on fundamentals.
The Kenno Vietnam Fund invests in fundamentally sound Vietnamese companies at attractive valuations. As Vietnam's investor base shifts toward institutions, we expect the market to reward consistent earnings and sound governance more reliably – the same qualities we build our portfolio around for long-term returns. If you would like to learn more about the fund or our investment approach, feel free to reach out to us.