After years of conversations, projections, and continued advocacy, FTSE Russell has officially upgraded Vietnam to Secondary Emerging Market status — effective September 21, 2026, following an interim review in March. This milestone is a strong validation of Vietnam’s macro trajectory, the government’s structural reforms, and the evolution of its capital markets. Many of you have heard us speak about this potential upgrade for years, and it’s exciting to finally see it confirmed.

We see this upgrade as far more than a change in classification. It opens the door to institutional capital flows that have long faced barriers entering the Vietnamese market due to regulatory and operational hurdles. With Vietnam’s inclusion in FTSE’s Emerging Markets indices, ETF and index funds will begin allocating systematically, creating a more stable source of foreign inflows. Over time, we expect active investors — those who scrutinize fundamentals, governance, and execution — to follow, particularly as Vietnam continues to align its market infrastructure with global standards. The removal of restrictive pre-funding requirements, improvements to trade settlement, the adoption of KRX infrastructure, and clearer foreign ownership mechanisms are all helping lower barriers for capital to enter.

One of the most visible benefits we expect you to see over time is greater market stability. In a retail-dominated environment, even fundamentally strong companies have experienced sharp price swings triggered by sentiment or rumour — a reality many of you have asked us about. A stronger institutional presence should help stabilise these dynamics, bringing more resilience, rationality, and improved liquidity to the market.

From an investment perspective, we view this as a genuine turning point. The VN-Index is up 31% year-to-date in USD terms, making it one of the top-performing markets in Southeast Asia, yet foreign outflows have remained at all-time highs. The FTSE decision is expected to reverse this trend by enabling broader access and instilling greater confidence among international investors. The timing is also noteworthy. Amid global trade shifts and the ongoing relocation of manufacturing from China, Vietnam is placing greater emphasis on domestic investment and industrial capacity. The country’s General Secretary recently set an ambitious GDP growth target of over 10% for 2026, alongside a per capita income goal of USD 5,400–5,500 — a strong signal of the government’s pro-business stance and long-term vision.

Looking ahead, the government has reaffirmed its commitment to further reforms, with the goal of achieving FTSE Advanced Emerging Market and MSCI Emerging Market status by 2030. The World Bank estimates that these continued efforts could unlock USD 25 billion in foreign inflows by the end of the decade. At Kenno, we’ve already positioned for this shift by rebalancing our portfolio toward liquid, large-cap industry leaders — the companies we believe are best placed to benefit from Vietnam’s rising visibility and global capital flows.

We’re proud to share this milestone with you. It’s one we’ve long anticipated — and it strengthens our conviction in Vietnam as a core part of Asia’s growth story.

Market Overview

In September, Vietnam’s stock market declined as retail investors adopted a wait-and-see approach ahead of FTSE’s reclassification decision. The VN-Index fell 1.2% month-over-month (MoM) in local currency, largely due to sector rotation. Capital moved out of financials (banks and brokers) and into sectors that had lagged this year’s rally, such as materials (steel) and industrials (construction). This rotation reflects investor caution, as the pace of reforms and new announcements has slowed, and prices in several sectors have already risen.

Market liquidity weakened, with average daily trading value down 32% MoM to USD 1.4 billion. Key catalysts, such as the Federal Reserve’s rate cut of 25 basis points, were largely anticipated and priced in. Our view is that while investors are becoming more cautious and holding higher cash balances heading into Q4/2025, the Ministry of Finance’s decision to withdraw its proposal for a 20% capital gains tax on securities investments supports market sentiment and liquidity.

Foreign investors were net sellers of USD 1.1 billion in September, with most of the selling concentrated in banks and brokerages following the sector’s strong performance. Year-to-date (YTD), Vietnam has recorded net foreign outflows of USD 4.1 billion, exceeding the 2024 total of USD 3.7 billion. In our opinion, the selling pressure reflects profit-taking after the summer rally and concerns about VND depreciation against the USD and EUR. Although foreign outflows remain at record levels, the upcoming emerging market upgrade and the revised Decree 245/2025 — which simplifies account registration for foreign investors — are expected to attract renewed foreign participation.

Despite strong macroeconomic performance, the Vietnamese Dong (VND) has declined 3.5% year-to-date (YTD) against the USD, weighing on foreign investors’ returns. To address this and strengthen foreign exchange management, the government has launched a five-year pilot program to establish a digital asset market. Vietnam currently ranks among the world’s largest crypto-trading markets, with an estimated USD 105 billion in recorded value and the fifth-highest adoption rate globally. Once fully implemented, a domestic regulatory framework for digital assets is expected to help ease pressure on the VND.

On the macro front, Vietnam’s economy expanded 8.2% in Q3/2025 — the highest third-quarter GDP growth since 2011, excluding the temporary rebound in 2022 from a low base following COVID. This brought YTD growth to 7.9%, tracking the full-year target of 8.3-8.5%. Consumption is also recovering, as retail sales increased 9.5% YoY over the same period,  although growth has been driven more by foreign spending than domestic demand. As domestic consumer confidence improves, we expect the positive impact on consumer companies to materialize gradually in 2026. 

Portfolio Updates

The Kenno Vietnam Fund returned −3.1% (USD) and −3.5% (EUR) in September 2025.

This month, we highlight three investment cases to provide additional perspective on our portfolio management activities:

Masan Group (MSN): Consumer staples | 16.3% weight | -2.4% MTD

MSN’s share price rose in mid-September after its subsidiary, WinCommerce — the flagship grocery retail chain — reported stronger-than-expected sales results. However, the stock declined toward the end of the month, in line with the broader market correction.

WinCommerce’s performance exceeded our expectations, with revenue up 16% year-over-year (YoY) and 415 new stores added in the first eight months of 2025, compared with our full-year forecast of +9% revenue growth and 550 new stores. With an estimated 1-percentage-point improvement in the net margin this year and continued gains in modern-trade penetration, we see upside to our 2025–2028 projections.

We estimate MSN’s net profit after tax and minority interests (NPATMI) to increase by approximately 50% YoY in 2025, driven primarily by WinCommerce (grocery retail) and Masan Meat Life, the group’s branded meat business.

As MSN remains our second-largest portfolio holding, we continue to engage actively with the company. This year, we began applying the ASEAN Corporate Governance Scorecard to deepen our assessment of MSN. Looking ahead to 2026, our goal is to support the company in upholding best-practice governance standards and enhancing long-term shareholder returns.

FPT Retail (FRT): Consumer discretionary | 7.4% weight | -2% MTD

FRT continued to face selling pressure from foreign investors in September. As seen across the broader market, this reflects ongoing foreign outflows rather than company-specific fundamentals. We view this as temporary and expect the share price to recover once foreign market conditions stabilize.

FRT’s first-half 2025 results were in line with our expectations, with revenue up 26% year-over-year (YoY) and pre-tax profit increasing 199% YoY, driven primarily by the strong performance of Long Chau, its modern pharmacy chain. Long Chau opened a net 248 new stores during the period, tracking closely against our full-year forecast of 352, while average sales per store increased 6% YoY, consistent with our projections. Based on these results, we maintain a positive outlook for FRT, forecasting earnings growth of 74% in 2025 and a 2025–2027 compound annual growth rate (CAGR) of 43%.

Operationally, Long Chau continues to strengthen its position within Vietnam’s healthcare ecosystem. The company has recently partnered with several leading global pharmaceutical firms to enhance its technical expertise and expand its service offerings. Notably, its latest collaboration with Pfizer focuses on improving staff capabilities in disease management, clinical research, and prevention. We believe such partnerships reinforce Long Chau’s competitive advantage and long-term growth potential.

Established pharmaceutical retailers like Long Chau are also benefiting from Vietnam’s recent campaign against counterfeit drugs and the introduction of new tax regulations, both of which favor well-regulated and transparent market leaders.

Thai Nguyen Hospital (TNH): Healthcare | 10% portfolio weight | -6.3% MTD 

TNH is going through an important transition to strengthen its position in Vietnam’s growing private healthcare market. The company has reorganized its operations and invested in new, well-equipped hospitals in fast-developing areas. These steps are improving efficiency and preparing TNH to benefit from rising demand for healthcare services, especially as the government’s new Resolution 72 expands national health coverage and raises service standards.

Recent results have been affected by higher staffing costs and the slow ramp-up of the new Viet Yen Hospital, which is still building patient volumes. We see this as a normal phase in its expansion rather than a sign of weakness. Viet Yen has now been granted more healthcare card coverage, which should bring more patients and better profitability in the second half of 2025. Another hospital is set to open in early 2026, adding capacity and supporting future growth.

At the same time, TNH has made clear progress in how it is managed and overseen. Since joining the board, our Head of Investments, Giang Nguyen, has chaired the Audit Committee and led changes to strengthen internal controls. A new policy has been introduced to bring more transparency to related-party transactions, setting clearer approval rules and stronger accountability. These steps build trust and support the company’s path toward better-quality earnings.

Although profits are still being held back by new-hospital costs, we see the business moving in the right direction. As the new hospitals reach stable operations and patient numbers increase, earnings should grow steadily from 2026 onward. Overall, we expect TNH to deliver strong and sustainable profit growth over the coming years as it benefits from Vietnam’s rising demand for reliable, high-quality healthcare.

Closing Remarks

The market’s weakness in September was not surprising after the strong rally earlier this year and does not change our positive view on Vietnam’s long-term potential. Instead, it provided an opportunity to adjust our portfolio toward large, well-established companies that offer good liquidity and are best positioned to benefit from the FTSE market upgrade and new foreign investment flows.

Looking ahead, as capital begins to move from financials to other parts of the market, we continue to see value in our consumer holdings, which we believe are well placed to benefit from this shift and turn it into solid earnings growth. Our focus remains on turning these favorable conditions into strong returns for our clients.