MSCI and Vietnam's Market Opening Story: Clear Progress, But 'Upgrade Ticket' Not Yet Confirmed

Keywords: MSCI, Vietnam stock market, market upgrade, foreign investors, CCP, global brokers, English disclosure, capital market reforms, FTSE, MSCI, clearing and settlement

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If you've been following Vietnam's stock market, you've probably seen a recurring topic over the past few months: market upgrade. This is not just a matter of designation; it directly relates to global capital flows, market attractiveness, and even stock valuation expectations.

Recently, MSCI—one of the world's most influential index providers—released its 2026 Global Market Accessibility Review, noting that Vietnam continues to push forward capital market reforms. Notably, MSCI acknowledged many important changes while also pointing out that there are still several 'bottlenecks' that make market entry for foreign investors less smooth.

In short: Vietnam has come a long way, but in MSCI's view, there is still work to be done before it can be considered a more attractive, higher-category market.

MSCI Notes Progress, Especially in Market Access

In the latest report, MSCI said Vietnam accelerated reform efforts during the assessment period. The biggest highlight is the implementation of the global broker model. For international investors, this is a long-awaited change because it allows foreign investors to participate in the market without opening a local trading account.

This may sound like a technical detail, but it is an extremely important step. For foreign investors, every additional layer of process adds cost, time, and operational risk. When processes are simplified, the market becomes easier to access and closer to international practices, naturally making it more attractive.

MSCI also confirmed that Vietnam has formally established a central counterparty (CCP) mechanism, expected to go live in early 2027. This is a critical piece of the puzzle, as CCP is often seen as a key foundation for modern clearing and settlement systems. Once fully operational, it will support broader use of non-prefunding transactions, making market operations more flexible and safer.

Another change highlighted by MSCI is the English disclosure roadmap. According to the plan, the Ministry of Finance will implement it in phases from January 1, 2025, to January 1, 2028. This may sound slow, but it is necessary in practice. For international investors, information must not only be complete but also easy to read, searchable, and timely. Transparency is always one of the fundamental conditions for market rating upgrades.

Obstacles Still Exist

However, MSCI did not paint an overly optimistic picture for Vietnam. The report clearly states that several obstacles still affect market access.

First is the foreign ownership limit. MSCI noted that in some conditional business sectors, foreign ownership is still capped between 0% and 75%, and these sectors account for more than 10% of Vietnam's stock market capitalization. This means some well-known stocks still face foreign ownership space constraints, reducing the flexibility of large funds' capital allocation.

Additionally, MSCI said many large listed companies have exhausted their foreign ownership space. This is not a new issue but continues to frustrate international investors. Once an attractive stock is fully restricted, even if foreign investors want to enter, it is difficult to buy smoothly. MSCI indicated that more than 1% of the MSCI Vietnam Investable Market Index is still affected by these restrictions.

The report also mentioned the issue of equal treatment of local and foreign investors. In principle, an attractive market should provide a relatively level playing field. However, in reality, corporate information is not always available in full English, and foreign investors' entry is still subject to ownership restrictions. This makes the investment experience for the two types of investors less consistent.

Foreign Exchange and Settlement: Still Need More Flexibility

Another point raised by MSCI is the foreign exchange market. Vietnam currently still lacks an offshore currency market, and domestic forex trading remains relatively closely linked to the underlying stock market. Compared to some other emerging markets, Vietnam's flexibility is still limited.

This may not be a problem everyone notices, but for large investment funds, the ability to manage currency risk and deploy capital efficiently is extremely important. If the forex mechanism is not flexible enough, hedging costs rise, affecting capital allocation decisions.

In clearing and settlement, although a non-prefunding solution has been introduced, MSCI still believes the market needs to wait until the CCP model is fully operational in 2027. In other words, Vietnam is on the right track but has not yet reached the destination.

MSCI also noted that after recent adjustments, over-the-counter (OTC) transfers have improved. However, some transactions still require document verification by the Vietnam Securities Depository and Clearing Corporation before execution. This shows that reforms have made progress, but not all procedural layers have been eliminated.

Upgrade Expectations: The Real Focus Remains the June 24 Review

An important point is that MSCI's latest report mainly focuses on market accessibility conditions, not the final answer on the upgrade. Investors are currently focused on the 2026 Annual Market Classification Review, expected to be released early on June 24.

That document will more directly impact whether Vietnam is upgraded or added to the watch list for upgrade. In this sense, this report can be seen as a progress check, while the June 24 report is the moment the market expects a clearer signal.

Simply put: Vietnam is doing many things right, but MSCI typically looks not only at 'what has been done' but also at whether it is truly effective in practice. Paper reforms are one thing; smooth, stable, and consistent implementation is another.

Conclusion

Overall, MSCI's latest report sends a fairly balanced signal: Vietnam is making clear progress in capital market reforms, but some bottlenecks still need time to resolve. The introduction of the global broker model, the development of CCP, and the expansion of English disclosure are all very positive steps, showing a strong willingness to align with international standards.

However, foreign ownership limits, information transparency, foreign exchange markets, and settlement mechanisms remain issues that international investors must consider carefully. Therefore, the upgrade story cannot yet be considered 'complete'; it has just entered the most critical phase.

For investors, it is worth paying attention not only to MSCI's classification outcome but also to how Vietnam continues to turn these reforms into operable reality. If it can consistently do so, Vietnam's stock market will become more attractive not only in MSCI's eyes but also in the eyes of global capital more broadly.