What Vietnam’s Emerging Market upgrade means for investors

By Vanguard

Markets and economy

Vietnam’s capital market has reached an important milestone. On the 18th of September the global index provider FTSE Russell announced the country’s upgrade from Frontier to Emerging Market status. In practical terms, that means Vietnam will become part of major Emerging Market benchmarks followed by investors globally.

The change may sound technical, but it has real implications for investors. Many index funds and ETFs (Exchange Traded Funds) use market benchmarks as a blueprint for deciding which countries to invest in. So investors tracking that benchmark gain exposure to a new market as part of their diversified portfolio.

Subject to benchmark implementation and portfolio management considerations, Vietnam’s inclusion could affect the holdings of funds that track relevant FTSE Emerging Market indexes, including:

Vanguard’s Duncan Burns, Head of Investment Management and Global Equity APAC ,and James Chatfield, Senior Portfolio Manager, Equity Investment Group APAC, join FTSE Russell and Vietnamese government officials to discuss Vietnam’s transition to Emerging Market status.

A market milestone years in the making

Vietnam’s inclusion follows years of reforms designed to make its market more accessible, transparent and investable for global investors.

As Vanguard’s Chief Investment Officer Duncan Burns said during celebrations in Vietnam last week, countries are not added to major benchmarks simply because investor sentiment improves. Rather, they are included when the underlying market infrastructure reaches the standards required by global index providers. Vietnam, he noted, has “earned this upgrade through years of reform, development and hard work”.

Over recent years, Vietnam has introduced a range of changes that have made it easier for international investors to access and invest in its market. Trading systems have been modernised, barriers for foreign investors have been reduced, and market processes have become more efficient and reliable. Together, these improvements helped Vietnam meet the standards required for inclusion in global benchmarks.

The value of a global market portfolio

Vietnam’s inclusion as an Emerging Market is the concept of a global market portfolio in action.

Rather than concentrating on a handful of countries, sectors or companies, investors can own a slice of the world’s investable markets. And as markets evolve and become more accessible to investors, global benchmarks evolve with them.

This means in the case of Vietnam, investors don’t need to make a judgement about whether the country will outperform others over the next decade. Instead, FTSE Russell has assessed that the market now meets the standards required for inclusion, and benchmark-tracking portfolios will adjust accordingly.

This highlights one of the key advantages of index investing. Rather than trying to identify tomorrow’s opportunities in advance, investors can participate in the evolution of global markets as it happens.

It also reinforces one of investing’s most powerful principles: diversification. A broadly diversified portfolio provides exposure across countries, sectors and regions, reducing reliance on any single market and helping investors participate in growth wherever and whenever it occurs.

The bigger picture for investors

The impact of benchmark inclusion can be significant. Vanguard expects to invest approximately US$2.5 billion into Vietnam through its FTSE-indexed portfolios over the coming year. That capital will be invested on behalf of millions of investors around the world through globally diversified portfolios.

History suggests that inclusion in a major benchmark often brings greater visibility among international investors, broader participation and improved access to capital. It can also help connect local companies with international sources of funding and deepen a market’s integration with the global economy.

For everyday investors, Vietnam’s inclusion is a reminder that successful investing isn’t about finding the next opportunity before everyone else. It’s about building a diversified portfolio that’s ready to capture opportunities wherever they emerge. As markets evolve and economies develop, diversification helps investors capture opportunities wherever they may arise.

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