The VN-Index, after bottom-fishing, recovered strongly in August, successively surpassing important psychological milestones. In general, in August, the VN-Index increased by 96.34 points, equivalent to an increase of 5.55% to the highest level in the month when closing the session on August 28 at 1,832.12 points, with the main driving force coming from Vingroup and bank stock groups.
Along with the general index developments, liquidity also experienced ups and downs with trading sessions at quite low levels in the bottom-fishing phase due to cautious sentiment and gradually improving as VN-Index entered an upward phase. Cash flow improved with the total market trading value in many sessions exceeding the 20-session average.
The most notable focus of the market is the positive changes of foreign capital flows.Foreign investors have returned to net buying more than 1,100 billion VND in the last week of August, after the market received positive information about upgrades.
In general, in August, foreign investors only net sold 1,369.7 billion VND, down 88.2% compared to the previous month (July net sold nearly 11,644 billion VND) and down nearly 93% compared to the strongest net selling month of the year (May net sold more than 19,384 billion VND).This is also the lowest net selling month since the beginning of the year.
The net selling wave of foreign investors is forecast to continue to decrease in the near future after officially upgrading the market. Based on the new proportion and asset size of funds simulating FTSE indices, VNDIRECT Securities Company estimates that passive capital flows from ETF funds and FTSE Emerging tracking open-ended funds may be allocated to Vietnamese stocks during the upgrade process and complete the roadmap at more than 2.2 billion USD.
The transition from Frontier Market to Secondary Emerging Market will be carried out by FTSE Russell in 4 phases, starting from September 21, 2026. According to the roadmap, Vietnam's proportion will reach 10% of the target proportion in the first phase, increasing to 30% after phase 2 on March 19, 2027, 65% after phase 3 on June 18, 2027 and reaching 100% after the last phase on September 17, 2027. Therefore, most of the passive capital flow from the upgrade process is expected to be disbursed in 2027.
In the first phase, with a proportion of 10%, the estimated capital flow was only about 220 million USD, equivalent to more than 5,760 billion VND, quite small compared to more than 90,000 billion VND of net selling value of foreign investors from the beginning of the year.
VNDIRECT believes that the first allocation is likely to mainly support market sentiment in the short term, instead of creating a major enough turning point to reverse the net selling trend of foreign investors, in the context of capital flow being screened in the market transition process.
In a positive scenario, Vietnam may be upgraded by MSCI to the Emerging Markets in the June 2028 review, while the base scenario is June 2029. For FTSE Russell, the analysis team expects Vietnam to continue to improve its criteria for market access and infrastructure, towards the goal of a high-end emerging market. In a positive scenario, Vietnam may be upgraded by FTSE to the High-end Emerging Markets in 2029, while the base scenario is in 2030.
Experts assess that FTSE Russell putting Vietnam on the list for consideration of upgrading to the secondary emerging market is a positive sign.If upgraded, the Vietnamese market may attract more international capital flows; passive funds alone are expected to bring in nearly 2 billion USD.
However, upgrading is only a necessary condition.The decisive factor is still the quality of "goods" in the market, i.e. listed companies.Foreign investors are interested in Vietnam's economic prospects but still need businesses with long-term growth potential, good governance and strong finances.With proactive funds, the supply of high-quality businesses will determine the ability to attract capital flows and create more investment opportunities.
