Upgrading is not a destination
Mr. Pham Luu Hung - Chief Economist and Director of the Investment Analysis and Consulting Center, SSI Securities Joint Stock Company - said that when it comes to upgrading the market, most investors only pay attention to foreign capital flows. Specifically, passive capital flows from index funds are estimated to be able to enter Vietnam at about 1.7 billion USD; while active capital flows can be many times larger.
However, Mr. Hung emphasized that this is only part of the story. "Upgrading not only opens up new capital flows, but also takes us to another playground, where higher transparency, greater scale and different operating standards are required. That is an opportunity for Vietnam to develop the capital market at a higher level" - he said.
According to SSI experts, the key point is that after being upgraded, management agencies and market members need to continue to reform more deeply, not only meeting the "enough conditions for upgrading" standard, but also aiming to increase the proportion in the basket of emerging indicators.
There are still many things that management agencies as well as market members need to do, because our goal is not only to achieve the minimum requirements for upgrading but we also want more, that is, Vietnam's proportion in the emerging market will have to be higher to be able to contribute to the overall growth of the capital market, Mr. Hung emphasized.
Improving liquidity and market quality
From a macro perspective, Ms. Nguyen Thi Bao Tran - Director of Strategic Macro-Macroeconomic Analysis, Mirae Asset Securities - said that global capital flows are shifting away from large markets to seek new opportunities in countries with good growth potential and reasonable valuation. Vietnam, with its clear upgrading story, is becoming the focus of attention.
After many quarters of net selling, foreign investors have returned to strong net buying since the end of 2024. This is a signal that the expectation of upgrading has begun to reflect in the leading capital flow, Ms. Tran assessed. If upgraded, passive investment funds monitoring the index can disburse nearly 1 billion USD into Vietnam, while active funds can bring in capital flow of more than 5 billion USD, Ms. Tran said.
From statistics on capital flows in markets upgraded by FTSE from 2011 to present, Mirae Asset experts said that these markets often continue to attract strong capital within 1-3 years after upgrading.
Not only supporting liquidity, foreign capital flows will create momentum to promote market quality improvement. Enterprises will have to proactively improve governance, increase information transparency, comply with international standards and be more active in investor relations, Ms. Tran commented.
In addition, the indirect impact of the upgrading is also reflected in liquidity. In July alone, market liquidity exceeded VND30,000 billion/day, up 60% over the previous month - a very notable increase.
Many pillar stocks benefit
According to Ms. Tran, the securities industry is the first group to clearly benefit in the context of strong capital flows into the market and significantly improved liquidity. In addition, other key industries are also expected to attract strong cash flow, including: Banking, real estate and consumer goods.
In particular, the banking industry - accounting for more than 40% of market capitalization has great potential thanks to high credit growth, improved asset quality and a more favorable legal corridor for bad debt handling.
The real estate industry - accounting for more than 20% of the capitalization - is having many problems resolved thanks to the early effectiveness of new laws and strong administrative reforms. Along with that, the retail and consumer groups are being supported by domestic stimulus policies and improved population income.
We expect the market EPS this year to increase by about 14 - 15%, corresponding to the current valuation level of 15.9 times - still lower than the long-term average of 16.6 times. This shows that there is still much room to attract capital when compared to other emerging markets, Ms. Tran added.
