Vietnam’s emerging markets ambitions will not be easily rewarded. It took Qatar and UAE, the first Middle East nations to earn the frontier-to-emerging upgrade, seven years of being on MSCI’s watch list for potential promotion.
However, it is easy to understand why Vietnam wants the promotion. Various global banks forecast Qatar and UAE would see billions in added foreign direct investment upon being added to the MSCI Emerging Markets Index. Foreign investors have bought almost $228 million of Vietnamese stocks this year, a paltry sum compared to the $4.2 billion that has gone into Indonesian stocks and the $1.3 billion added to Philippine shares, according to Bloomberg. Inflows to Vietnamese stocks have been enough to send VNM to a 17.3% year-to-date gain. FM is up 14.5%.
One hurdle Vietnam must clear before becoming a credible candidate for the emerging markets upgrade is foreign ownership, an issue also faced by Qatar. In May, Qatar announced an increase of foreign ownership limits for stocks listed on the Qatar Stock Exchange to 49% from 25%. [Qatar ETF Rallies as Foreign Ownership Limits Increased]
Vietnam’s foreign ownership is 49%. Earlier this year, Vietnamese policymakers and the central bank revealed plans to lift foreign ownership limits across several sectors financial services and materials. Those sectors combine for 40.6% of VNM’s weight.
iShares MSCI Frontier 100 ETF
