Experts present two scenarios for Vietnamese stocks before 'G' hour FTSE Russell

There is strong market expectation that this October review could be a 'historic moment' - marking the transition from Frontier to Secondary Emerging.

Investors anxiously await the upgrade results tomorrow - Photo: QUANG DINH

Tomorrow morning, October 8 (Vietnam time), FTSE Russell will officially announce the results of its periodic market classification. Vietnam is one of the focal points that global investors are watching.

Emphasizing with Tuoi Tre, Mr. Trinh Thanh Can - General Director of Kafi Securities - said that this is not only a technical event, but also a measure of the many years of efforts of the Vietnamese financial market on the journey towards international standards.

Paradox before the time of stock upgrade

Kafi Securities General Director said that in the most recent assessment, Vietnam has met most of FTSE's criteria, only lacking two factors: a payment mechanism that does not require "prefunding" (non-prefunding) and failed trade costs.

Over the past period, the Government and regulators have implemented a series of reforms - from the launch of the KRX, guidance on non-prefunding, to improving the clearing process.

As a result, the market has high expectations that this October review could be a "historic moment" - marking the transition from the Frontier group to Secondary Emerging.

Mr. Trinh Thanh Can - Photo: QUANG DINH

However, the actual market situation shows a remarkable paradox. Foreign capital - which is expected to "anticipate" the upgrade story - is selling strongly, with the largest scale in recent years.

This contrast between expectations and actions has many domestic investors starting to question: do international investors really believe that Vietnam will be upgraded this time, or are they cautious about the possibility of another delay?

As the market approaches an important milestone, it is essential for investors to be prepared for both scenarios - upgraded or not upgraded - so that they can proactively respond.

Always have two scenarios ready

Up to this point, nothing is certain as all information about the results is still pending. Mr. Can has proposed two scenarios with appropriate action strategies.

With scenario 1, upgrade is successful

This is the most expected scenario. If Vietnam is officially included in the list of emerging markets by FTSE, the psychological impact and cash flow will be positive.

Historically, upgraded markets such as Qatar, UAE, Pakistan, or more recently Kuwait, have seen average gains of around 20-25% from announcement to effective date (usually within 6 months).

Stocks in the index basket added to the Emerging Market group often increase more strongly than the general level thanks to the inflow of ETF and active funds.

However, it should also be noted that after the official upgrade took effect, most of these markets recorded an average correction of about 10-12%, due to short-term profit-taking and short-term cash withdrawals.

After that, the market entered a more stable accumulation phase and established a new, more sustainable price level.

Therefore, the sensible strategy in this scenario is to buy after the upgrade announcement, ride the 3-6 month wave of expectations, and gradually take profits closer to the effective date.

After the market adjusts and stabilizes, investors can consider buying back at more attractive prices to catch the new growth cycle.

While buying after the announcement may cause investors to miss the early part of the rally, in reality, the upside over a 6-month period is often large enough to ensure attractive returns without the risk of misreading the upgrade outcome.

Scenario 2, not upgraded this term

This is a lower probability scenario, but still needs to be considered. The market has recently reflected quite a lot of expectations for an upgrade, with speculative money strongly participating in large-cap stocks - those considered "candidates" in the FTSE Emerging portfolio.

If the announced results are not as expected, this speculative cash flow will be withdrawn quickly, possibly causing the VN-Index to adjust strongly in the short term, especially when foreign investors are still maintaining a net selling trend.

Combined with the psychological pressure of disappointment, the decrease in amplitude in the first few sessions can be quite large, creating a temporary "shake-out".

However, this is not a negative long-term signal in nature. Vietnam's macro foundation remains positive: GDP in 2025 is targeted at over 8%, inflation is under control, and listed business activities are generally still growing positively.

The lack of an upgrade at this stage is purely technical and will likely be completed at the next review, once the remaining criteria are fully endorsed by FTSE.

With this scenario, the reasonable strategy is to be cautious in the short term, avoid catching the bottom early in the first sessions of sharp decline, and at the same time prepare a good stock portfolio to gradually accumulate when the market discounts to an attractive valuation zone.

This is an opportunity for medium- and long-term investors to increase their exposure to fundamentally strong businesses with leading positions in the industry and great potential for profit when the market is expected to upgrade in the near future.

Back to topic

TRINH THANH CAN (General Director of Kafi Securities)

Source: https://tuoitre.vn/chuyen-gia-neu-hai-kich-ban-cua-chung-khoan-viet-truoc-gio-g-ftse-russell-20251007082333919.htm