Thursday 23 April 2026 2:58 pm
How is Vietnam outperforming the FTSE 100?
Vietnam's stock market has seen a surge in gains this year to date, outpacing the UK's blue chip FTSE 100 index. The FTSE 100 gained roughly 22 per cent in 2025, its best year since 2009, but is now being left behind by emerging market rivals, including Vietnam.
Asia's up-and-coming indices have held their nerve during the global turmoil of the Iran war. Markets there have received a significant boost from rising demand for AI hardware and a shift in supply chains, making the region a manufacturing hub for cutting-edge tech.
Taiwan's TAIEX is up 28.1 per cent year-to-date, reaching a market capitalisation of $4.13 trillion, surpassing the UK's $4.09 trillion. South Korea's Kospi is up 48.2 per cent. Vietnam's VN index is perhaps the most surprising name on the list of London-beating benchmarks.
Vietnam's market capitalisation is roughly £232.2bn, significantly lagging behind the FTSE 100, but its pace of gains has caused investors and analysts to take a closer look.
Fading haven by the Thames
The stock exchange in Ho Chi Minh City reflects a different economy at an earlier stage of development. The extent of its outperformance prompts a key question: why is the main index of a fully developed economy like the UK no longer better placed to weather global turmoil?
Several emerging markets have reaped benefits from being upgraded on the FTSE Russell Emerging Market index, which measures large and mid-cap stocks across over twenty countries. This month, FTSE Russell confirmed that Vietnam will be upgraded from a frontier market to a secondary emerging market, classifying it as a developing economy more accessible to international investors, with an expected weight of up to 0.35 per cent on the index.
Valuation prospects
A VinaCapital Vietnam Opportunity fund manager called this a “positive and long anticipated milestone,” as the index trades at attractive valuations. The upgrade is expected to attract between $5bn and $6bn in foreign capital, with institutional investors already piling in ahead of the September 2026 effective date, creating a liquidity surge the FTSE 100 cannot replicate.
Hunter Beaudoin, analyst at Morningstar, said: “Vietnam’s upcoming upgrade by FTSE Russell has indeed been a source of optimism, underpinned by improvements to domestic equity market accessibility. That said, its inclusion will be gradual, phased across four tranches from September 2026 to September 2027, and its eventual representation is expected to be relatively modest. The FTSE upgrade can be viewed as a preliminary test, while a potential MSCI upgrade further down the line would represent a more consequential milestone.”
GDP growth boosting optimism
A surge in GDP growth has also improved investment conditions. The economy grew by 8.2 per cent in late 2025 and is aiming for up to 10 per cent in 2026, according to Dragon Capital. In contrast, the UK struggles with sclerotic growth, expanding only 0.5 per cent in February, with the Iran war set to interrupt any improvement.
In Vietnam, macro growth led to double-digit earnings per share growth, with top companies seeing a 17 per cent rise. The nation also enacted its Law on Investment in March 2026, accelerating market entry, streamlining approvals, and slashing regulatory red tape.
Global tech hub
Vietnam has evolved into a key hub for tech and manufacturing, with electronic exports exceeding $110bn annually. Northern Vietnam has cemented itself as a “China plus one” manufacturing hub, offering a cost-effective alternative for companies diversifying supply chains away from China. Samsung, Google, and Apple are leveraging Vietnam’s capabilities, making it a smartphone manufacturing powerhouse.
Beaudoin said: “Active Asia and emerging market equity managers have allocated to off-benchmark Vietnam stocks in recent years to gain exposure to strong structural growth. They have favoured companies in financials and consumer sectors, positioned to benefit from rising financial inclusion and domestic consumption. However, managers have been highly selective, focusing on the largest and most liquid names.”
Risk Saigon
Despite growth, analysts warn of risks. Infrastructure remains limited in some areas, particularly for energy and transportation, increasing costs and time frames. Vietnam is a highly sensitive export-oriented economy, with geopolitical instability and trade tensions potentially damaging growth. Raw material prices also remain a challenge, as many companies operate on thin profit margins.
Beaudoin added: “For active managers, liquidity considerations and the equity market’s sensitivity to macroeconomic developments remain top of mind. Foreign ownership limits have historically constrained investability, and while GDP growth has been robust, it has shown vulnerability to global macro shocks, such as the US tariff announcement in 2025 and the Iran conflict in 2026.”
