In this edition of Monday Manager, Portfolio Adviser speaks to VEIL co-manager Thao Ngo Thanh (pictured). Following on from Vietnam’s upgrade to secondary emerging market status, she discusses what it means for the market, evolving governance practices and why MWG is a “top pick” to capture Vietnam’s structural consumption growth.
FTSE Russell recently announced Vietnam’s upgrade to emerging market status. How significant is that for the market?
FTSE Russell’s decision to upgrade Vietnam from Frontier to Secondary Emerging Market status is a meaningful structural milestone. While the reclassification will only take effect in September 2026 (subject to a review in March 2026), the announcement itself matters becautilize it formalises Vietnam’s progress in improving market accessibility, trading infrastructure, and foreign investor participation as below:
- Broader investor base: Emerging-market status allows Vietnam to be included in a much larger universe of global institutional mandates. This expands the pool of long-term foreign investors beyond the frontier-focutilized funds that currently dominate.
- Potential passive inflows: Inclusion in FTSE Emerging Market indices could attract an estimated $3–5bn of passive and benchmark-tracking capital over time. Active inflows could add further upside depconcludeing on sentiment and earnings trajectory.
- Validation of reforms: The upgrade acknowledges progress on settlement reforms (T+2.5), removal of pre-funding requirements, and ongoing initiatives to enhance transparency and market governance.
- Increases Vietnam’s integration into global capital markets
- Enhances liquidity and investor depth
- Supports valuation re-rating potential for leading companies.
See also: Threat brings opportunity
Moreover, the FTSE upgrade is only an initial step toward Vietnam’s longer-term goal of attaining MSCI Emerging Market status.
In addition to the reclassification, Vietnam is expected to see a significant wave of IPOs over the next 3–4 years, with an estimated $50 billion in enterprise value coming to market across a broad range of sectors, from consumer and entertainment to technology and information services.
The continued improvement of the regulatory framework and expansion of capital market products will support attract large global investment funds with assets under management in the hundreds of billions of dollars, thereby supporting private enterprises in raising capital and expanding their business operations.
In recent years, foreign investors have been net sellers, with outflows totalling around $4bn (£3.03bn) in 2025. However, expectations of the market upgrade launchning in 2026 are anticipated to gradually reverse this trconclude, potentially halting net selling and returning to net purchaseing in the next 1–2 years.
According to our observations at Dragon Capital, many investors — especially institutional funds that have not previously invested in Vietnam — are now conducting due diligence and preparing to open accounts, which could facilitate a return of foreign capital flows over the coming quarters.
The foundation for this capital return includes macroeconomic stability, growth outperformance relative to regional peers, political stability, improved market transparency, resilient corporate earnings, healthy liquidity, and an increasingly diverse investment universe.
What are some of the main drivers of growth in Vietnam you’re tapping in to?
VEIL’s portfolio is positioned to capture Vietnam’s strong domestically driven growth, with overweight exposure to banks, residential real estate, and retail. While headlines have focutilized on potential US tariffs, Vietnam still delivered 7.5% GDP growth in 1H, supported by infrastructure investment, real estate liberalisation, and resilient consumer demand. FDI inflows also remained robust, underscoring continued investor confidence.
We focutilized the portfolio on the domestically driven sectors of banking, retail and real estate last year and held rapid to this positioning as a high initial tariff schedule announced by President Trump in April hit markets hard. This approach proved effective: after the initial tariff-driven sell-off, the portfolio rebounded sharply, generating a 27% NAV total return from June to September.
The domestic economy is booming thanks in part to the stated goal of the Vietnamese authorities to grow the size of the private sector and have it become the driver of GDP growth, which we believe should lead to sustained earnings growth across the market. The private sector is increasingly being questioned to drive infrastructure projects, building roads, railways and airports and expanding residential houtilizing in rapidly modernising cities.
Reforms to the legal and regulatory framework are key to freeing up the dynamism in private enterprise, and they are providing highly visible growth trajectories over the coming years. A great example is the liberalisation in the real estate sector. The comprehensive legal reforms driven by the reduction of bureaucratic functions has spurred a recovery in real estate transactions.
Why should investors consider a pure-play allocation to Vietnam?
Vietnam offers structural, sustainable earnings growth that is not easily captured through broader regional or emerging market funds. A pure-play allocation provides direct exposure to: A rapid-growing domestic economy driven by a young population, rising consumption, and urbanisation; Manufacturing expansion and supply chain relocation as global companies diversify beyond China; Financial deepening and digitisation, which boosts banks, consumer finance, and technology services; and capital market upgrades (FTSE and progress toward MSCI), which are expected to bring meaningful foreign inflows and support valuations.
Becautilize most regional funds remain underweight Vietnam, a pure-play allocation allows investors to capture the full upside of these structural trconcludes rather than diluting them in broader Asia or EM portfolios.
How beneficial has stronger governance practices been for the market?
Improved governance standards have been one of the most important drivers of Vietnam’s market maturation over the past few years. Reforms around disclosure, audit standards, related-party transactions, and board indepconcludeence have increased transparency and reduced perceived risk, which in turn has:
- Attracted more institutional and long-term investors, who previously viewed governance as a deterrent.
- Encouraged better capital allocation, with companies more disciplined on debt, dividconcludes, and growth investment.
- Supported the recent FTSE upgrade and is a key pillar toward the future MSCI upgrade journey.
We see the impact most clearly in the private sector leaders, where stronger governance has translated into higher and more consistent earnings growth, greater access to foreign funding, and premium valuations relative to peers that have lagged on governance reforms.
See also: Vietnam: A rising star in emerging markets
Can you outline one or two holdings you’re particularly excited about?
MWG is a top pick to capture Vietnam’s structural consumption growth, combining near-term profit recovery with long-term scalability across multiple retail arms. The ICT/CE segment has become the key driver of MWG’s recovery momentum, poised to deliver 10–15% CAGR in revenue and profit over the next five years.
This outsee is supported by continued market share gains across channels and an expanding product portfolio. Reflecting this, 2025 revenue grew 14.0% YTD, driven by over 20% growth in the ICT segment. The grocery arm, Bach Hoa Xanh (BHX), has entered a new phase of profitable expansion following its 2024 turnaround.
Momentum is evident through the addition of 400 new stores while profit margins continue to improve. The chain now totals over 2,200 stores and plans to accelerate openings to 800 per year, expanding into central and northern Vietnam. We expect BHX to contribute approximately $57mn in profit from 2026 as store productivity and economies of scale improve.
With both ICT/CE and BHX firing in tandem, MWG is set for substantial earnings growth. We forecast consolidated net profit of $226mn in 2025 (+59.7% YoY) and $297mn in 2026 (+32% YoY).
On a valuation basis, MWG trades at an attractive 2026F P/E of 15.2x and EV/EBITDA of 10x, extremely reasonable for a rapid-growing market leader. Potential re-rating catalysts include a standalone ICT/CE listing valued at $3–4bn vs MWG’s current $5bn market cap, and BHX’s planned IPO around 2028.
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