Tellimer

Vietnam: MSCI — Expectations from capital flows into Frontier Markets

  • Vietnam could benefit the most from the reclassification of the MSCI Frontier Markets Index in November
  • With Kuwait upgraded to Emerging Market status, Vietnam could see a weight increase of 13% in the Frontier Markets Index
  • Capital would flow into stocks in VN30 Index, especially with Vietnamese stocks accounting for large proportion in MSCI

Vietnam could benefit the most from the reclassification of the MSCI Frontier Markets Index in November. With Kuwait upgraded to Emerging Market status, Vietnam could see a weight increase of 13% in the Frontier Markets Index to become the most important market in this Index. However, MSCI has just suggested a gradual weight reduction for Kuwait at the rate of once per quarter and lasting for a year, starting in November 2020. Then instead of reducing Kuwait to 0% and rebalancing the weights of other countries in the MSCI Frontier Markets 100 Index in November, this could take longer than expected.

In our opinion, capital would flow into stocks in the VN30 Index, especially with Vietnamese stocks accounting for a large proportion in MSCI. In particular, net money inflows is estimated at US$63mn with stocks having the largest money flows: VNM (US$9.5mn), VIC (US$9.3mn), VHM (US$8.7mn), HPG (US$5.7mn), and VCB (US$4.5mn). However, we note that the value of capital inflows could be higher than our estimate because we have not counted active funds and other funds benchmarking this index.


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