A multi‑line chart showing GDP per capita from December 31, 1980 through December 31, 2030 for Poland, South Korea, Chile, China, and Vietnam. South Korea shows the strongest long‑term growth, rising from about 1,745 to over 44,000. Poland and Chile show steady but more moderate increases, with Poland climbing from around 1,600 to over 38,000 and Chile from about 2,600 to above 20,000 by 2030. China accelerates sharply beginning in the 2000s, growing from under 500 to nearly 19,000. Vietnam rises gradually from about 650 to more than 6,300. Two dotted horizontal lines mark the middle‑income range, and values after 2025 reflect IMF forecasts.
Vietnam: Bridging new frontiers
From war torn nation to thriving economy, Vietnam is reinventing itself and attracting renewed attention from global investors.
Insights from Julian Bolton
Vietnam has come a long way since the end of its war in 1975, when the nation was left as one of the poorest in the world.
A look back
In 1986, the government introduced a series of economic and political reforms called Doi Moi - shifting to a market economy and setting the foundation for the trajectory of significant economic growth that has helped the country approach full emerging market (EM) status.
Last October, index and benchmark provider FTSE Russell announced Vietnam will be reclassified from Frontier to Secondary EM status with an effective date of September 2026, subject to an interim review in March 2026, after being on FTSE’s reclassification watchlist since 2018. This will place the market alongside India, Indonesia, and Philippines, among others and open new foreign investor flows into the market.
FTSE Russell highlighted the establishment of the non-prefunding model as a core driver for the move to EM status, providing sufficient progress in enabling access to global brokers. The next focus is to gain EM status on MSCI’s index hierarchy, which has a larger capital pool and stricter requirements, with Vietnam aiming to meet the upgrade criteria in 2030.
From frontier to secondary emerging market status
Prior to the FTSE announcement, both the FTSE and MSCI indices classified Vietnam as a Frontier market, preventing many investors from investing in it – particularly passive funds. The reclassifications may deliver significant benefits to Vietnam’s equity market, increasing investor inflows and liquidity, enabling further growth. The World Bank has estimated that these upgrades could bring foreign net inflows of $25 billion by 20301, the majority of which could come after the MSCI upgrade. Beyond market implications, achieving EM status elevates Vietnam on the global stage, strengthening the country’s voice in the region and among peers.
In November 2024, to enhance their chance to be elevated, Vietnam eliminated the requirement to fully pre-fund equity trades, removing a long-standing operational obstacle foreign investor had faced when investing into the Vietnam market. Previously, investors had to execute an FX transaction to purchase Vietnamese Dong (VND) before placing a securities trade. This process can tie up liquidity and leaves residual VND balances that required later repatriation, creating unwanted cash management complexity. This reform marked a significant step towards improving market accessibility and addressing a persistent barrier that was cited by FTSE and MSCI and that deterred many global investors from entering Vietnam’s stock market.
To advance its long-term objectives and in addition to the newly established non-prefunding (NPF) model, Vietnam has initiated measures to increase foreign ownership limits, establish a central clearing counterparty by 2027, and introduce securities lending programs. The market has also advanced technologically with the launch of the new Korea Exchange (KRX) trading system in mid-2025.
Next steps and challenges ahead
While the new NPF model marks meaningful progress for the market, it still comes with challenges. It requires an arrangement between investors and their brokers to establish trading limits. When the investor places their order, the broker checks the trading limits and confirms whether the trade is eligible for NPF or not. Due to this process, we’ve seen a slower adoption of the new model than initially anticipated. With investors wary of the new requirements, most clients have continued to prefund their equity trades.
At BBH, we are closely monitoring changes in Vietnam and collaborating with local providers to navigate evolving market dynamics.
Please contact Julian Bolton for further information
1Reuters, Vietnam set to launch new stocks trading system in bid for market upgrade
Vietnam: towards 2045
Elias Haddad
Vietnam aims to be a high-income country, defined as having a GDP per capita of between $15,000- $18,000, by 2045.
Achieving this will require Vietnam to grow at an average annual rate of roughly six percent over the next two decades. That is realistic given that Vietnam’s real GDP has averaged 6.5% in the last two decades and surged by 8.5% over 2025.1 The far greater challenge lies in escaping the so called ‘middle income trap,’ where countries fail to transition to high-income status.
Currently, 108 countries are classified as ‘middle-income’ with GDP per capita ranging from $1,136 to $13,845. The IMF estimates Vietnam’s GDP per capita at $4,745 in 20251. Over the last 34 years, only 34 economies have succeeded in breaking out of the middle-income trap, notably South Korea, Chile, and Poland (chart 1). All three nations boosted productivity by accelerating investment, introducing new ideas from abroad to their economies, and ultimately becoming innovators themselves.
Vietnam’s government has already embarked on an ambitious reform agenda to improve productivity, upgrade key infrastructure, and boost domestic demand. That will be a gradual process. In the meantime, exports and foreign direct investment will remain key pillars of Vietnam’s growth strategy. That means the Vietnamese Dong (VND) faces structural downside pressure. Indeed, USD/VND has been trading at the upper end of its trading band (implying a weak VND) for over a year (chart 2).
A line chart tracking Vietnam’s USD/VND exchange rate from October 17, 2022 through January 16, 2026. The SBV reference rate (SBVNUSD) gradually increases from about 23,586 to over 26,380. Two parallel lines represent the +5% and –5% trading bands around this reference rate. The VND market rate fluctuates within or near these limits but generally trends upward in line with the reference rate. The chart highlights daily exchange‑rate movements within the central bank’s managed‑band system over the observed period.
As a background, the State Bank of Vietnam (SBV) manages the VND through a crawl-like[1] exchange rate arrangement. Since October 2022, the USD/VND trading band has been set at +/-5% from the daily reference rate. The daily reference rate is based on (i) the previous day’s weighted average USD/VND exchange rate; (ii) a weighted average of movements in VND exchange rates vis-à-vis seven other important trading partners’ currencies; and (iii) domestic macroeconomic factors.
1 A crawl-like arrangement is when the exchange rate remains within a "narrow margin of 2% relative to a statistically identified trend for six months or more (with the exception of a specified number of outliers), and the exchange rate arrangement cannot be considered as floating. Source: IMF/Reuters. IMF reclassifies India's FX regime as 'crawl-like' from 'stabilized'. 26 November 2025.
All figures sourced from eLibrary
Changes to market dynamics in Korea
Win Thin and Derrick Leonard uncover the latest developments encouraging foreign investment in the Korean market.
In pursuit of developed market economic status, South Korea has recently implemented several measures to improve investor accessibility and relax FX regulations.
South Korea has long dreamed of achieving developed market status for their economy and eradicating the ‘Korea discount’ in their equity markets. In early 2023, Korean authorities announced several enhancements across their capital markets to address conditions laid out for potential inclusion in the World Government Bond Index (WGBI) when they were added to the watch list in late 2022. While the enhancements eased entry for foreign investors as well as corporate governance, several notable changes announced also impacted the Korean FX market.
What’s changed?
In January 2023, Korea announced the elimination of the Investor Registration Certificate (IRC) requirement when opening investment accounts and allowed investors to use their Legal Entity Identifier (LEI) to open accounts. Korea also stopped requiring investors to open cash accounts in their name at banks other than their local custodian to execute 3rd party FXs related to security investment. These measures started the process to improve accessibility for investors and to relax FX regulations allowing freer movement of capital in the market.
Notable enhancements:
- Registered Foreign Institution (RFI): RFIs would be authorized by the government to participate in the interbank FX market for FX swap and spot transactions. To become an RFI, offshore financial entities would need to register with the MOEF and submit to Korean regulation. Once approved, RFIs would be expected to establish credit relationships with many onshore banks, with a portion reserved for ‘key’ onshore banks identified by the MOEF. RFIs would be expected to maintain regular, consistent FX volume to deepen liquidity access for foreign investors.
- Extending FX market hours: The MOEF extended the FX market hours to the London close, with plans to eventually be open 24 hours.
The RFI program and extended market hours went live on a trial basis in January 2024, with official implementation in June of the same year. Volumes have been muted and bid/offer spreads are a bit wider than the onshore FX market, but activity is expected to pick up once Korean Government Bonds are included in the WGBI.
New challenges ahead:
The RFI program initially intended to deepen liquidity, support extended hours, and give investors more FX options, however, existing prohibition of overdrafts on foreign investor cash accounts discouraged investors from pursuing FX away from their local custodian.
To address this challenge, the MOEF allowed foreign investor account overdrafts related to security settlement. The goal was a temporary OD facility to avoid security settlement failure related to delayed receipt of the 3rd party FX KRW payment. Despite this announcement, local banks have been slow to implement OD lines as it is unclear who would be providing the credit lines. The local custodians maintain relationships with global custodians, while the local cash accounts are held in the end investor name.
Industry reactions and ongoing challenges:
Implementation of these enhancements by local banks has been slow, as the Korean authorities have been looking to Korean banks to determine how best to provide support.
- To truly open the FX market, true offshore entities will need to access the FX market and be comfortable with the regulatory requirements that come along with that access.
- The market has not settled on a solution to offering overdrafts. Until that is done, foreign investors will need to assume the risk of security failure if they utilize FX banks away from their custodial line in the market.
The MOEF has been embarking on multiple roadshows to publicize Korea’s inclusion in the WGBI and all the changes to the FX market. The messaging emphasizes the openness of the market and why Korea is well positioned for investors.
At BBH, we continue to maintain our international reputation as seasoned leaders with recognized expertise and access in emerging markets. We continue to monitor developments in Korea, and work with our local providers to support the market changes and to be prepared for Korea’s inclusion in the WGBI in November 2025.
Changes to market dynamics in India
Win Thin and Derrick Leonard discuss the changes and opportunities ahead for investors in India including the T+0 settlement change, operational difficulties, and regulatory complexities.
1Reuters, Vietnam set to launch new stocks trading system in bid for market upgrade
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