Vietnam Establishes and Activates The IPO–M&A Capital Cycle: The Initial Catalyst and Other Driving Factors

Vietnam’s stock market was approved by FTSE Russell (Financial Times Stock Exchange Russell) for an upgrade to Secondary Emerging Market status on October 7, 2025, with the reclassification to take effect from September 2026. This marks the success of a seven-year journey of persistent reforms and the Government’s strong and resolute efforts in recent years to advance the market’s upgrade.

This is not merely a symbolic milestone, but also a turning point that opens a new era for Vietnam’s financial and stock markets, an era in which international capital flows, confidence, and expectations can converge to help create a long-term growth engine for Vietnam, Vietnamese business, and both local and foreign investors.

A Powerful Pull for International Capital
Vietnam’s equity and financial markets are set to welcome a “second wave of capital inflows”, 25 years after the first wave when the stock market officially opened in 2000. According to FTSE estimates, the upgrade is expected to bring approximately USD6 billion in passive inflows to Vietnam from global index funds. As multiple reinforcing factors align, including stronger government policy support, a more transparent and sustainable market structure, increasinglyattractive market valuations, an enhanced national reputation, and more vibrant capital circulation, Vietnam could attract an additional USD15–20 billion in investment from active funds, foreign direct investment, private equity funds, and multinational corporations over the next 5 years. These capital inflows are expected to continue compounding and expanding in subsequent years, enhancing liquidity, improving operational efficiency, and moving Vietnam’s stock market into a new growth cycle that is more professional and more sustainable.

Rising Wave of IPO and M&A Activity in Vietnam
Initial public offerings (IPOs, commonly referred to as “listings”)  and mergers and acquisitions (M&A) activities have always been closely linked, operating together within the broader value chain of capital markets. A market upgrade will create a strong boost for IPO. This development, in turn, will stimulate a more dynamic and active M&A envrionment.

When investors acquire equity stakes or inject capital into a company, they must consider exit strategies and the realization of returns after a holding period. In this context, M&A and IPO are often regarded as two common and complementary exit channels. For example, a company that has received investment through an M&A transaction may subsequently use an IPO to continue its valuecreation strategy and optimize capital. Conversely, a listed company may continue to leverage M&A to further enhance value and and optimize capital.

However, in Vietnam, this activity chain remains limited. Most M&A transactions, especially in the private sector, when reaching the exit stage, are often followed by secondary transactions rather than IPOs. Conversely, companies that have completed an IPO often stop there and are unable to further enhance value through M&A transactions. When the IPO market is more strongly promoted, alongside more diversified and transparent exit channels, M&A activities will certainly become more dynamic and attractive. A Capital cycle can be established and activated to support one another, allowing investment capital to be continuously recycled and expanded.

Empirical evidencefrom multiple countries have shown a certain correlation between stock market upgrades and an increase in IPO and M&A activity. After each market reclassification and upgrade, the number of IPO and M&A transactions has recorded significant growth, reflecting increased investor confidence and more effective capital-raising capacity.

Other Critical Factors
Alongside these positive signals, significant challenges remain. Market upgrade is only a trigger point. To fully capture the opportunity and sustain momentum, Vietnam’s stock market must continue to strengthen other aspects, from the composition of capital flows and the investor base to corporate quality and the diversity of financial instruments. The core issue still lies in how the market operates: its level of efficiency, transparency, investor accessibility, market sustainability, and a sufficiently robust policy and legal framework to protect and encourage the development of capital flows. When corporate quality is enhanced, the market operates efficiently, and capital circulates in a sustainable manner, only then can the IPO and M&A cycle, two core activities and critical pillars of capital market infrastructure, truly take off, forming a dynamic, advanced, transparent, and sustainable capital ecosystem.

*This article is originally published by Vietnam Investment Review, on December 8th, 2025. See original article here.

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