The UK’s blue chip stock market index has been outpaced in 2026 by rival benchmarks tracking alternatives in emerging markets, creating some eye-catching comparisons over the returns generated in the year to date.
For London and the FTSE 100, it amounts to a change in fortunes. It gained roughly 22 per cent for 2025, in its best year since 2009. Now it is being left behind by a range of 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 the rising demand of AI hardware and a shift in supply chains, meaning the region is primarily responsible for manufacturing much of the cutting-edge tech reshaping the world.
Taiwan’s TAIEX is up 28.1 per cent this year to date and has outstripped the FTSE in terms of value after reaching a market capitalisation of $4.13 trillion (£3.05 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, not least due to the country’s contrasts with Taiwan and South Korea.
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 at the market.
Fading haven by the Thames
The stock exchange in Ho Chi Minh City reflects a very different economy and one at an earlier stage of development. The extent of its outperformance of London prompts a key question: why is the main index of a fully developed economy UK no longer better placed to weather the global turmoil of the Middle East conflict?
Several emerging markets have reaped the benefits from being upgraded on the FTSE Russell Emerging Market index.
The index measures the performance of both large and mid cap stocks, spanning over twenty countries, providing a benchmark for investors seeking exposure to developing economies.
This month, FTSE Russell confirmed that Vietnam will be upgraded from a frontier market, which marked it is a developing country with lower market capitalisation and liquidity, to a secondary emerging market.
The upgrade will classify Vietnam as a developing economy and financial market which is deemed more accessible to international investors, with the nation expected to gain a weight of up to 0.35 per cent on the index.
Valuation prospects
A Vina Capital Vietnam Opportunity fund manager said this is a “positive and long anticipated milestone”, coming as the index is trading at one of its most attractive valuations levels in the past five years,
It is also expected to attract between $5bn and $6bn in foreign capital, but already institutional investors are piling into the exchange, despite the upgrade not taking effect until September 2026, in a bid to get ahead of the expected funds. This amounts to a liquidity surge which the FTSE 100 is unable to 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 from local authorities.
“That said, its inclusion in FTSE indices 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 likely represent a more consequential milestone given the materially larger pool of assets tracking MSCI indices.”
GDP growth boosting optimism
A surge in GDP growth has also helped investment conditions and led to an increase in interest in the exchange from both domestic and foreign investors.
The economy grew by 8.2 per cent in late and is aiming for up to 10 per cent in 2026, according to Vietnamese investment platform Dragon Capital.
In contrast, the UK is struggling with notoriously sclerotic growth. It produced an expansion of 0.5 per cent in February, which was better than expected but did not fully interrupt a trend for numbers that look anemic compared with so much of the rest of the world. And the impact of the war is set to interrupt the improvement.
The numbers are brighter in the east. In Vietnam, the macro growth also led to double-digit earnings per share growth, with the country’s top performing companies seeing a 17 per cent rise.
The nation also enacted its Law on Investment as of March 2026, which accelerated market entry for companies, streamlined approvals by removing 30 per cent of licensing requirements and slashed regulatory red tape.
Global tech hub
Vietnam has also evolved to become a key hub for tech and manufacturing, with the country’s electronic exports exceeding $110bn annually making it the nation’s leading export category.
In particular, Northern Vietnam has cemented itself as a ‘China plus one’ manufacturing hub, as it is able to provide a cost-effective alternative for companies who are looking to diversify supply chains away from China as costs rise and threat of tariffs continues to loom.
Samsung, Google and Apple are among the names who are leveraging Vietnam’s abilities, helping the country become a smartphone manufacturing powerhouse.
Beaudoin said: “Active Asia and emerging market equity managers have allocated to some off benchmark Vietnam stocks in recent years, in part to gain exposure to the country’s strong structural growth backdrop.
“In particular, they have favoured companies in the financials and consumer sectors, which are positioned to benefit from rising financial inclusion and strengthening domestic consumption within Vietnam. That said, managers have been highly selective, typically focusing on the largest and most liquid names.”
Risk Saigon
Despite Vietnam’s growth and new opportunities, analysts have warned investors to be cautious, emphasising the nation’s emerging market specification.
While supply chains for certain sectors are thriving, infrastructure remains limited in some areas of the country, particularly for energy and transportation, increasing time frames and costs.
The nation is also a highly sensitive export-oriented economy, with ongoing geopolitical instability and trade tensions potentially damaging economic growth, while raw material prices also remain a challenge, as many companies operate on thin profit margins meaning slight fluctuations can affect profits.
Beaudoin said: “For active managers, liquidity considerations and the Vietnam 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 also shown vulnerability to global macro shocks.
“Recent examples include the US tariff announcement in 2025 and the Iran conflict in 2026, both of which were especially challenging for Vietnam given its export-oriented economy.”
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