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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The writer is a managing partner and head of research at Axiom Alternative Investments

The AT1 bond market does not have many friends. When Swiss authorities controversially wiped out $17bn of the Additional Tier 1 bonds issued by Credit Suisse, many claimed that the market was dead. As the argument went: “Surely no one would be foolish enough to read the terms and conditions and still buy bonds that can be worth zero overnight?”

Lots of people were, it turned out: since lows hit in the wake of the failure of Credit Suisse, a Bloomberg index of the price of the bonds is up 50 per cent. And 2024 still saw a near 60 per cent increase in issuance to €46bn, according to Barclays. This year issuance has reached €34bn.

AT1s were introduced as a form of supplementary bank capital, designed to be wiped out in a crisis to cover losses. They are crucial to reduce banks cost of equity and increase their capacity to lend. The issue with the Credit Suisse AT1s is whether the bonds were wiped out fairly. The Swiss Federal Court ruled on Tuesday that the treatment of the bonds was unlawful — a decision my investment firm supports as we own some bonds affected and are taking separate legal action. Now we are hearing a similar argument to the one made at the time of the Credit Suisse failure, only in reverse: if you cannot wipe out AT1 capital when an entity is a “gone concern”, the asset class is dead.

But the circumstances of the Credit Suisse saga are idiosyncratic. To simplify, Swiss regulator Finma argued that it had basically three grounds to wipe out the bonds: two contractual grounds based on the terms of the bonds, and one general legal right, as an authority overseeing the bank’s resolution. The court dismissed the contractual grounds with a reasoning that is strictly limited to the specifics of this case. The terms and conditions allowed the wipeout in two situations: i) a notification by Finma of the non-viability of the bank and request by it for the wipeout of both AT1 and Tier 2 bonds or ii) necessary state aid improving the capital of the bank. On the first point, the court noted that Finma issued no such notification and, incomprehensibly, did not wipe out Tier 2 bonds. It could have done so. On the second point, the court says that Credit Suisse only received liquidity, and liquidity does not improve capital.

The last nail in the coffin? Finma argued that, as AT1 eligible bonds, the terms were maybe unclear but should have allowed the wipeout. The court answered that Finma should not have authorised the bonds if they did not meet AT1 requirements.

The discussion on the “general legal right” is also very intriguing. There were many ways for the Swiss authorities to zero the bonds. Swiss banking law gives huge discretion to Finma as a resolution authority and the court points that it explicitly refused to declare a resolution event and wipe out the bonds, presumably to protect the shareholders who received $3.2bn from UBS in the takeover of Credit Suisse and would have been left with nothing in a resolution. Under the Swiss constitution, an infringement on property rights requires a law and emergency ordinances can only be used as a substitute if no law is readily available.

None of this has direct implications for the rest of Europe. European authorities have already proved that swift and strict application of resolution laws can be done with little litigation risk. Sberbank Europe was wound down in 2022 and even the fall of Banco Popular in 2017 did not leave many pathways for AT1 bondholders to pursue redress in court.

Where does this leave UBS? Our firm has an interest in the outcome as we own UBS bonds but hold short positions on the stock. It’s the big unknown, and the Swiss court was very careful to point out that it was not answering that question — yet. This is why it calls its own decision “partial”. But the full text of the ruling hints at three possibilities.

Ruling that the ordinance wiping out the bonds is null could simply mean that the bonds are reinstated and reintroduced in UBS’s balance sheet. Whether UBS could receive indemnification from the Swiss government, in the middle of the current tense discussion on massive new capital requirements for the bank is another story. But the court could also rule that the AT1s remain void and that its decision only opens the right to seek indemnification from Finma or from the now combined Credit Suisse-UBS.

Who pays what in that scenario remains highly speculative — not to mention that this complex decision is not final and Finma will appealed against it. The Credit Suisse AT1 saga is far from over.

Researchers at Embry-Riddle Aeronautical University and Brazil’s Instituto Tecnológico de Aeronáutica (ITA) will combine forces on one of the main challenges of electric aircraft — controlling the heat spikes they generate at takeoff.

The collaboration is supported by a $450,000 National Science Foundation International Research Experiences for Students (NSF IRES) grant.

“Both sides have been working on the heat management challenge, so there are some real synergies,” said Dr. Sandra Boetcher, the interim department chair and professor of Mechanical Engineering  and principal investigator on the project. Boetcher is working with co-principal investigator Dr. Mark Ricklick, associate professor of Aerospace Engineering, as well as Brazilian colleagues Dr. Guilherme Borges Ribeiro and Dr. Elisan dos Santos Magalhães.

The collaboration is intended to offer hands-on research training to students, preparing them to tackle the issue of heat management on electric aircraft, considered key to reducing the aviation industry’s carbon footprint. The project will involve three cohorts of five Embry-Riddle students over the next three years spending eight to ten weeks between May and August in Brazil at ITA.

Boetcher said the heat management research that she and Ricklick undertake tends to be fundamental, developing prototypes, for example, that can be further tested. Similar research out of ITA, which is affiliated with the Brazilian Air Force and the Brazilian multinational aerospace corporation Embraer, tends to be applied.

One of the main technologies the researchers from both countries are exploring relates to phase-change materials, which convert from a solid to a liquid at certain temperatures and are capable of absorbing large amounts of heat during the process.

Drs. Sandra Boetcher and Mark Ricklick, standing in front of an aircraft turbine, received a $450,000 NSF grant to offer a student research collaboration with Brazilian colleagues on heat management of electric aircraft. (Photo: Sandra Boetcher)In a phase-change process, energy, in this case heat, is expended on overcoming the molecular forces holding a solid structure together, changing the material to a liquid. No temperature rise occurs during the change. This happens in everyday phase changes, Boetcher explained.

“It’s like you’re melting an ice cube,” she said. “The ice cube is melting, but the temperature stays the same,” until the ice cube becomes water and the water’s temperature starts to climb.

The phase-change materials being investigated by the researchers capitalize on the phenomenon and can be applied as a slab under an aircraft’s electrical circuit to keep it under a certain temperature.

Modeling to optimize the performance of phase-change materials with computer simulations can be time-consuming, with computational fluid dynamics problems taking as long as two weeks to solve.

Magalhães brings coding expertise that could “speed up the process of solving the problem,” Boetcher said.

The researchers will also look at other technologies to manage heat in electric aircraft, including ones that could provide active cooling rather than passive heat absorption.

Boetcher said she thinks the students who travel to Brazil will benefit deeply, even apart from participating in the technological innovations that could result.

“It’s dealing with other cultures, with other collaborators, how they view things, how they operate, how they work,” she said. “There’s a lot of maturing when you get to have these opportunities abroad.”

Dr. Jeremy Ernst, vice president for research and doctoral programs, further emphasized the value of the collaboration.

“The IRES program is impactful in creating research exposure and authentic international experience,” Ernst said. “The work led by Dr. Boetcher and Dr. Ricklick is of high value to students, offering enhanced cultural immersion in Brazil within its rich aviation and aerospace environment. This experience allows students to develop skills that are directly transferable to the global workforce.”

Vietnam’s upgrade to Emerging Market status by FTSE Russell is a green flag for global investors and a step towards greater financial market integration. The 2025-2027 reforms can translate into easier capital access and disclosure transparency for businesses looking at a long-term foothold in Vietnam.

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FTSE Russell announced on October 7, 2025, that Vietnam will be upgraded from Frontier to Secondary Emerging Market (EM) status, from September 21, 2026, after a final review scheduled for March 2026. The decision comes after nearly seven years of gradual reform since Vietnam was first placed on the FTSE watchlist in 2018.

Vietnam’s upgrade to Secondary Emerging Market status places it alongside China, India, Indonesia, the Philippines, and Qatar. It ranks below Advanced Emerging Markets such as Thailand and Malaysia, and Developed Markets like Singapore.

Understanding the FTSE classification and upgrade process

FTSE Russell’s Equity Country Classification Framework evaluates markets based on a set of quantitative and qualitative indicators that measure openness and regulatory quality.

The Secondary Emerging Market status hinges on countries satisfying these primary criteria:

• Market accessibility for foreign investors;
• Settlement and custody infrastructure;
• Transaction transparency and liquidity; and
• Market size, free float, and institutional participation.

Vietnam successfully met all these conditions and addressed many longstanding barriers that were limiting investor participation. The country addressed two critical technical barriers that previously prevented the upgrade, including:

• Settlement cycle and pre-funding requirements

In November 2024, the Ministry of Finance issued Circular 68/2024/TT-BTC, which introduced the Non-Pre-funding Solution (NPS) model. Before, foreign institutional investors were required to fully pre-fund equity purchases before execution, a rule that discouraged global funds accustomed to T+2 settlement systems. Under the NPS, securities firms now bear the responsibility of assessing and managing payment risk under the contracts.

• Failed trade processing mechanism

Vietnam implemented a mechanism for handling settlement failures to improve transparency in post-trade activities. It ensures the timely resolution of settlement failures and brings Vietnam’s back-office procedures closer to international standards.

Interim review and pending conditions

Although Vietnam has met the requirements for EM classification, the March 2026 interim review will evaluate one remaining area, which is direct access for global brokerage firms.

FTSE Russell noted that this is not a mandatory criterion for maintaining EM status, but it remains crucial for Vietnam’s index and for aiding participation by major global institutional investors.

Projected capital inflows and portfolio effects

The upgrade is expected to catalyze a lot of foreign capital inflows. Analysts have made various investment projections, some of which like:

• FTSE Russell estimates inflows of around US$6 billion from passive index trackers that replicate the FTSE Emerging Market Index;
• The World Bank projects short-term inflows of approximately US$5 billion before and after the upgrade from passive and active investors, and long-term potential inflows could reach $25 billion by 2030; and
• HSBC forecasts range from US$3.4 billion (active funds) to US$10.4 billion (total including passive funds).

Vietnam is expected to account for approximately 0.5 percent of the FTSE Emerging Market Index once the reclassification takes effect.

Active fund participation

According to HSBC, approximately 38 percent of Asia-focused funds and 30 percent of global emerging market funds already hold Vietnamese equities, which suggests that beyond passive index flows, Vietnam could attract new active fund allocations too.

Liquidity, valuation, and trading depth

Vietnam’s stock market has demonstrated strong liquidity in 2025. In July 2025, average daily trading volume reached over 1,422 million shares as average daily turnover reached VND 34,993 billion (US$1.32 billion). The market hit historic liquidity records with total trading value on the Ho Chi Minh City Stock Exchange (HOSE) as it approached VND 78.2 trillion (US$2.9 billion) in early August 2025. As of May 2025, Vietnam Exchange posted nearly US$18 billion in monthly trading value, overtaking Malaysia (US$12.1 billion) and Indonesia (US$15.3 billion)

Anticipation of the FTSE announcement has already influenced domestic equity performance. The VN-Index has risen from 1,100 points in April 2025 to nearly 1,700 points by October 2025, which is a 50 percent jump and a 33 percent year-to-date gain; thus, Vietnam has become the best-performing market in Southeast Asia.

HSBC analysts, however, caution that front-loading, the tendency of investors to buy in anticipation of future reclassification, may limit further short-term upside. Profit-taking could occur after the announcement, as observed in other markets following index upgrades. Nevertheless, most research expects active funds to disburse gradually between March and September 2026.

Domestic reforms enabling the upgrade

Vietnam’s reclassification is a cumulative result of regulatory and structural reforms that have improved its foreign access.

Central counterparty and post-trade reforms

The State Securities Commission (SSC) has given a roadmap to launch a central counterparty (CCP) system for Vietnam’s equity market by Q1 2027. Milestones on the way are:

• Q1-Q2 2026: SSC and the Vietnam Securities Depository and Clearing Corporation (VSDC) will issue a new circular to replace Circular 119/2020/TT-BTC on registration, custody, and settlement;
• Q3 2025-Q1 2026: Establishment of a VSDC subsidiary to handle CCP functions;
• Q3 2025-Q4 2026: Introduction of a revised accounting framework to replace Circular 89/2019/TT-BTC;
• 2026: IT system upgrades, staff training, and simulation testing; and
• Q1 2027: Full-scale operation of the CCP.

CCP will help foreign institutional investors reduce currency risk during the payment cycle and provide safer mechanisms against payment risks.

Technology infrastructure modernization

Vietnam launched the KRX trading platform on May 5, 2025, in partnership with the Korea Exchange (KRX). The platform addresses several bottlenecks and expands derivative products available to investors with these new features:

• Same-day trading (T+0) and short selling;
• Faster settlement processing; and
• Support for options contracts and CCP clearing.

Disclosure and transparency

From January 1, 2025, all VN30 companies (the 30 largest listed firms) have been required to publish disclosures in Vietnamese as well as English. By the end of 2026, all approximately 2,000 listed and registered trading companies must complete the transition to English-language disclosures. Currently, only about 25-30 percent of listed companies provide complete English disclosures.

Other reforms

Other transformative reforms include:

• Removal of pre-funding obligations: As noted above, Circular 68/2024/TT-BTC eliminated the full pre-funding requirement for foreign investors.
• Foreign ownership liberalization: Decree 245/2025/ND-CP, issued on September 11, 2025, removed provisions that allowed listed companies to set foreign ownership limits below the legal maximum. All public companies must now publicly disclose their maximum allowable foreign ownership ratio within 12 months of the decree’s coming into force.
• Simplified trading code issuance: Foreign investors can now receive an electronic securities trading code (ESTC) and commence trading immediately without submitting physical paperwork.
• Accelerated IPO and listing timelines: The period for securities to be traded after listing approval was shortened from 90 days to 30 days, and the overall listing process was reduced by 3-6 months.

Remaining reform gaps

Despite its upgrade, Vietnam continues to face structural challenges that must be addressed to sustain investor confidence.

• Currency convertibility: The Vietnamese Dong is not freely convertible and cannot be remitted overseas. Foreign exchange transactions remain subject to State Bank of Vietnam (SBV) controls.
• Global broker access: The March 2026 interim review will specifically assess progress in this area.
• ESG disclosure: Only 25 percent of listed companies publish environmental, social, and governance (ESG) reports, most without external assurance.

Integration with global finance

The FTSE upgrade is a part of a series of efforts Vietnam is taking for global financial integration and capital market openness. Vietnam’s Finance Minister Nguyen Van Thang stated that “the official recognition and upgrade of Vietnam’s securities market is clear evidence of the country’s sound development path and its growing capacity to integrate deeply into the global financial system”.​

The government has set an ambitious target of 8 percent GDP growth for 2025 and aims to achieve double-digit growth between 2026 and 2030. The present roadmap for Vietnam’s stock market development goes up to 2030. The market can aim for medium-term targets for MSCI Emerging Market upgrade between 2026 and 2027 and can have long-term goals for FTSE Advanced Emerging Market status by 2029 and 2030.

Monetary and currency management

Vietnam’s GDP growth recorded an 8.23 percent year-on-year rise in Q3 2025, the fastest since 2022. The Purchasing Manager’s Index was 50.4 in September 2025, and total trade volume reached US$680 billion, with exports up 14.8 percent to US$262.44 billion.

The SBV maintains an inflation target of 4.5 percent for 2025. As of mid-year, consumer prices rose 3.27 percent, and core inflation stood at 3.16 percent. Refinancing rates remain at 4.5 percent (at an accommodative policy stance).

The Federal Reserve’s rate cuts in 2025 have provided room for Vietnam to maintain low domestic interest rates without pressuring the dong. As we noted, the Vietnamese Dong is not freely convertible as foreign exchange transactions still are subject to SBV controls.

Vietnam’s sovereign credit ratings remain below investment grade but stable:

• Standard & Poor‘s BB+ with stable outlook (affirmed August 2025);
• Fitch’s BB+ with stable outlook (affirmed June 2025); and
• Moody’s: Ba2 with stable outlook (unchanged since 2022).

The EM reclassification could fuel investor appetite for Vietnamese sovereign bonds, which could potentially lower long-term borrowing costs. Vietnam now stands at the threshold of deeper global integration. Despite global headwinds, Vietnam’s domestic reforms and foreign investors’ belief in its robustness can provide a much-needed boost for double-digit growth.

Read more: Vietnam’s Rising Purchasing Power: 2024 Household Living Standards Survey

(US$1 = VND 26,349.5)