Vietnam will introduce regulations allowing open-ended funds before the end of the year, and permit the introduction of more investment products next year, as it seeks to lure investors back to a stock market roiled this year by accelerating inflation and rising interest rates.
The government will also issue regulations on real-estate investment trusts and voluntary pension funds by the third quarter of 2012, the Ministry of Finance said in a statement posted yesterday on the State Securities Commission’s website.
VN Index, the benchmark measure of the HCM City Stock Exchange, has lost 20 percent this year, the most in Asia, as high borrowing costs hurt economic growth and corporate earnings. Vietnam’s growth is expected to slow to 6 percent this year, from 6.78 percent last year. The refinancing rate has been raised to 15 percent in five steps from 9 percent at the beginning of the year. The new products are aimed at developing institutional investment and bolstering demand, the ministry said.
The new regulations may eventually “attract money from other asset classes, such as real estate, but initially it’s more likely to work with retail investors,” said Fiachra MacCana, managing director of HCM City Securities Corp.
Open-ended funds usually allow for the creation of new shares or redemptions, as opposed to close-ended funds, in which new shares are rarely issued after the fund is established and into which investors are locked until the fund closes. The State Securities Commission has been working on regulations to establish and manage the funds for several years.
“Open-ended funds will allow fund-management companies like us to give investors more flexible options in this environment, where changes may happen very quickly,” said Le Chi Phuc, investment director at SGI Capital, a unit of Saigon Invest Group, which manages about $50 million in assets. “With open-ended funds, investors can promptly seize opportunities, instead of having their cash locked in for five years or more in a closed-ended fund.”
Vietnam will also develop a plan next year to allow exchange-traded funds, the finance ministry said in the statement.
The new guidelines “will help lay the foundations for the rebirth of the domestic fund-management industry,” MacCana said. “For the first time they will have a product that should mirror equity-basket trading.”