What is the future for domestic ETFs?

22-Jun-2019 Intellasia | Dau tu Chung khoan | 6:02 AM Print This Post

Data published by the State Securities Commission (SSC) showed that among 31 securities investment funds licensed in Vietnam, there are 16 open funds, of which two are Exchange-Traded Funds (ETFs), including SSIAM VNX50 managed by SSI Asset Management Company Limited (SSIAM) and ETF VFMVN30 managed by VietFund Management (VFM).

VFMVN30 tracks the performance of the VN30 index of HCM City Stock Exchange (HoSE) and SSIAM VNX50 picks the VNX50 index. After a period of operation, the two funds are having huge differences.

SSIAM VNX50 started operation in the end of 2014 and initially picked the HNX30 index. By late 2015, the net asset value on each SSIAM VNX50 fund certificate was 7,737.02 dong with the total net asset value of the fund was 78.144 billion dong. At the same time, the ETF fund of VFM had a net asset value on each fund certificate of 9,516.83 dong with the total net asset value of the fund reaching 358.785 billion dong. The difference is huge, but the chance of levelling the gap is possible.

By mid-June 2019, the two domestic funds seemed to have followed two different directions. VFMVN30 recorded a net asset value on each fund certificate of 14,157.16 dong, and the net asset value of the fund reached over 6.304 trillion dong, which means that the fund’s size has increased by 17.57 times.

In the same period, the scale of SSIAM VNX50 has only seen an increase of 2.17 times in asset size, reaching 169.651 trillion dong, and a net asset value on each fund certificate of 12,474.34 dong.

Considering investment efficiency, it seems that SSIAM is gaining the upper hand over VFM. From the end of 2015 until now, the net asset value of each VFM’s fund certificate has risen by nearly 48.76 percent, while that of SSIAM’s fund certificate has risen by over 61.12 percent. From the beginning of the year until now, each fund certificate of SSIAM has increased by 4.47 percent, while that was only 0.44 percent for the case of VFMVN30.

So why VFM has still attracted a lot of new capital into the fund, while the new investment in SSIAM is very modest.

One point to concern is that the ETF of VFM has attracted a large number of foreign investors, in which the foreign ownership rate was above 98 percent in late April 2019 and above 96 percent in late May 2019.

What is the reason making SSIAM VNX50 to receive less attention from investors?

Brand prestige, or even personnel quality technology, etc. is probably not the issue, because both VFM and SSIAM are big and reputable names in the Vietnam’s stock market. They are the destination for foreign investors who seek consultancy when entering Vietnam to explore opportunities. The difference perhaps lies in the indices that those ETFs have chosen.

“Since SSIAM picks HNX30, investors were less interested,” said the leader of a large fund management company, expressing surprise when knowing that the transactions of SSIAM’s ETF have been based on the VNX50 for several years. On the SSC’s website, information about SSIAM’s ETF was still recorded as SSIAM HNX30 ETF. As the VNX50 was picked by SSIAM, some investors said that although the fund’s efficiency is better, they are not really interested.

“ETF will mainly target foreign investors, and domestic investors may participate, but not significantly. Meanwhile, foreign investors will tend to find familiar and common indices on the market. Talking about the market, in addition to the VN Index, the VN30 is perhaps the second index to be concerned and the most invested index,” said manager of another foreign investment fund.

So what is the future for domestic ETFs?

The number of funds established by domestic fund management companies has increased considerably over the years. However, there are only two ETFs. This is a modest number, which makes it difficult for the market to give a positive comment about the boom of domestic ETFs.

Nevertheless, the story of VFM, with a sharp increase in net asset value in the recent two years (but the change between the peak and the bottom in the same year in terms of total net asset value is very large) and the increase in size of SSIAM’s ETF (although the absolute value is not very large, the relative value increased 46.47 percent in the first half of this year) are showing the opportunity to scale up investment of ETFs.

A noteworthy point is that ETFs’s products are fairly poor, because ETF must rely on the index built by the Department of Construction. Many people said that in order for the ETFs to be more diversified, the stock exchange must quickly develop new indices that suit market taste.

 


Category: Stocks, Vietnam

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