Two more exchange-traded funds to be launched at southern bourse
Tuesday, October 14, 2014, 13:00 GMT+7
The Ho Chi Minh City Stock Exchange (HoSE) has announced that two more exchange-traded funds (ETF) will be launched at the southern bourse by the end of the year. The exchange currently has two existing ETF.
Their potential to attract capital is as good as the operational ones, including VFMVN30, launched on October 6 by VietFund Management Co(VFM), and another EFT, managed by SSI Asset Management Ltd (SSIAM), which is under construction, said HoSE.
The establishment of two new ETF is very feasible, as the two companies managing them have met with HoSE and submitted detailed plans, and they have also deployed specialized divisions for the creation of these entities, Nguyen Thi Viet Ha, Director of the Research and Development Department under HOSE, told newswire Dau Tu Chung Khoan.
In developed economies like the US, there are thousands of ETF, while regional countries like Japan and South Korea have hundreds, Ha said.
When choosing an index as the basis for an ETF, the fund management company uses two criteria: the level of representation, and liquidity of the component stocks. The VN30 index was picked by VFM for the VFMVN30 as the index is a representative basket of value stocks accounting for 60 percent of the market value with good liquidity.
Among many indices on HoSE, the VN30 index has a sustainable growth trend, Ha added.
"VN30, with its remarkable advantages of liquidity and sustained growth, can still be used as the main index for new ETF to follow.
“Other funds may choose the lower number of shares that simulated only with a difference of less than 10 percent compared to the reference index. They are not necessarily to invest in all 30 stocks covered by the VN30,” Ha said.
ETF VFMVN30 was very confident that after six months it can raise funds of VND400-500 billion, double the current scale, to break even.
The advantage is that an ETF is conducive to attracting investment from both domestic and foreign capital.
For local investors, ETFs are suitable for big investors with diversified portfolios, or just individual investors who invest according to market trends.
For foreign investors, owning ETF certificates can help them avoid the limits of stock ceilings available at many good firms.
By the end of this year or early next year, the southern floor will bring to the market the industry indices of three large sectors, including finance-banking-insurance, manufacturing industries and real estate, said HoSE.
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An ETF is an investment fund traded on stock exchanges - like stocks, hold assets such as stocks, commodities, or bonds - and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index. ETFs have been available in the US since 1993 and in Europe since 1999. ETFs traditionally have been index funds, but in 2008, the U.S. Securities and Exchange Commission began to authorize the creation of actively managed ETFs. As of January 2014, there were over 1,500 ETFs being traded in the U.S., with over $1.7 trillion in assets. |
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