VietNamNet Bridge – Administering agencies are speeding up legal and technical preparations for the birth of the first exchange traded funds (ETFs) in Vietnam in the third quarter of this year, said Nguyen Son, head of market development department under the State Securities Commission (SSC).

ETFs are funds that track specific indexes and whose portfolios include a basket of stocks.

Speaking at a review meeting of the Hochiminh Stock Exchange (HOSE) last Friday, Son said that the Circular 229/2012/TT-BTC was released at the end of 2012 to provide guidelines for ETFs establishment and management. Since 2013, SSC has cooperated with stock exchanges and the depository agency to prepare legal and technical conditions for the funds.

The two local stock watchdogs are finishing rules for product design and trading mechanism of ETF fund certificates. The Vietnam Securities Depository is also completing a project that allows clearing of ETF products and deals with risks related to ETF transaction cancellation.

After all the steps are finished and piloted at stock exchanges, the ETFs will be launched into transaction in the third quarter, Son said.

ETFs construction will be based on stock indices, including the VN30 and HNX30. Recently, the two stock watchdogs have also launched new sets of indexes to reflect detailed market data.

“It is estimated that the VN30 and HNX30 will be the first sets of indexes we base on to design products,” Son said.

HOSE will present new indexes on January 27. To prepare for the move, HOSE will announce the list of constituent stocks of the new indexes today, including 30 stocks of the VN30, 70 stocks of the VNMidcap and 149 stocks of the VNSmallcap. The list was adopted during the meeting of the index council last Wednesday.

Looking at data of the indexes in the past, a representative of HOSE said that the indexes had seen different growth rates. For instance, the VNMidcap and VNSmallcap reported faster growth rates than the VN-Index and the VN30 in the past year. However, the VNMidcap had the strongest growth rate in the past five years.

Developments of the indexes will help investors make suitable decisions to optimize profits. However, HOSE has yet to expect the VNMidcap and VNSmallcap as investable indices as constituent stocks still have low liquidity. At present, only the VN30 is estimated to become an investment index for funds.

Concerning the merger between the two local exchanges, Son said that SSC is completing final drafts on the issue and will field suggestions from relevant agencies in March. Based on these preparations, the Government will release a decision on merging the two stock exchanges.

Source: SGT