Vietnam pushing stock market with ETFs, future derivatives

Mar 25th at 16:45

25-03-2014 16:45:39+07:00

The Vietnamese stock market is preparing to leverage exchange traded funds (ETFs) and would-be derivatives to lure more capital, heard a workshop in Ho Chi Minh City March 25.

Regulators are speeding up legal and technical preparations so that the first ETFs could start operations in the second quarter of this year, said Nguyen Son, head of market development department under the State Securities Commission.

ETFs are funds that track specific indexes and whose portfolios include a basket of stocks. To date, all operating funds in Vietnam are closed-end funds.

The Ho Chi Minh Stock Exchange (HOSE) and Hanoi Exchange (HNX) are finishing rules for product design and trading mechanism of ETF fund certificates. The Vietnam Securities Depository is 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 first ETFs will be launched into transaction.

Also in order to leverage and better facilitate the market, the two bourses would become one in the coming time, before Vietnam’s derivatives market was set to open in 2016, Son said. The Government would soon make the final decision on merging the two stock exchanges.

Regarding derivatives, Vietnamese Prime Minister Nguyen Tan Dung on March 11 approved the project to build up and develop the derivatives market, which would include such new products as share purchase rights, covered warrants, option contracts, as well as traditional products like as shares and bonds.

Son said the derivatives launch over the next two years was seen another step towards completing the country’s stock market structure, supporting development of bond and stock markets and strengthening the role of the stock market in the financial industry and the entire economy.

The new market would be developed from simple to complicated products, Son told the workshop, co-organised by Vietnam Investment Review and PetroVietnam Securities Inc. (PSI).

PSI is the manager and operator of PVN-Index, the Vietnam National Oil and Gas Group (PetroVietnam) launched in 2012 to measure the business performance of enterprises in the country’s oil and gas sector.

France-based Intelligent Financial Research & Consulting (IFRC), specialised in the new development of new indexes and in the customised index services, wanted to develop many new products based on PVN-Index, said IFRC founder and CEO Dr. Mai Huu Minh.

He added an idea from PSI and IFRC cooperation was to extend the idea of PetroVietnam to other leading Vietnamese companies like State utility Electricity of Vietnam and Petrolimex.

PVN-Index is currently a basket of 32 share codes, including PVN-10 Index representing the sector’s top 10 companies. The 32 codes account for 20 per cent of the market capitalisation.

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