Foreign ETFs leading the way

Foreign ETFs leading the way, illustration photo

Last week, Fubon FTSE Vietnam exchange-traded fund (ETF), the first ETF from Taiwan specialising in investing in Vietnam’s stock market, mobilised around VND8.1 trillion ($352 million) at its initial public offering.

According to newswire Mirrormedia, Taiwanese investors were rushing to purchase all Fubon FTSE Vietnam ETF certificates right after its launch. The ETF tracks the FTSE Vietnam 30 Index as reference, focusing on the 30 most liquid large-cap stocks on Vietnam’s stock market, including Hoa Phat Group, Vietcombank, Masan Group, Sabeco, Vietjet, Vingroup, and others.

The shares of Vingroup held the largest proportion of 10.44 per cent in March 24, followed by Hoa Phat Group (10.03 per cent), Vinhomes (9.97 per cent), and Vinamilk (9.9 per cent). The ETF will also periodically rebalance its portfolios twice a year, in March and September, to best suit its risk tolerance.

According to the Taiwanese fund, Vietnam’s young and dynamic population, along with preferential economic policies supported from the local government, will help the country outperform its regional peers.

“At the moment, Vietnam seems to be cast in the same mould as Taiwan back in the 1980s. Now they could make a profit through Vietnam’s economic reforms and huge potential via Fubon Vietnam ETF,” said Yang Yining, chief investment officer of the fund.

Taiwan 2.0

The sectors that account for the largest proportion in the FTSE Vietnam 30 Index basket are real estate, consumer finance, and other financial products, which are forecast to have earning-per-share (EPS) growth of 16, 20, and 21 per cent, respectively, in 2021, which shows that the stocks in the Fubon Fund FTSE Vietnam ETF have long-term growth potential with competitive advantages.

Besides this, a per capita income surpassing $2,000 is also supporting a thriving stock market, as seen in the case of South Korea, China, Japan, and Taiwan. Vietnam’s per capita GDP officially exceeded $2,000 in 2014, reaching $2,715 in 2019, and $2,881 last year.

With the long-term optimism of the Vietnamese stock market, Fubon FTSE Vietnam ETF is believed to pour cash into this lucrative emerging economy. The fund is not the first subsidiary of the Fubon Financial Holdings network in Vietnam, given that other siblings, such as Taipei Fubon Bank Vietnam and Fubon Insurance Vietnam have been operating in the country for a long time.

In September 2020, CTBC Investments, another prominent asset management firm in Taiwan, also launched the CTBC Vietnam Equity Fund to cash in on the promising equity market. Set to bridge the gap between Taiwanese investors and the Vietnamese financial landscape, CTBC Vietnam Equity Fund’s size was initially committed at around $160 million. The total assets of the fund reached more than $278 million as of January 29.

The FTSE Vietnam ETF, which is managed by Deutsche Asset Management with a size of around $400 million, also tracks the FTSE index as a reference.

The number of ETFs in Vietnam, both foreign and locally-run, has increased significantly over the past decade. FTSE Vietnam ETF and VanEck Vectors Vietnam ETF were the first two foreign funds to invest in the Vietnamese stock market, established in 2008 and 2009, respectively, with initial assets of $5.1 million and $14 million. The total assets of the FTSE Vietnam and VanEck Vectors Vietnam ETFs reached nearly $273 million and $457 million in 2020, respectively.

Domestic ETFs rising

Last August, SSIAM VN30 ETF, the third fund from SSI Asset Management Co., Ltd. (SSIAM) under Saigon Securities Incorporation (SSI), was listed on the Ho Chi Minh City Stock Exchange (HSX).

SSIAM is managing ETFs since 2014, with currently two ETFs in its portfolio listed on the HSX. With the great financial resources from the fund’s authorised participants, especially from SSI, SSIAM will create advantages in liquidity for fund certificates, ensuring primary buying and selling for investors with as least differences in prices as possible.

“ETFs are expanding all across Asia, not just in Vietnam. Index funds are playing a larger role in markets, similar to North America and Europe, where they have dominated for many years,” said Nguyen Minh Hanh, portfolio manager of the ETF funds of SSIAM.

Meanwhile, there is also a slew of domestic ETFs emerging as alternative and effective investment channels. The first domestic one established in 2014 was VFMVN30 with an initial asset value of $9 million. By the end of 2020, this increased 35.7 times to $322 million. Currently, there are seven locally-run ETFs, with total assets of approximately $480 million, cited VNDIRECT Securities.

In 2020 alone, there were five domestic ETFs officially introduced to the market, accounting for 70 per cent of the total number of domestic funds. New ETFs are not only based on traditional indexes such as the VN30 or VN100, but also help local and foreign investors to explore more diversified options. For instance, the VFMVN Diamond Fund tracks a portfolio of shares that reach their foreign ownership limit (FOL), such as FPT and Mobile World.

This is a new investment method for foreign investors to indirectly invest in Vietnamese stocks that have reached the FOL. Launched in May 2020 with a net worth of only $4.5 million, VFMVN Diamond’s value now increased by nearly 50 times to $224 million, becoming the second-largest domestic ETF in the market, after the ETF VFMVN30.

Experts at Asian Frontier Capital (AFC) noted that despite outstanding macroeconomic data and a positive consensus about Vietnam’s economic outlook, foreign investors are still not back in the stock market and continue to have very minimal investment exposure to Vietnam.

“Foreign institutional investors use the fact that Vietnam is not part of any large ETF benchmark as an “excuse” for why they are not part of such an attractive market, while domestic investors and a small group of foreign funds are enjoying the ride. It remains to be seen when foreigners will return,” an AFC statement said.