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Market to offer exchange-traded funds

Update: August, 14/2012 - 10:18

HA NOI — Exchange-traded funds are urgently needed and are expected to become operational on the Vietnamese stock market next year, the State Securities Commission has announced.

Developing exchange-traded funds (ETFs) was a must, said Ha Noi Stock Exchange deputy director Nguyen Anh Phong. Only stocks, bonds and closed-end fund certificates were currently being traded on the market, Phong said, and the current model of closed-end funds made it difficult for fund management companies to create new products.

"These companies need a more flexible and effective tool," Phong said at the seminar last Friday. "Fund management companies, brokerages and investors are all eager for ETFs."

ETFs offered advantages of diversification, low costs and transparency, but investors would need thorough training to full appreciate the benefits, he added.

The greatest strength was transparency, since the investment portfolios of ETFs would be updated daily, said the head of the commission's fund management department, Nguyen Thanh Long, noting that net asset values could be updated as frequently as every 15 seconds.

Meanwhile, the costs of managing traditional funds could amount to 2-3 per cent of net asset value, but the costs for ETFs were much lower. "In European countries, it's around 0.55-0.99 per cent," Long said.

ETF certificates would be traded on the Ha Noi Stock Exchange, with the first fund certificate to list likely to be based on the HNX30 Index, he added.

"Picking the HNX30 as the basis for the initial fund is aimed at establishing a legal framework," said the exchange's general director, Tran Van Dung. "After this framework is complete, other qualified indices can be considered as a basis for an ETF."

The State Securities Commission has drafted a circular on the establishment and management of securities investment funds, with a chapter dedicated to ETF transactions. — VNS

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