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Fund managers turn noses up at VN30 index

Update: February, 10/2012 - 10:19

HA NOI — The benchmark VN30 Index was officially opened on the HCM City Stock Exchange on Monday, but some funds say they will use the new index only as a reference to supplement their own assessment criteria.

The introduction of the VN30 Index, which tracks the movements of the 30 leading shares by market capitalisation and liquidity, was regarded as one important way to push up the stock market from the beginning of this year. However, funds are not keen on this index.

"We don't compare the changes of the VN30 with our investment results. This Index is not really necessary for us," Andy Ho, managing director of VinaCapital, told the Nhip Cau Dau Tu (Investment Bridge) newspaper.

Andy Ho said VinaCapital has its own assessment criteria when investing in listed shares, including information on the sector, growth rate and company leadership. The movements of the VN-Index and VN30 should only be seen as one factor.

Currently, VinaCapital's total investment value in listed shares is estimated at US$250-300 million, a large per cent of which also appear on the VN-30 index under the guise of dairy giant Vinamilk (VNM), Phu My Fertiliser (DPM), and confectionery Kinh Do Corp (KBC).

Managing director of Saigon Asset Management (SAM) Louis Nguyen also said his firm was not very keen on this new index because SAM's investments focused on small- and medium-sized companies while the VN30 comprises the 30 most valuable shares.

Besides, foreign ownership in those codes has almost reached their upper limits, Nguyen said, adding SAM had its own private SAM90 index which is calculated on the basis of the 90 small and medium enterprises. He said the SAM90 helped the fund monitor their investments more effectively.

On the other end of spectrum, Dominic Scriven, managing director of Dragon Capital, supported the diversification of the market metrics. He praised the VN30's calculation methods that rely on the free float rate (shares that are freely transferable) and liquidity factors (the amount of shares traded per day).

A member of the committee managing the VN30 Trinh Hoai Giang said the VN30—the 30 leading shares representing 80 per cent of total market capitalisation—would overcome the disadvantage of the current VN-Index, which is often distorted by several large-caps such as insurer Bao Viet (BVH), food processor Masan (MSN) and property developer Vincom (VIC).

Giang said almost all funds had set up their own index family to help monitor their investments, but if the VN-30 began to correctly reflect the market's development it would prove its value.

The birth of the VN30 is expected to be a prerequisite for index investment activities, but Giang said it would take at least two years for such activities to appear in the market.

Meanwhile, analysts warn that investments in the VN30 would be risky as the index does not assess companies' business efficiency and is still heavily affected by the five codes: MSN VIC, VNM, Eximbank (EIB) and Sacombank (STB), which make up over 50 per cent of influence on the index. — VNS

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