Vietnam's government will allow exchange-traded funds and open-end funds to operate and seek to monitor indirect investment inflows in an attempt to support the sliding stock market, the Finance Ministry said on Wednesday.
The Vietnam Index has lost nearly a fifth of its value so far this year in the face of macroeconomic instability as the country battles one of the highest inflation rates in Asia, a slumping property market and a troublesome banking sector.
The ministry will issue guidelines on the operation of open-end funds by year-end and publish rules on property investment trusts and voluntary pension funds by the third quarter of 2012 to attract more institutional investors and boost demand, it said in a statement.
The package of measures aims to "continue to stimulate the stock market for a stable development," it said.
The ministry will launch a program to restructure the stock market next year and in 2013 and seek to manage the inflow of indirect investment with policies expected to take effect by the end of this year.
The statement did not elaborate on the measures for monitoring the inflows.
The new regulations may eventually "attract money from other asset classes, such as real estate, but initially it's more likely to work with retail investors," said Fiachra MacCana, managing director of Ho Chi Minh City Securities Corp.
Open-end funds usually allow for the creation of new shares or redemptions, as opposed to close-end funds, in which new shares are rarely issued after the fund is established and into which investors are locked until the fund closes. The State Securities Commission, the market watchdog run by the Finance Ministry, has been working on regulations to establish and manage the funds for several years.
"Open-end funds will allow fund-management companies like us to give investors more flexible options in this environment, where changes may happen very quickly," said Le Chi Phuc, investment director at SGI Capital, a unit of Saigon Invest Group, which manages about $50 million in assets. "With open-end funds, investors can promptly seize opportunities, instead of having their cash locked in for five years or more in a closed-end fund."
Exchange-traded funds for commodities could be available on the stock exchanges next year and corporate global depository receipts will be traded pending the government's consent, the statement said.
The new guidelines "will help lay the foundations for the rebirth of the domestic fund-management industry," MacCana said. "For the first time they will have a product that should mirror equity-basket trading."
Other measures to boost Vietnam's stock markets are under way.
The Ho Chi Minh Stock Exchange, the country's main bourse, will extend trading hours into the afternoon from next February, a move that has been delayed for three years, the Vietnam Economic Times newspaper said on Wednesday.
In August the National Assembly approved a government proposal to reduce income tax on stock investors by 2012.
The Finance Ministry's statement said it plans to suggest the assembly continue the tax reduction and exemption to ease difficulties facing investors and businesses. It gave no new timeframe.
"In general, the package of measures by the State Securities Commission will likely have a positive impact on the stock market, which may help attract new foreign cash inflows given the country's macro fundamentals are stable," said Deputy Director Quach Manh Hao of Thang Long Securities Co.
"If different types of funds and derivative products are to be allowed next year, plus extending the trading time, it is good news because investors will have more tools to manage risks and of course it will help boost market liquidity," Hao said.
He said market regulators should cut the payment time to two days from three days now, and allow investors to buy and sell stocks in the same trading session.
If the government's policymaking is effective, investors' trust in the Vietnamese dong will improve and the stock market could see a boom, he added.
The index edged up 0.78 percent on Wednesday, ending a losing streak to close at 390.89 points.