Vietnam to allow establishment of ETFs to boost stock market

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Vietnam will allow the establishment of exchange-traded funds as part of efforts to boost the nation's equity market.

Under a Ministry of Finance circular that comes into effect on Sept. 1, ETF shares will have a par value of 10,000 dong (48 cents) each, according to a document posted on the State Securities Commission's website.

For ETFs that track stock indexes, the underlying gauge must have at least 10 members, with the largest-weighted stock not exceeding 20 percent of the measure, according to the document. ETF founding members must meet prescribed capital adequacy ratios for the 12 months before they apply to establish a fund, the document said.

"Launching ETFs will be a good news for local investors as they will have more products," Tran Thi Kim Cuong, Ho Chi Minh City-based head of equities at Manulife Asset Management (Vietnam) Co., said today. "It will support the stock market because authorized participants will buy shares in order to replicate the tracked index, creating more demand for the ETF's underlying stocks and improving liquidity."

The benchmark VN Index of the Ho Chi Minh City Stock Exchange has rallied 17 percent this year, the second best- performing measure in Asia after Japan, extending last year's 18 percent advance. The gauge rose 0.6 percent to 482.21 at the trading break today.

The State Securities Commission widened trading bands on the two stock exchanges in Hanoi and Ho Chi Minh City from Jan. 15. The regulator also plans to increase margin financing, establish a credit-rating agency and introduce more financial products, it said in January.

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