The initial public offering of Vietnam’s first domestic exchange-traded fund has raised twice the amount of money expected, according to the company managing the product.
Ho Chi Minh City-based VietFund Management raised about 200 billion dong ($9.4 million) for the VFMVN30 fund in an IPO that ran from July 21 to Aug. 20. The company had expected to raise about 100 billion dong, Chief Executive Officer Tran Thanh Tan said in an e-mailed response to Bloomberg questions. The fund will track the VN30 index, which comprises the stocks with the largest capitalization and liquidity on the Ho Chi Minh City Stock Exchange. It’s expected to start trading on the bourse next month.
The offering has outperformed the IPOs of 33 Vietnamese state-owned companies this year, which have raised less than half their targeted funds. Some foreign investors see the introduction of ETFs as a means of increasing their exposure to Southeast Asia’s best-performing stock market this year. There are no limits on foreign inflows into the fund, while overseas investment in listed companies is capped at 49 percent, and at 30 percent for publicly traded banks.
“We might be able to buy without a limit and many other foreigners will go in that way,” Dennis Lim, a money manager at Templeton Emerging Markets Group, said in an interview earlier this month.
The fund “will seek only to replicate the index and will not implement active strategies of any kind in rising or falling markets,” according to the company’s website. This will cut costs for investors, it said.
“The result reflects that the capital inflow to the market is very ample, and that investors are very confident in the development of the stock market,” Tan said.
The state decided last year to allow the creation of ETFs as part of measures to boost Asia’s second-smallest stock market. Prime Minister Nguyen Tan Dung approved in March a plan to create a derivatives market, and the government is also considering increasing foreign-ownership limits at listed companies.
“Foreign investment into the ETF will not be counted in the foreign limit calculation because investors will not physically own stocks,” Nguyen Thi Hoang Lan, deputy general director of the Hanoi Stock Exchange, said this week.
Still, the fund may not be as appealing to local retail investors, who still prefer to do their own trades, according to Tran Thi Kim Cuong, Ho Chi Minh City-based head of equities at Manulife Asset Management (Vietnam) Co.
“It can be a good choice for investors who want to diversify their portfolio, but it may need more time for them to get familiar with how it works,” she said.
The benchmark VN Index (VNINDEX) has rallied 23 percent this year and is valued at 13.7 times projected 12-month earnings, the cheapest level among the six major Southeast Asian markets. International investors have bought a net $215.2 million of Vietnamese shares this year, heading for a ninth year of net purchases, as the economy stabilizes and inflation eases.
There are currently two overseas ETFs linked to the Vietnamese markets: Van Eck’s Market Vectors Vietnam ETF and Deutsche Bank’s db x-trackers FTSE Vietnam ETF.