Emergence of VNX Allshare, theNew Vietnamese Stock Index

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One of the best performing stock markets in the first nine months of 2016 has been Vietnam, where the benchmark VN-Index has grown at the second-fastest rate in Asia, gaining 18.91 per cent, behind only Pakistan. Vietnam’s current two indices, the Ho Chi Minh Stock Exchange (HSX) and the Hanoi Stock Exchange (HNX), posted a combined market capitalisation of USD$62.17 billion at the end of June 2016 (more than 89 per cent accounted for by HNX), with over 19,000 foreign investors currently trading stock (about 15 per cent of total trade), which represents a year-on-year increase of 7.1 per cent. Demonstrating considerable resilience in the face of uncertainty elsewhere in the region, Vietnam’s economy is clearly proving to be appealing to foreign capital, with confidence increasing on the back of new free trade agreements and a growing openness with regard to foreign investment in listed companies. Currently evaluated as a Frontier Market (FM), the stock market in Vietnam is working towards being upgraded to Emerging Market (EM) classification, which will also help it to attract more capital from foreign investment funds.
In a positive and innovative move, and as a further means of attracting more overseas capital into Vietnam, a new stock market index, VNX Allshare, was launched on 24 October. Comprising of shares from 388 companies (208 from HSX, 180 from HNX), the new common index was developed jointly by the two stock exchanges with the aim of bringing increased transparency to Vietnamese shares, making them an even more attractive proposition for foreign players. VNX Allshare will have a base level of 1,000 points, and to be listed companies need to meet newly-established criteria with regard to their legal status, liquidity and freedom of capital transfer. Currently, the VN-index and HNX-index have different sets of rules, and so this unified single index will also make it easier to track Vietnam’s equities market.
The creation of VNX Allshare likewise means that both foreign and domestic investment funds looking to capitalise on Vietnam’s low manufacturing costs and new free-trade agreements will now find greater support and have access to more accurate and accessible company information, while those trading stock index futures on the Vietnam market will also be far better informed. It is also expected that the introduction of standardised indicators will boost the growth of other financial products, including exchanged traded fund (ETF) certificates and derivatives, and see the stock market in Vietnam operate more in line with international standards. In addition, the creation of VNX Allshare is expected to improve significantly the status of Vietnam’s equity market globally, and therefore represents an exciting opportunity for foreign investors who are looking for ways of benefitting from the country’s strong economy, political stability, and willingness to increase transparency and open more of its markets to the world.
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