Intelligent Financial Research & Consulting (IFRC)
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SCIENTIFIC ACADEMIC RESEARCH

FTSE Vietnam ETF Underlying Reviews and Prices, Volumes Effects in the Vietnam Stock Market

by Huu Minh MAI *, Ngoc Thanh Tuyen MAI **, Minh Thao NGUYEN***
  • Although the Vietnamese market is more than 20 years old, it has always been classified for more than 10 years as a “Frontiers” country according to the MSCI classification, hoping to rise among “Emerging” countries.
  • Some market rules prohibit the listing of index products if the underlying is not calculated by the Vietnamese Stock Exchange. This rule goes in the opposite direction to the desire to open the market, an essential condition, necessary but not sufficient, to be eligible to become an emerging market.
  • Major index producers, such as MSCI, Standard & Poor’s, STOXX, FTSE, MVIS, have launched Vietnamese equity indices. But only FTSE and MVIS support ETFs, listed on international markets, but prohibited in Vietnam according to the previous rule.
  • FTSE Vietnam ETF is the oldest ETF in the Vietnamese equity market. FTSE calculates more than hundreds of thousands of indices, must follow maximum rules of transparency. The indices are managed according to the rules only and based on completely public information (“rules driven”), and therefore all investors can anticipate possible changes, and in particular, changes in composition.
  • Current UAM of FTSE ETF Vietnam is around 500 Mn$. An entry or exit of values ​​in the order of 5% of the components, would represent transactions over a short period, of 25 Mn$, which leads to pressure on prices on an illiquid market like the Vietnamese ones.
  • Able to anticipate these events would allow buy (respectively sell) stocks that will enter (exit), and prices will rise (fall), and have profitable returns. This phenomenon will have impacts on the prices and volumes of the shares concerned, and perhaps on the whole market, because these stocks ​​are Large Caps.
  • Most event studies analyze these effects on the effective dates (change of composition), and/or announcements, but not the date of availability of information to apply the index management rules. This date is generally the beginning of the effective month, and therefore still earlier than the dates frequently studied.

We will study the impacts on prices and volumes of additions and removals of FTSE Vietnam index, by “event studies” method on the 3 dates: 1. data available for review, 2. announcement, and 3. effective change.

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Foreign Trading Imbalances Impacts on the Returns and Volatility in the Vietnam Stock Market (2008-2022)

Mai Linh CHU*, Huu Minh MAI **
  • Vietnam has been trying for a long time to enter the club of emerging countries, which would attract even more foreign investment, in particular, on the Vietnamese Stock Markets.
  • Foreign shareholding initially limited, relaxed, then now relatively open. The side effect of this openness is the dependence of Vietnamese stocks, in terms of performance, on transactions from foreign investors.
  • Investors such as ETF producers, for example, have a rather medium and long-term strategy, but the revision of their indices causes very significant variations in share prices.
  • Other foreign investors are looking for speculative opportunities to increase their profitability, which is weaker in their countries of origin. Trading sessions with a variation of +/-5% are no longer rare as before, and volatility in 2021 and 2022 are at their highest historically.

In this study, we are going to examine the effects on prices and volatility, the opportunity for profitable abitrage where large transactions of foreign investors and the buy/sell very different and marked.

Impacts of Foreign Investors Trading in the Vietnam Stock Market (2008-2022)

 

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