Intelligent Financial Research & Consulting (IFRC)

IFRC Forbes Vietnam 50 index

Index is a very lucrative business

Futures Industry Association (FIA) has released yearly statistics that show the total number of futures and options traded on exchanges worldwide reached a record level of 46.77 (Equity Index 18.06)  billion contracts in 2020, up 35.6% (49.3%)  from 2019. Regarding ETFs, the Index Under Asset Management is estimated today superior to 10 Trn $.

The very varied indices, increasingly innovative to meet the expectations of more and more demanding investors, can be divided into two main categories, depending on their use:

  • Benchmark (or All Share) indices are generally made up of a large number of stocks (generally all stocks) and are used for financial analysis, academic research. Stocks in the basket are weighted by full market capitalization.
  • Tradable or Investable indices are built to be underlying financial products. They  comprise a limited and fixed number of constituents (to limit liquidity cost for the product issuers) and exclude illiquid stocks. For example IFRC VNX 25 index, or IFRC WOMEN CEO Top 10 index.

The index providers are not very numerous. Over the past few years, they have merged to strengthen their position: MSCI/DOW JONES/S&P, FTSE/RUSSELL. Data providers have become Index Providers too: Bloomberg, Eikon/Reuters/Refinitive. Other largest Index Providers: NASDAQ, STOXX, SOLACTIVE, MORNING STAR, MARKET VECTOR, MARKIT.

Issuers of index products compete to release new profitable products for investors. Their objective is to create Tradable indexes that perform on a regular basis, while minimizing transaction and management costs.

Design and Calculation

The IFRC VNX FORBES 50 index is designed as a Tradable index following the International Standard, which can serve as the basis for index products. It is UCITS III compliant*, the weighting of constituents is based on Market free float capitalisation, and the maximum weight of a stock in the portfolio is limited at 15% (to avoid a too large impact from very few stocks).

*Undertakings Collective Investment in Transferable Securities (UCITS) is a European Directive, has become essential or even compulsory for the creation of index products in Europe. UCITS compliant products are considered “secure”, and well-managed which increases investor confidence.

The IFRC Forbes 50 index is available in 8 versions: 2 (Price, and Total Return) x 4 Currencies (VND, USD, EUR, and JPY). The constituents are reviewed annually and based on the Forbes Vietnam announcement of the 50 Best Listed companies. Information is available on the website. Today, the IFRC VNX Forbes 50 indexes are calculated in real time, every minute by IFRC Indexes.

Performance Comparison

It was launched at the end of December 2012 with a base value of 1000. At the end of April 2021, the index ends at 4,740 pts, i.e. an average compound annual returns of 20.05% (since 2012), compared to 2.15% (VAN ECK VIETNAM*),  12.67% (VN 30*),  13.07% (FTSE VIETNAM*),  17.69% (HNX 30*),  and 20.68% (IFRC VNX ALL SHARE**)  performances over the same period.

The chart shows the Forbes 50 index significantly outperforms the compared Tradable indexes. It is very correlated with the IFRC VNX ALL SHARE index which represents nearly 750 stocks.

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*VN 30 and HNX 30 are Tradable indexes for the HSX, and HNX Stock Exchanges respectively. FTSE Vietnam, and Van Eck Vietnam indexes are the underlying of two ETF  listed in international markets.

**IFRC VNX ALL SHARE index is a Benchmark (All Share) index comprising all listed companies in the HSX and HNX Stock Exchanges (748 companies 19 May 2021).

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