Mutual open-ended funds and ETFs in Vietnam are gaining traction with both local and foreign investors, with total AUM almost tripling from $19.4bn in 2015 to $52.5bn last year.
While the country is considered a proxy for emerging markets in foreign investors’ eyes, Le Hoang Vu, equity investment director at Eastspring Vietnam, said local retail investors are also more receptive to the idea of a professional fund manager as they see the benefits compared to self-investment.
The credit landscape in Vietnam is also becoming more popular among local retail investors, boosted by the rise of the mutual fund market and the relatively low rates offered by government bonds and bank deposits.
According to Eastspring, liquidity in the credit market has tripled in the last five years with an average monthly trading value of $110m.
The equity market, meanwhile, has been resilient during the pandemic and has been one of the best performing markets globally in the first half of the year, according to Eastspring.
Market cap has expanded 22 times to $292bn, which is more than the country’s GDP, with liquidity mainly driven by retail investors.
Annual returns have averaged 15.5% over 12 years whilst the stock universe has seen a fivefold rise, according to the Vietnam Security Depository Centre website, as at the end of July 2021.
Owning to a relaxation in foreign ownership limits, overseas investors now have more exposure to both active and passive investment.
Since the start of this year, Vietnam has also enhanced transparency on regulations, plus has introduced a new securities law to bring the local legal framework in line with international standards.
“Among key highlights of the New Securities Law are stricter criteria for public companies and the introduction of new investment instruments, such as depositary receipts, non-voting depositary receipts and short selling,” said Vu.
“Those are essential to increase the chances of Vietnam being reclassified as an emerging market in the coming years.”