Dragon Capital Vietfund Management (DCVFM), founded in 1994 and the largest independent asset management company in Vietnam, has announced the launch of the country’s first Vietnam midcap equity ETF.
The VN Midcap Index, which tracks the Vietnam midcap market, delivered growth of 76 per cent in 2021 compared to 33 per cent for VN30 (Vietnam’s 30 largest listed companies).
However, the firm writes that the Vietnamese midcap market appears to be overlooked; DCVFM analysis of five leading securities companies in Vietnam revealed only 13 out of 70 midcap companies had significant research coverage. It also showed just 38 per cent of the segment’s market cap was covered by research, and much of the coverage provided on the sector overall is intermittent.
Suu Vu, Portfolio Manager of DCVFM’s three ETFs says : “The rise in liquidity in the Vietnamese market – much of it driven by a growing local retail investor base – has improved the volume of trading in midcaps, which is creating a new opportunity for investors. However, companies in this sector, despite being some of the most exciting in Vietnam and often outperforming the main index and large caps, are often overlooked, and not covered by analysts.
“Our new Midcap ETF is the first to offer investors access to this exciting sector, and Vietnam’s next generation of market leaders.”
The macro-economic outlook for Vietnam remains strong, the firm says. Consistent pro-market macro policy and deep political stability has enabled the Vietnamese Government to deliver years of economic growth. Key outcomes have been the creation of a large and growing middle class, and an FDI-driven export machine. Future growth should also be supported by an increase in spending on infrastructure.
DCVFM is predicting GDP growth for Vietnam of around 7.8 per cent in 2022.
Listed on the Ho Chi Minh City Stock Exchange (HOSE), the DCVFMVNMIDCAP ETF aims to physically replicate the performance of the VNMIDCAP Index. It uses a sampling replication model and an optimisation algorithm giving priority to stocks with high market capitalisation and high liquidity.
In terms of the ETF’s sector allocation, 32 per cent is invested in banks, 15.2 per cent in real estate companies and 16.1 per cent in Capital Goods.
The DCVFMVNMIDCAP ETF has an annual management fee of 0.80 per cent.