There were fourteen Vietnam-focused ETFs in operation at the end of 2021 with a combined AUM of US$3bn, of which Dragon Capital’s two domestic ETFs made up $1.1bn of this figure - US$598m in the DCVFM Diamond ETF and US$474m in the DCVFM VN30 ETF.
Both of Dragon Capital’s ETFs are locally listed on the Ho Chi Minh Stock Exchange, where the total AUM of Vietnam’s nine domestic ETFs totals US$1.3bn. A further US$1.7bn trades on overseas stock exchanges.
The DCVFM Diamond ETF, which saw an NAV increase of 67.9% in 2021 - the highest of any Vietnam-focused ETF - replicates the performance of VN Diamond Index as closely as possible. The DCVFM Diamond ETF finishing 2021 with total NAV of US$598 means the fund has seen high levels of growth after being launched in April 2020 with just US$5m.
The VN Diamond Index comprises of companies listed on Ho Chi Minh Stock Exchange (HOSE) which have no or very little availability for overseas investors to trade on the market, but can be owned through the ETF. Stocks must also satisfy an index criteria which includes market capitalization, free-float, liquidity and P/E ratio, among other factors. As at 31st December 2021 the Fund had 72% of its exposure in ten companies at their foreign ownership limit, with the remaining 28% in seven companies calculated as being close to having no foreign room available.
Meanwhile DCVFM’s VN30 ETF had total NAV of $474m at the end of 2021 following an increase of 45.4% for the year. The fund tracks an index of the top 30 companies listed in Vietnam adjusted for market capitalisation, free-float and liquidity. Last year, the Vietnam Index - which tracks the entire Ho Chi Minh Stock Exchange - returned 39.0%, less than both the DCVFM Diamond ETF and the DCVFM VN30 ETF.
Suu Vu Duc, Head of Passive – Rule Based Strategies at DCVFM said: “The growth of Vietnam’s ETF market has come hand in hand with the broader development of Vietnam’s capital markets, which have come a long way since Dragon Capital launched Vietnam’s first domestic ETF in 2014.
With total market capitalisation of $340bn at the end of 2021 and average daily liquidity routinely over $1bn, index tracking funds are among a variety of instruments that are allowing investors greater access to companies at the forefront of the Vietnam growth story. Locally listed ETFs can provide overseas investors unrestricted access to Vietnamese listed companies, including those with no foreign trading room available, without any of the impediments a foreign-domiciled ETF is subject to.”
The top three sectors in the DCVFMVN Diamond ETF as at 31st December 2021 were banking (41% of total NAV), followed by retail (16%) and technology (14%).
Following a mass inoculation campaign in the second half of 2021, more than 90% of adults in Vietnam and more than 60% of children aged 12-17 are double vaccinated. GDP growth for 2022 is targeted at a minimum of 6.5% and is supported by positive export and supply chain shifts, a rapidly growing middle class, low interest rates and a government stimulus package.