Biến động quỹ đầu tư trong cuộc khủng hoảng Covid-19 ở ...

24Tạp chí Khoa học & Đào tạo Ngân hàngSố 231- Tháng 8. 2021

© Học viện Ngân hàngISSN 1859 - 011X

Biến động quỹ đầu tư trong cuộc khủng hoảng Covid-19 ở Việt Nam

Trần Thị Xuân Anh - Nguyễn Quỳnh Thơ - Ngô Thị HằngKhoa Tài chính, Học viện Ngân hàng

Ngày nhận: 31/03/2021 Ngày nhận bản sửa: 06/05/2021 Ngày duyệt đăng: 19/05/2021

Tóm tắt: Các quỹ đầu tư đóng vai trò không thể thiếu trong thị trường vốn của mỗi nền kinh tế trên toàn cầu bởi các quỹ cung cấp nguồn tài trợ vốn và đầu tư đáng kể cho các chủ thể khác nhau trên thị trường, đồng thời đóng góp vào sự ổn định của thị trường. Tuy nhiên, sự tác động mạnh mẽ của đại dịch Covid-19 chưa từng có tiền lệ trước đó tới toàn thế giới trong đó có thị trường tài chính và ngành quỹ đầu tư của Việt Nam, đã gây ra sự sụt giảm nghiêm trọng về giá trị danh mục đầu tư của các quỹ cũng như khiến cho các nhà đầu tư tháo chạy khỏi các quỹ đầu tư, làm trầm trọng hơn biến động của quỹ cũng như làm suy yếu vai trò ổn định thị trường của

Investment fund volatility during the Covid-19 crisis in VietnamAbstract: Investment funds take an indispensable role in the capital market of any economy over the globe since they provide major sources of financing and investment for various market participants, and contribute to the stability for the market. However, the unprecedented Covid-19 has catastrophically hit the entire world including Vietnam’s financial market and the fund industry, specifically causing drastic plunge in value of fund holdings and investors to flee out of investment funds, magnifying the volatility and shrinking the market stabilizing role of investment funds. Therefore, examining the investment fund volatility during the covid-19 crisis in Vietnam could benefit investors, investment funds, and market regulators in drawing solutions and better preparation in enhancing the resilience of investment funds as well as Vietnam’s financial market for future unpredictable events. This paper, by utilizing descriptive statistical tools combined with the aggregating method, finds that Exchange Traded Funds (ETFs) have proven their resilience better than open-end funds, especially under market stressed circumstances, and the effect of the Covid-19 on those funds seems to be smoothed out for later comebacks. Then, to improve the presence and sustainable development of the investment fund industry in Vietnam, few valuable recommendations have been withdrawn.Keywords: Investment, Funds, Volatitiliy, Covid-19, Vietnam.

Tran, Thi Xuan AnhEmail: [email protected], Quynh ThoEmail: [email protected], Thi HangEmail: [email protected] faculty, Banking Academy of Vietnam

TRẦN THỊ XUÂN ANH - NGUYỄN QUỲNH THƠ - NGÔ THỊ HẰNG

25Số 231- Tháng 8. 2021- Tạp chí Khoa học & Đào tạo Ngân hàng

các quỹ đầu tư. Do vậy, việc nghiên cứu sự biến động của các quỹ đầu tư trong giai đoạn khủng hoảng covid-19 tại Việt Nam sẽ mang lại những lợi ích nhất định đối với các nhà đầu tư, quỹ đầu tư, và cơ quan quản lý thị trường trong việc hoạch định các giải pháp hiệu quả cũng như xây dựng các phương án chuẩn bị tốt hơn để nâng cao khả năng chống đỡ cho các quỹ đầu tư cũng như thị trường tài chính Việt Nam trước các sự kiện khó tiên lượng trước được trong tương lai. Bài viết này, sử dụng các công cụ thống kê mô tả kết hợp với phương pháp tổng hợp, đã chỉ ra rằng các quỹ hoán đổi danh mục (ETFs) có sức chống đỡ tốt hơn các quỹ đầu tư dạng mở, đặc biệt là trong các giai đoạn thị trường căng thẳng, đồng thời tác động của dịch bệnh Covid-19 tới các quỹ cũng dần ít đi trong các đợt dịch xuất hiện sau đó. Theo đó, một số giải pháp đã được đề xuất nhằm gia tăng sự hiện diện cũng như duy trì sự phát triển bền vững của ngành quỹ đầu tư tại Việt Nam. .Từ khóa: quỹ, đầu tư, biến động, Covid-19, Việt Nam.

1. IntroductionAfter more than 20 years since its estab-lishment, Vietnam’s stock market has witnessed a remarkable development path in terms of market size, diversified prod-ucts and a stronger investor base. As re-ported by the State Securities Commission of Vietnam (SSC), by the end of 2020, 1,655 companies listed their shares on three Vietnam stock exchanges (including Hanoi stock exchange - HNX, Hochiminh City stock exchange - HOSE, and Up-CoM), marking a massive increase from only 2 listed firms at the opening of the stock market back in 2000 (SSC, 2021a). This provides investors with a diversified set of securities along with investment

fund certificates, government & corporate bonds, and some of the securities deriva-tives introduced recently, including cov-ered warrants and future contracts. The market capitalization of all Vietnam-ese securities markets to GDP peaked 90.43% in 2017 and continued to hit new records during the period of 2018 - 2020 (Table 1). Particularly, closing the year 2020, Vietnam’s stock market is recog-nized as one out of 10 global securities markets with surprising resilience against the Covid-19 pandemic coupled with the fastest-recovering speed (Hoa Son, 2021). Similarly, the Vietnamese securities market’s liquidity surged to an impressive record with the average daily trading value

Table 1. Market Capitalization of different securities markets in Vietnam from 2016 to 2020Unit: Billions of VND

Year HOSE HNX UPCoM Bond Markets

TotalValue %GDP

2016 1,491,778 150,521 306,629 931,340 2,880,268 68.72017 2,614,150 222,894 677,629 1,013,833 4,528,506 90.432018 2,875,544 192,136 893,777 1,121,307 5,082,674 101.502019 3,279,611 192,029 911,940 1,189,085 5,572,666 100.552020 4,080,757 212,320 1,000,696 1,385,867 6,679,640 110.64

Source: State Securities Commission of Vietnam (2021a)


26 Tạp chí Khoa học & Đào tạo Ngân hàng- Số 231- Tháng 8. 2021

of 7,420 billion Vietnamese dong (VND) in 2020, increasing by 59.3% compared to the year 2019 (Hoa Son, 2021). Other than that, the statutory framework has been noticeably strengthened with the first official Law on Securities No. 70/2006/QH11 enacted in 2007, which was newly replaced by the new Law on Securities No. 54/2019/QH14 approved in 2019 and taking effect in January 2021. This lays a solid legal foundation for grounding a more sustainably developed Vietnamese stock market with a higher quality of market products and market transparency. Although Vietnam’s stock market had been lagged behind regional markets throughout its development path, it has risen significantly with positive moves and achievements since 2018. It has become a regional bright spot for investment, at-tracting individual and institutional inves-tors’ attention to foreign ones. The proactive participation of the institu-tional investors, especially various invest-ment funds, is believed to considerably drive a sharp increase in the market capi-talization and liquidity, even regardless of the severe impact of the Covid-19 crisis.

Additionally, according to Table 2, the in-vestor base has also been improved thanks to institutional investors’ share. The number of institutional investors’ trad-ing accounts has increased roughly 71% over the last 5 years. Nevertheless, indi-vidual investors still take a dominant share (remaining at roughly 99.5% throughout the period of 2015 - Jan, 2021). This questioned the probability of deteriorating investors’ herd behavior as well as mar-ket volatility, especially against spillover effects from international economic and financial events. Given those facts, investigating the perfor-mance and volatility of investment funds operating in Vietnam plays a crucial role in finding feasible and appropriate solu-tions on encouraging the development of the fund industry to strengthen the inves-tor base and the sustainable development of Vietnam’s stock market as a whole, particularly under distressing circumstanc-es such as the Covid-19 epidemic.

2. Current Status of Investment Fund Industry in Vietnam

Firstly, the investment fund industry is op-

Table 2. Number of approved securities trading accounts in Vietnam from 2015 to Jan, 2021Unit: one account

Year Domestic International

Total yoyIndividualInvestors

InstitutionalInvestors

IndividualInvestors

InstitutionalInvestors

2015 1,486,644 6,343 15,221 2,656 1,510,864

2016 1,685,598 7,438 16,850 2,503 1,712,389 13,3%2017 1,890,521 8,472 19,696 2,865 1,921,554 12.21%

2018 2,144,735 9,298 24,975 3,319 2,182,327 13.57%

2019 2,332,560 10,119 28,511 3,704 2,374,894 8.82%2020 2,725,087 11,251 31,134 3,937 2,771,409 16.70%

1/2021 2,811,194 11,413 31,594 3,953 2,858,154 3.13%Source: State Securities Commission of Vietnam (2021a)



erating with increasing, yet underperform-ing fund managements. The rising attrac-tion of Vietnam’s stock market has also triggered investors’ demand for profes-sional financial services, especially invest-ment consultancy, and investment man-agement related reservices. These services are offered by asset management compa-nies with qualified investment experience and profound local knowledge, leading to an increase in the number of management companies established in Vietnam.

While up to 2004, Vietnam’s stock market operated with only 7 brokerage firms and 2 asset management companies. The situ-ation changed quickly, with 47 manage-ment companies managing over 100,000 billion VND in 2012 and falling to 41 firms as of 2013 (Table 1). The rocket jump in the number of broker-age firms and their branches and man-agement companies called for a closer supervision process and actions from market regulators, resulting in the ap-

Table 3. Number of Asset management firms in Vietnam, 2003- 2020Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2020

Approved 1 2 6 18 25 45 47 47 47 47 47 51

Operating 1 2 6 18 25 44 46 47 47 47 41 45Source: State Securities Commission of Vietnam (2021a)

Figure 1. Asset under management in all existing management companies in Vietnam from 2012 to June, 2020

Unit: Billions of VND, Source: Nguyen Hai Nam (2020), SSC (2021a)

Table 4. Running Investment Funds in Vietnam’s stock market by type until Jan, 2021Year Open-end

FundsClosed-end

FundsPartnership

Fund ETFs(a) REITs(b) Total

Number of funds Total NAV(c)

2016 19 1 8 2 1 31 7,7592017 22 1 10 2 1 36 14,831

2018 25 2 10 2 1 40 22,485

2019 32 2 10 2 1 47 32,603

2020 34 2 13 7 1 57 57,693

1/2021 34 2 13 7 1 57 62,042Note: (a) – Exchange Traded Funds; (b) – Real Estate Investment Trusts; (c) – Net Asset Value in trillions

of VNDSource: State Securities Commission of Vietnam (2021a)



proval of several circulars and decisions related to those financial institutions. Of which, Ministry of Finance enacted the first official regulation on the operation of the asset management firms (Circular No. 212/2012/TT-BTC) under the “Secu-rities Market and Insurance Companies Restructuring” Scheme (issued in Deci-sion No. 1826/QD-TTg, 2012) in an effort of improving these intemediaries’ qual-ity and raising investors’ trust in tandem with boosting their participation into these managements’ funds. Eventually, during the period of 2013 - 2014, 6 management

firms, accounting for 12% of total firms, ended their operations. These strict moves by regulators have significantly gained much attention of the public and their trust in accessing collective investment vehicles (such as various investment funds) pro-vided by the fund management companies. As illustrated in Figure 1, by the mid of 2020, there were 45 normally operating management firms and 4 other under-restructuring-process firms, managing a total asset value of 358,000 billion VND, a threefold increase from the statistics recorded by the end of 2015 (Nguyen Hai

Table 5. Number of listed issuers in Vietnamese stock market, by securities types (updated in March, 2021)

Year Firm shares Investment Fund Certificates

Covered Warrants

(CW)

Bonds

HOSE HNX UPCoM Total Closed-end Funds ETF HNX HOSE

2015 307 377 256 940 1 2 0 0 35

2016 320 375 414 1,109 1 2 0 0 35

2017 344 384 694 1,422 2 2 0 0 39

2018 373 376 804 1,553 3 2 0 0 48

2019 378 367 872 1,617 3 2 37 2 43

2020 392 353 910 1,655 3 7 118 2 33Source: State Securities Commission of Vietnam (2021a)

Table 6. Volume of securities listed and traded in Vietnamese stock market, by security types (updated in March, 2021)

Unit: millions of shares

Year Stocks Government Bonds

Corporate Bonds Fund Shares CW Total

HOSE HNX UPCoM ETF Closed-end

2015 53,080 7,530 86 0 5,060 38 0 0 65,800

2016 60,380 9,300 95 0 14,820 41 15 0 84,650

2017 71,820 9,980 160 0 24,710 180 20 0 106,870

2018 88,710 10,860 350 0 31,920 310 37 0 132,150

2019 97,840 11,520 340 25 41,840 470 37 98 152,170

2020 112,360 13,570 260 25 38,130 850 37 437 165,670Source: State Securities Commission of Vietnam (2021a)



Nam, 2020). However, the performance of those asset management firms seems to not keep pace with the achievements in aspects of quan-tity and assets under management afore-mentioned. Completing the year 2009, merely 14/46 management firms could mobilize enough capital for establishing their investment funds, and that statistics was 13/47 as of 2010 (Nguyen Thu Thuy, 2012). The problem remains unsolved after roughly 10 years. As reported in Nguyen Huu (2019), 19 out of 45 operat-ing asset management companies, since establishment, carry neither investment

portfolio management services nor invest-ment funds which are the key mainline products formulating the role and the im-portance of the management firms in the securities market. Again, this should be taken into market regulators’ consideration to preserve the quality of fund managment firms and the sustainable development of the securities market as a whole. Secondly, investment funds grow with more-diversified fund types, yet in imbal-anced development. The investment fund industry, officially putting first steps in Vietnam’s stock market since 2003, is considered a young market with numerous

Table 7. Performance of closed-end funds, by the percentage of difference between market price and net asset value per share from 2006 to 2011

Unit: in percentage (%)Closed-end Funds 2006 2007 2008 2009 2010 2011 VF1 +14.45 -28.33 -54.60 -43.77 -46.38 -46.38

BF1 n/a -21.34 -50.75 -33.87 -31.37 -39.52

MPF1 n/a +8.29 -50.75 -33.87 -31.27 -39.52

VF4 n/a n/a -52.50 -21.79 -34.02 -44.84

VFMFA n/a n/a n/a n/a +3.17 -28.66Note: “+” sign implies that market price is higher than NAV (premium), “+” sign implies that

the market price is lower than NAV (discount)Source: Nguyen Thu Thuy (2012)

Table 8. Annual Performance of Various Investment Funds in Vietnam from 2014 to 2020

Fund TypeYear 2014 2015 2016 2017 2018 2019 2020 VN-Index 8.1 6.1 14.8 48.0 -9.3 7.67 14.87

Open-end SSI-SCA 1.8* 17.7 24.1 38.2* -12.1* 3.91* 18.61

Open-end VFMVF1 9.0 13.6 15.0 44.84* -9.6* 10.61 25.23

Open-end VFMVF4 6.1* 19.9 16.38 46.2* -11.7* 17.84 26.8

Open-end VFMVSF -23.8* n/a

Open-end VFMVFB** 15.74 6.32 9.53* 15.94* 11.25 9.15 n/a

ETF SSIAM VNX50 ETF 13.1 11.0 3.6* 60.4 -7.1* 6.04* 22.95Note: Unit: in percentage, * for year that the fund underperformed the market index, ** VFMVFB

is a bond fund while all other funds mainly invest in stocks; Shaded cells refers to years that this fund was not established yet;

Source: SSI (2021), Dragon Capital (2021)



room for further development. The num-ber of funds tailored by management firms has witnessed a significant increase from only 2 funds in 2005 to 16 and 23 funds in 2007 and 2010, respectively (Nguyen Thu Thuy, 2012). However, fund types are still less-diversified in serving investors’ vari-ous needs and risk appetites. Most of these funds are closed-end funds, and the rest are partnership funds. In pursuing a more-developed invest-ment fund industry, new fund types have been introduced to the market with firm statutory frameworks and regulations in 2012, including open-end funds, Real estate funds (REITs), ETFs. Of which, the proactive participation of open-end funds and ETFs over the years has conveyed vast contribution to the market liquid-ity, investor base coupled with providing diversified investment choices for inves-tors, especially individual investors, which in turn raises the need for new open-end fund and ETFs, lifting the fund industry. As of December 2020, the total number of funds operating in Vietnam has soared to 57, including 34 open funds, 2 closed funds, 13 partnership funds, 7 ETFs and 1 real estate fund, managing the total net asset value (NAV) of over 62 trillion VND (approximately $2.7 billion USD) (Table 4) (SSC, 2021a). Newly-established ETFs have especially attracted capital inflows from regional markets as Thailand and South Korea, which poured significant investment capital into Vietnam’s stock market, creating positive sentiment for the market (Vietnam News Agency, 2020).However, there seems an imbalance in the development path of different fund types with: (1) the open-end catergory taking the dominant market share over other funds in terms of fund numbers thanks to their flex-ible fund share issuance and redemption as

well as their wide sets of asset allocation strategies (Table 4); (2) number of funds listing their shares on stock exchange fall heavily behind stocks, covered warrants and bond issuers (Table 5 & 6), impeding the investment fund industry from ap-proaching potential investors in the nu-merous and rising secondary market. Aside from a limited number of funds plus investors’ investment habits being prone to self-investment rather than authorizing via management companies, investment funds’ weak and unstable performance is another important element hindering investors from allocating their idle capital into investment funds. The exit of closed-end funds in Vietnam’s stock market in the past was, if not be-cause of reaching the end of the fund life, due to their disappointing performance with their fund shares’ market price be-ing sharply discounted from the net asset value per share, ranging from over 20% to roughly 60% (Table 7) (Nguyen Thu Thuy, 2012). Although the erection of open-end funds and ETFs in the mar-ket, compared to closed-end funds, have brought new hopes on better performance, their performance (except for big funds as SSI-SCA and VFMVFI run by SSI Man-agement and Vietnam Fund Management), especially in terms their ability to beat market index during periods of turmoil, seems to be weak and quite turbulent (Table 8). This poses a concern towards investment fund’s volatility during distressing peri-ods, specifically requiring a closer look over the funds’ performance during short-er time frames rather than just looking at flattened annual statistics. In particular, the bearish market’s impact on the fund’s asset allocation and the fund rigidity in adjusting its allocation strategies could



magnify the fund’s weak performance during market downturns. Afterward, this could dry out fund investors and indirectly affect individual investors’ trading behav-ior, causing drastic washouts in the market and finally severely damaging the entire market. Therefore, again, examining the volatility of investment funds, especially those with large market shares in the in-dustry like ETFs, Open-end funds (Table 5), provides valuable and viable solutions to minimize the fund industry’s volatil-ity lure investors’ capital into investment funds is crucial.

3. Methodology and Data

By adopting the research approach of Con-gressional Research Service (2020), the volatility of investment funds in Vietnam will be observed in different aspects de-pending on types of investment funds. As aformentioned discussion, for the recent rising prevalence of ETFs and open-end funds in Vietnams’ fund industry, the vol-atility of those fund types will be analyzed as representative cases. For ETFs, these funds provide investors with investment opportunities into funds in both primary market (transactions executed with NAV per share, which is calculated by taking total assets under managment of an ETF fund minus its total liabilities and then divided by the outstanding number of ETF shares) and secondary market (transactions executed with market price determined by the supply and demand of ETF shares on stock exchanges). Therefore, the volatil-ity of ETFs could be witnessed through the divergence of the market price from the NAV. To do this, time series of NAV per share and market price of ETF funds’ shares are collected. For open-end funds, for their special feature of containing no

secondary market for investors’ trades, there is no market price for any single open-end funds, and then, the volatility will be examined on NAV movements only. Due to limited access, we have to reply on two sources of daily database: (1) public database available on websites of invest-ment funds (investment funds of SSI Asset Management, VanEck Vectors, and Vietnam Fund Management - VFM); (2) internal and confidential database provided by an anonymous brokerage firm for the confidential purpose (all other ETFs). The data is gathered from February of 2018 to February of 2021. As for data processing method and data analyzing techniques, this paper employs descriptive statistical tools combined with the aggregating method and qualitative analysis to assess those funds’ volatility during different Covid-19 waves occuring in Vietnam.

4. Volatility of Investment Funds in Vietnam under the Covid-19 Pandemic

4.1. Exchange Traded Funds (ETFs)

Exchange-traded funds (ETFs) are consid-ered as cheaper and effective alternatives to mutual funds when considerable market volatility exists (Congressional Research Service, 2020). Since ETFs first appeared in Vietnam in 2008, these investment vehicles have become more and more popular in the market due to their diverse portfolio and low transaction costs. By the end of 2020, there were 3 active ETFs in the Vietnamese stock market, including seven domestic ETFs and six foreign ETFs (Table 9). The first foreign ETF was FTSE Vietnam Swap UCITS ETF (set up in 2008), followed by VanEck



Vectors Vietnam ETF (launched in 2009). Over the years, the size of total assets managed by ETFs has increased dramati-cally. Starting with an initial total asset of only 5.1 billion USD, the entire asset value of FTSE Vietnam ETFs has reached 394 billion USD by March 2021, increas-ing its value by 77 times. Those of another oldest ETFs in Vietnam, VNM VanEck Vectors Vietnam ETF, has risen from 14 billion USD to 457 billion USD, increas-ing its value by 32.6 times.Domestic ETFs were established later. The first domestic ETF in Vietnam, VFMVN30, was established in 2014 with an initial asset value of 9 million USD. Its total asset also increased rapidly to 332 million by the end of 2020, changed 35.7 times. VFMVN30 is currently consid-ered as the biggest domestic ETF in the market at the moment. Recently a series of domestic ETF funds were founded. In

2020, there are five domestic ETFs newly launched, accounting for 70% of the total domestic ETFs operating in Vietnam. According to VNDirect Securities Compa-ny (2020), the total asset value of all seven domestic ETFs by the end of 2020 was 480 million USD. Noticeably, VFMVN Diamond Fund has developed extremely fast. Launched on May 2020 with an initial asset value of 4.5 million USD, it increased its value by 49.7 times to 224 million USD, becoming the second-largest domestic ETFs in Vietnam.ETFs’ shares can be traded as stocks on stock exchanges at market price which could be different from its underlying port-folio’s NAV per share, leading to a high probability of ETF’s liquidity mismatch - a threat to financial stability (Congressio-nal Research Service, 2020). An ETF gap with premium to NAV implies that ETF shares are worth more than their underly-

Table 9. Statistics of ETFs in Vietnam Stock Market by March, 2021Unit: Billions USD

Name of fund Ticker Benchmark Type Inception year

Beginning NAV

Ending NAV

FTSE ETF FTSE FTSE VN Foreign 2008 5.1 394

VNM ETF VNM VanEck VN Foreign 2009 14 457.29

iShare Frontier Vietnam iShare MSCI Foreign 2012 11.4 418.5

VFMVN30 ETF E1VFVN30 VN30 Domestic 2014 9 332

KIM ETF KIM ETF VN30 Foreign 2016 163 189

SSIAM VNX50 ETF FUESSV50 VNX50 Domestic 2017 3.6 9.1

Premia MSCI Vietnam PREMIA MSCI VN Foreign 2019 21 30.9

VFMVN Diamond FUEVFVND VNDiamond Domestic 2020 4.5 224

SSIAM VNFIN Lead FUESSVFL VNFINL Domestic 2020 9.4 47.66

VinaCapital VN100 FUEVN100 VN100 Domestic 2020 2.5 3.6

SSIAM VN30 ETF FUESSV30 VN30 Domestic 2020 2.4 2.8

Mirae Asset VN30 FUEMAV30 VN30 Domestic 2020 n/a n/aKindex Vietnam VN30 Futures Leverage 368470 KS VN30 Foreign 2020 8.3 13.52

Source: State Securities Commission of Vietnam (2021)



ing holding, and vice versa. This situation would not occur under normal market conditions.During waves of Covid-19, the market has reacted in different ways. There was a correlation between VN-Index, number of confirmed coronavirus cases, and deaths (Figure 2).Similar to VN-Index’s reaction, the vola-tility of ETFs’ share varied during periods of market turbulence. To clarify the re-sponse of ETFs, we investigate the volatil-ity of ETFs in 4 different phases: Phase 0: before Covid-19: before November 2019; Phase 1: the first wave of Covid-19: from December 2019 to May 2020; Phase 2: the second wave of Covid-19: from June 2020

Figure 2. Correlation between VN-Index, number of confirmed cases, and deaths from Jan, 2020 to August, 2020

Source: Bloomberg (2021), KB Securities Vietnam (2020)

Figure 3. Phase 0: ETF NAV Gap before Covid-19 pandemicSource: Authors’ calculations from database provided in Bloomberg (2021), SSI (2021), VanEck (2021),

Dragon Capital (2021)

to November 2020; Phase 3: the third wave of Covid-19: from December 2020 to February 2021Before the Covid-19 crisis, ETF shares traded smoothly on Vietnam stock ex-changes. The deviation of ETFs’ price from its NAV was relatively small in the range of -/+ 5% (Figure 3).

Wave 1st: No experience - Huge volatilityThe market witnessed strong fluctua-tions of ETFs’ NAV gap during the first wave of Covid-19 in March 2020. This period was considered the most chal-lenging investment period in the history of many investors. As this was the first time the Covid-19 outbreak in Vietnam,



investors had no experience dealing with such unprecedented market volatility. The divergence between ETF price and NAV in this phase was huge. The sudden hit has negatively impacted investors’ behavior and weakened ETFs’ NAV and price. A lot of ETFs shrunk due to the Covid-19 outbreak. Some funds even fell by 20% since the beginning of 2020 (Van Anh, 2020). The largest local fund management company, VietFund Management (VFM), paid 304.35 million USD to avoid the shock, but it did not work well. Most of VFM’s investments lost their value.Following the general trend on the stock exchange during the first wave of Co-vid-19, the two major ETFs (VNM ETF and FTSE Vietnam ETF) also had a bad performance. The biggest foreign ETF on Vietnam Stock Market, VNM ETF, recorded a capital outflow of 9.94 mil-lion USD on 20 March 2020 when the Covid-19 situation in Vietnam became significantly worse. From the beginning of 2020 to 23 March 2020, the total cash out-flows of VNM ETF were approximately 25 million USD (Fili, 2020). At the peak, VNM ETFs saw their widest discounts of -10.11% to their NAV. VFMVN30 ETF, the biggest domestic ETFs in Vietnam, also saw a decline of 18.21% in NAV per share on 12 March 2020 and recorded their widest discounts of -10.12% to their NAV.

Wave 2nd & 3rd: Minor volatility During the second wave of Covid-19, the market’s response differed from those of the first wave. This time marked an unexpectedly successful period for big investment funds in Viet Nam. Despite the resurgence of Covid-19 and the economic index’s slow recovery, the stock market moved positively. Some argued that this

was because the Vietnamese government applied good policies to control the dis-ease. The interest rate was also set approx-imately 2% lower, encouraging short-term cash flows, triggering an investment wave. Since the resurgence of community Co-vid-19 transmission in Danang on 24 July 2020, the stock market has faced a gloomy period. Most ETFs recorded good per-formances. Along with the growth of the VN30 index, NAV per share of domestic ETFs grew. NAV per share of VFMVN30 ETF rose 21.8%, followed by SSIAM VNX50 (increased 21.4%). Foreign ETFs also had a positive performance. In par-ticular, FTSE Vietnam ETF, Premia MSCI Vietnam ETF, VNM ETF increased 16%, 14%, and 9.2% respectively. However, there was no big gap between ETF shares and the NAV of their holdings (Figure 5). The investors have had knowledge and experience to deal with this unexpected event after the first wave of Covid-19.According to the HOSE report (2020), a series of domestic ETFs were newly founded in this period, including VFMVN Diamond, SSIAM VNFIN Lead, Vi-naCapital VN100, SSIAM VN30 ETF, Mirae Asset VN30. These ETFs attracted a massive amount of capital and have become a source of support for the market during difficult periods. In the second half of 2020, the capital inflow to Vietnam ETFs increased dra-matically despite the bear market in March and April. In July, the major ETFs on the market together attracted 21.3 million USD. The biggest foreign ETF, VNM ETF, attracted 9.16 million USD, while the largest domestic ETF in the market, VFMVN30 ETF, drew 2.8 million USD. The proportion of Vietnamese stock in ETFs portfolio increased, accounting for nearly 70% of the portfolio. FTSE Viet-



nam ETF also attracted 2.8 million USD only in July. Other domestic ETFs such as VFMVN Diamond ETF and SSIAM VNFin Lead ETF drew 3.2 million USD

and 4.3 million USD in the second half of July, respectively. In December, the capital inflow to ETFs reached 140 million USD, mostly going to VFMVN Diamond

Figure 4. ETF NAV Gap during the first wave of Covid-19Source: Authors’ calculations from database provided in Bloomberg (2021), SSI (2021), VanEck (2021),


Figure 5. ETF NAV Gap during the second wave of Covid-19Source: Authors’ calculations from database provided in Bloomberg (2021), SSI (2021), VanEck (2021),


Figure 6. ETF NAV Gap during the third wave of Covid-19Source: Authors’ calculations from database provided in Bloomberg (2021), SSI (2021), VanEck (2021)



ETF and FTSE Vietnam ETF. Although VFMVN Diamond ETF was newly es-tablished in May 2020, it quickly became a target for foreign investors. VFMVN Diamond ETF was considered the most effective fund in 2020, with the growth of NAV per share of 69.7%. The fund’s size increased 49.7 times in only seven months from inception, becoming the second-big-gest domestic fund in Vietnam.Similarly, during the 3rd wave of the Co-vide-19 epidemic, little volatility was ob-served in ETFs’ performance. Following the bullish trend, ETFs attracted around 135 million USD. The pandemic did not affect the market volatility much. The gap between ETFs’ share price and the NAV of their holdings was much smaller. The ETFs ecosystem has proved its resilience despite the high market volatility caused by the pandemic (Figure 6). The actual experiences of ETFs have shown that the ETFs ecosystem remained strong and functioned well.In short, during the height of financial market stress, contrary to the pessimistic predictions, ETFs’ volatility has been smoothed out. In the first wave, the diver-gence of ETFs’ price and NAV was huge due to investors’ fragile manner. After having experiences dealing with unex-pected events, the gaps narrowed down, the market became more stable, and the liquidity mismatch level was also lower. ETF performance throughout the market volatility demonstrated how ETFs could add stability to capital markets. ETFs did not increase market volatility during the Covid-19 crisis, instead, they were a source of stability as investors increasing-ly turned to ETFs to efficiently rebalance holdings, hedge portfolio and manage risk. Throughout the pandemic and result-ing market volatility, investors increas-

ingly turned to ETFs to allocate capital and manage risk in their portfolio. ETFs generally functioned well and delivered on investor expectations crisis despite facing the most turbulent market conditions of the Covid-19.

4.2. Open-end Funds

Different from other fund types such as closed-end funds and ETFs, open-end funds do not list their fund certificates (fund shares) on the stock exchange and only allow investors to conduct fund share purchases and sales directly with the fund management (SSC, 2021b). Then, there is no stock exchange for open-end fund shares nor the market prices. Therefore, the volatility of open-end funds is exclu-sively observed with NAV movements over time. For the first wave of the Covid-19, simi-lar to ETFs, all of the open-end funds got hit by the Covid but in different magni-tude. Vietnam Fund Management (VFM), although widely recognized as the largest domestic management firm in Vietnam’s stock market with over 7.000 billion VND under management and good performance records of running its funds, could not avoid the hit from the covid epidemic in the first wave with most of their funds’ holdings losing value going along with the market.In particular, according to Dragon Capital (2021) while VFMVF1 with 414 billion VND ($18 million) fund size, experienced NAV per share (NAV) falling by 16.18 percent compared to the beginning of the year, the other VFM fund with a smaller investment scale of 99 billion VND ($4.3 million), VFMVF4, was hit harder and recorded a slash of 20.21 percent, worse than a 19.95 percent decrease in the



VN-index of Ho Chi Minh City Stock Exchange (Figure 7). It could be seen that despite lower investment value, VFMVF4 still witnessed a drastic fall in NAV per share than VFMVF1. This is because of their difference in asset allocation strate-gies. Unlike VFMVF4 - an equity fund, being a balance fund investing in both equity and debt securities, VFMVF1 was less damaged and volatile. On the other hand, VFMVSF and VFM-VFC with smaller investment value (35 billion VND and 2.5 billion VND, respec-tively), investor size, and the majority of their holdings falling into debt securities and certificates of deposit, suffered less losses than VFMVF1 & VFMVF4 with their NAV falling by only 13.75 and 2.12 percent (Van Anh, 2020). Especially being a bond fund, VFMVFB proved its resilience against shocks in the stock market as its NAV per share, from the beginning of the year to mid-March, grew by 2.02 percent (Table 8). The 2nd and 3rd phases of the Covid-19 crisis still slightly dragged down the operation of open-end funds but within a shorter time, about a half month since the beginning of the reoccurrence (Figure 8). The entire country and the fund industry have had experiences from the first wave of the Covid-19, the high alerted 2nd Co-vid -19 detected in July 2020 was quickly under control. As a result of successfully containing the Covid-19 outbreak in line with financial support via the State Bank of Vietnam’s monetary policy on cutting interest rates to support businesses and the economy, Viet Nam’s reputation as an attractive and safe investment destination has been cemented. Investors’ panic was settled down, and the fund also restruc-tured its asset allocation, with the number of target stocks cutting down to 28 - 32

from 35 - 40 (Vietnam news agency, 2021). These explained the minimized change in NAV per share of open-end funds during these periods. In a nutshell, similar to ETFs, the im-pact of the unprecedented Covid-19 on open-end funds in Vietnam was recorded to be tremendously negative during the first presence of the pandemic, especially has weighted heavily on larger funds and funds with main holdings of listed shares, but seems to be smaller in magnitude for later comebacks. Moreover, open-end funds seem to be more volatile compared to ETFs, as mentioned earlier. So, the consideration of nurturing the flourishing of ETFs is worth looking to stabilize the market and investors’ trading behavior.

5. Concluding remarks, policy recom-mendations and future research path

Our paper contributes to the recent lit-erature on how the Covid-19 crisis has affected different segments of the financial market in general and capital market in particular and literature on the investment fund industry. The paper has found out that: (1) the investment funds and fund management companies are increasingly proving their importance in the capital market in providing investors with diversi-fied collective investment vehicles supe-rior to bank savings and strengthening the Vietnamese stock market’s investor base towards a rising proportion of institutional investors to reach a more stable market against shocks; (2) Under the Covid-19 crisis, ETFs proved to be more resilient than open-end funds and were additive to the overall functioning of markets; (3) As for open-end funds, bond funds and funds with smaller holdings of listed shares on major stock exchanges seem to be safe



investment spots.In Vietnam, there has been estimated to be 19.000 investors participating in investment funds (Review of Finance, 2018), accounting for a modest number compared to 2.2 million investors in the Vietnam stock market by the end of 2018. Therefore, there is numerous room for the development of both asset management firms and investment funds. In addition, the need for exchange-traded products classifications has underscored. Without clear classification, it is difficult

Figure 7. Fluctuations on the NAV per share of the two biggest open-end funds from June, 2019 to March, 2021

Source: Authors’ calculations from database provided in Dragon Capital (2021)

Figure 8. A closer look on NAV of open-end funds during 2nd & 3rd wave of the Covid-19

Note: Historical data of SSI-SCA’s NAV per share is available only from July, 2020Source: Authors’ calculations from database provided in Dragon Capital (2021), SSI (2021)

for investors to distinguish among differ-ent exchange-traded products in terms of structures and risks. Therefore, ETF has become a blanket term for any product that offers exchange-tradability. In fact, many products labelled as “ETFs” have characteristics different from the type of product most commonly associated with a benchmark index, exposure to the credit-worthiness of the issuer of the underlying debt. As a wider range of end-investors turn to exchange-traded products, it is be-coming increasingly important to protect



investors by helping them acknowledge the wide range of structures and risks as-sociated with the products, understand the way such products behave during periods of market volatility and the risks involved. An exchange traded product classification system will better serve end-investors by providing more clarity on the specifics of

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Số lượng nhà phân tích theo dõi và chi phí vốn chủ sở hữu của các doanh nghiệp niêm yết tại Việt Nam

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Quyết định số 242/QĐ-TTg ngày 28/2/2019 của Thủ tướng Chính phủ phê duyệt đề án “Cơ cấu lại thị trường chứng khoán và thị trường bảo hiểm đến năm 2020 và định hướng đến năm 2025”.

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management firms; (2) encourage the es-tablishment of ETFs by, (2a) encouraging big brokerage firms to be proactive autho-rized participants in the primary market of ETFs to support the creation and liquidity of ETF certificates, (2b) offering favour-able tax policy such as tax-exempt for ETF certificate redemption in the primary market as seen in international markets since these redemption trades are exclu-sively done by exchanging sets of assets, no cash involved; (3) assist end-investors with clarity on the specifics of exchange traded products to avoid exposure to the creditworthiness of the issuer of the under-lying debt.This paper, due to limited access to the internal database, has just tapped on the volatility of Vietnam’s investment funds in aspects of NAV changes and divergence of fund shares’ market price from their NAV along with fragmented data on fund flows. For the inherent features of funds with periodically varying capital inflows, outflows, and fund holdings, the assess-ment on investment funds’ volatility could be remarkably stronger if a closer look at those aspects is taken with a wide range of higher frequency datasets (monthly,

daily). This, afterward, will provide con-siderably strong sources of proxies for the quantitative approach with event study and other econometric models to provide more objective evaluations. ■

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