Index & Indicators Development
Index & Indicators Development
VN30 Equal Weight Index
Phoenix Global Wealth Management (PGWM) collaborated with S&P Dow Jones, a company specializing in constructing leading global indices, to launch the VN30 Equal Weight (VN30 EQ) index.
VN30 EQ tracks the performance of the 30 most capitalized and liquid stocks on the HOSE exchange. This index employs an equal-weight methodology for its constituent stocks, aiming to address liquidity issues, foreign ownership ratios, and state ownership when foreign investors want to passively invest in the Vietnamese stock market.
VN30 EQ is the first index calculated by a professional company specifically for the Vietnamese stock market and is published by an independent index provider. The distinctive feature of VN30 EQ is the use of equal weighting for constituent stocks in the Southeast Asia region, reducing concentration on large-cap stocks, a significant limitation of the Vietnamese stock market (the largest stock occupies over 14%, and the top 5 stocks represent over 43% of the market capitalization of the VN30 index). This helps diversify the sectors within the index, as opposed to a heavy focus on the financial sector in the VN30 index. It also enhances the tradability for foreign investors by minimizing allocation to foreign stocks significantly. In summary, with credibility and reliability from the S&P Dow Jones brand, VN30 EQ is poised to be the representative index for Vietnam that international investors monitor when considering investments in the country.
The criteria of floating ratio, liquidity, and market capitalization are crucial for selecting the top 30 stocks in Vietnam for inclusion in the VN30 EQ index. The selected 30 stocks are assigned equal weight of 1/30. Although the weights may change during the period, the 1/30 ratio is reset in each adjustment period. The VN30 EQ index undergoes a semi-annual portfolio adjustment in January and July. During these adjustments, new stocks are added, and stocks that no longer meet the criteria are removed. However, quarterly adjustments in April and October maintain equal weights for the constituent stocks.
Comparison of the VN30EQ portfolio with ETF VNM and FTSE ETF: For international investors, the VN30 EQ index presents an opportunity to passively invest in the Vietnamese market through ETF products tracking the index. Given the tight control of capital flows into Vietnam, ETFs tracking the Vietnamese market abroad are an effective way for international investors to invest in Vietnam. With active investment not proving very successful in Vietnam recently, passive investment channels through ETF products help international investors gain confidence in investing in the Vietnamese market by reducing risk and transaction costs.
VN30 EQ inspires confidence for international investors
The VN30 EQ index consistently outperforms the VN30, reflecting an equal investment level in constituent stocks. Source: Bloomberg
For domestic investors, the VN30 EQ index is considered a representative market index alongside the current VN index and VN30 index. The equal-weight methodology of VN30 EQ helps domestic investors actively demonstrate market breadth better than the existing indices.
VN30 EQ inspires confidence for domestic investors
It is evident that VN30 EQ tends to perform better than VN30 during market uptrends. In such periods, medium to large-cap stocks yield higher returns than the largest-cap stocks. However, in market downturns or sideways movements, large-cap stocks are considered a safer choice and often result in higher returns. The VN30 index tends to deliver higher returns in such market conditions. Source: Bloomberg
With this construction methodology, significant changes in VN30 EQ index can only occur when many stocks change, rather than relying on a few large-cap stocks as in the VN30 index and VN index. With this construction method, individual domestic investors can build a diversified investment portfolio based on simulating the VN30 EQ index.
Commodity Investment Cycle Index
