The Ministry of Finance has issued Circular No 183 guiding the establishment and management of open-end funds – a move hailed by many who hope the new regulations to help retain foreign investments, which are expected to leave the stock market along with the closure of many funds next year.
According to BIDV Securities statistics, many investment funds plan to close next year with total estimated value of 24 trillion VND (1.14 billion USD). This divestment value will have negative impacts on the market, particularly as the market suffered a prolonged downturn this year.
"The operation of open-end funds will pave the way for the conversion of funds and help them avoid the pressure of divesting capital which may have forced them to close," BIDV Securities analysts wrote in a note.
They said open-end funds also have the advantage of attracting both domestic and foreign capital, creating the foundations for the establishment of different types of funds, including exchange-traded funds, pension funds and insurance funds.
Open-end funds are an investment scheme which can issue and redeem shares. Its shares are not listed and investors generally purchase shares directly from the fund itself rather than from existing shareholders. This is in contrast to a close-end fund scheme where fund certificates are listed and tradable between investors.
The price of open-end fund certificates will be based on the net asset value of the fund at the time of transaction, offering greater advantages to investors in comparison with the high discount rates (usually 40-50 percent) of many current close-end funds.
Dragon Capital's deputy general director Phan Minh Tuan said the launch of new products is a good thing in the current context, offering investors more investment choices and helping reduce risks and improve investment efficiency.
"Although the circular does not allow close-end funds to be converted into open-end funds, the new regulations allow the funds to buy back shares, thus increasing their actual value," he said.
However, Tuan cautioned that delivery of more products is not the fundamental factor which could keep the planned divestment capital in the market. Their biggest concerns are economic development and Government policies.
Analysts at BIDV Securities also said that due to the greater flexibility of open-end funds, capital flows could be more quickly withdrawn from the market in the face of adverse developments.
Besides, due to the small size of Vietnam's stock market and majority of small individual investors, investors are used to make investments based on herd psychology, thus "the appearance of open-end funds can bring about more speculative factors to the market", they said.
"However, one of the most decisive factors that will help open-end funds raise capital is high market liquidity which is expected to improve early next year". /.
According to BIDV Securities statistics, many investment funds plan to close next year with total estimated value of 24 trillion VND (1.14 billion USD). This divestment value will have negative impacts on the market, particularly as the market suffered a prolonged downturn this year.
"The operation of open-end funds will pave the way for the conversion of funds and help them avoid the pressure of divesting capital which may have forced them to close," BIDV Securities analysts wrote in a note.
They said open-end funds also have the advantage of attracting both domestic and foreign capital, creating the foundations for the establishment of different types of funds, including exchange-traded funds, pension funds and insurance funds.
Open-end funds are an investment scheme which can issue and redeem shares. Its shares are not listed and investors generally purchase shares directly from the fund itself rather than from existing shareholders. This is in contrast to a close-end fund scheme where fund certificates are listed and tradable between investors.
The price of open-end fund certificates will be based on the net asset value of the fund at the time of transaction, offering greater advantages to investors in comparison with the high discount rates (usually 40-50 percent) of many current close-end funds.
Dragon Capital's deputy general director Phan Minh Tuan said the launch of new products is a good thing in the current context, offering investors more investment choices and helping reduce risks and improve investment efficiency.
"Although the circular does not allow close-end funds to be converted into open-end funds, the new regulations allow the funds to buy back shares, thus increasing their actual value," he said.
However, Tuan cautioned that delivery of more products is not the fundamental factor which could keep the planned divestment capital in the market. Their biggest concerns are economic development and Government policies.
Analysts at BIDV Securities also said that due to the greater flexibility of open-end funds, capital flows could be more quickly withdrawn from the market in the face of adverse developments.
Besides, due to the small size of Vietnam's stock market and majority of small individual investors, investors are used to make investments based on herd psychology, thus "the appearance of open-end funds can bring about more speculative factors to the market", they said.
"However, one of the most decisive factors that will help open-end funds raise capital is high market liquidity which is expected to improve early next year". /.
