The HCM City Stock Exchange introduced the new VN-30 Index at a conference yesterday in Ha Noi, with the expectation that it will better serve the diverse investment needs of investors, as well as overcome shortcomings of the current index.


"The establishment of the VN-30 aims to satisfy the information demand of the market, overcome disadvantages of the VN-Index and meet the demand of tradable index," said Nguyen Thi Viet Ha, head of Research and Development of the HCM City Stock Exchange.
The VN-30 Index will comprise 30 of the largest stocks led by both market capitalisation and liquidity, representing about 80 per cent of the total market capitalisation and 60 per cent of the total market volume.
The exchange also adjusts the calculation method, of which the free float rate (The number of shares freely traded on the market over the total number of outstanding shares) of over 5 per cent will be applied for eligible stocks.
Meanwhile, the weight rate of each stock will be capped at 10 per cent in order to eliminate potential distorted impacts of several stocks on the index.
Shares subject to control, warning, suspension or the possibility of cancelling the listing will be removed from the basket of the VN-30, which will be reviewed every six months.
Ha also said the VN-30 would improve the delivery of services to the HCM City Stock Exchange and create the ability to compare the index with other indices of regional stock exchanges.
The new index is expected to be delivered to the market by the end of this year or the beginning of next year.
Currently, the VN-Index is the only indicator used by the exchange and represents Viet Nam's stock market, but it has gradually revealed many limitations, which have yet to be reflected on the index. The index was distorted by several large caps such as insurer Bao Viet Holdings (BVH), food producer Masan Group (MSN) or property developer Vincom Company (VIC).
Le Yen Quynh, portfolio manager at Dragon Capital Group, said top 30 shares made up nearly 80 per cent of total market capitalisation, of which top 3 accounted for 32 per cent, and other 270 shares occupied just 20 per cent.
Quynh said several factors made funds difficult to evaluate on the VN-Index, including the large gap of market capitalisation among shares, inconsistency in determining weight rate of shares, as well as a failure to take liquidity into account share.
"The VN-Index is not a tradable index," Quynh said.
She said the delivery of the VN-30 would open up opportunities for new investments, and it could become a base indicator to develop other investment commodities, particularly derivative products.
"Diversification of investment products will further attract capital into the market, helping improve the market liquidity."
According to Pham Ngoc Bich, Director of and investment consultation of Saigon Securities Inc, it was important that the VN-30 would comply with the international standards, such as capitalisation, free float and liquidity of the stock basket. He said this also provided investors with other choices.
To meet the market demands in the future, the HCM City Stock Exchange plans to build other new indices, including the VN Composite Index, VN-30 Foreign, VN-Core 10, VN-Large 20, VN-Mid 70, VN Small, or the industry index.