HNX30 index to be launched in Q2

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The HNX30 will include the top 30 stocks on the bourse measured by capitalisation and liquidity.


The HNX30 was designed to meet the need of developing new products such as exchange-traded funds and index futures contracts.


The selection of stocks included in the HNX30 will be adjusted every six months

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The Ha Noi Stock Exchange yesterday introduced its new price index – the HNX30 – which is expected to come into operation next month.

The HNX30 includes the bourse's 30 best stocks in terms of liquidity and market capitalisation, having a lot in common with the HCM City Stock Exchange's VN30.
With a base point of 100 and base date of January 3, the index is estimated to reach 140 points by now.


The method to establish the HNX30 is similar to that of the VN30. The most important difference is that liquidity is chosen to be the most crucial criterion for selecting stocks tracked by the HNX30.


"It is the most effective factor that supports the market's function of raising funds," said economist Vuong Quan Hoang, a member of the index management board.


New products to follow the development of the HNX30 would be based on liquidity rather than corporate profits or sectorial operation, he said.


To limit the significant impacts of some large-cap shares, the exchange uses a capped ratio of 15 per cent to assure that none of the listed codes has capitalisation ratios exceeding 15 per cent of the total market value.


"According to international practices, the capped ratio is often 10 or 15 per cent, which is suitable for adjusting the market capitalisation ratio of such stocks as the Asia Commercial Bank (ACB)," said exchange deputy general director Nguyen Anh Phong.


Asia Commercial Bank currently accounts for 43.3 per cent of the value of the HNX30.


The movement of the HNX-Index is almost the same as that of the bank. The HNX30 is expected to more precisely reflect the common trend of the market.
However, Sai Gon-Ha Noi Fund Management Co's head of economic and research Nguyen Viet Duc was worried that the new index would be forgotten the way the VN30 was.
"Earlier this year, the introduction of the VN30 attracted the interests of many investors but they then began to ignore it," he said.


As there was no promotion towards foreign investors, they were still forming their portfolios based on the VN-Index, he said.


Duc advocated the use of stock index futures by which investors would not have to change their portfolios but just buy or sell futures. He said it would both reduce short-term risks for funds and maintain long-term growth potential for the stocks.


"When such derivatives are born, benchmark indices will fluctuate less."
However, Hoang predicted the exchange should kick off more promotion programmes to make investors thoroughly understand index investment. "Derivatives are what investors are looking for to reduce risks," he said.


Deputy head of the State Securities Commission's fund management division Nguyen Thanh Long said: "The new index will become an effective source of investment information, promptly reflecting actual operation of enterprises while functioning as a forecast."


In addition, stock indices would also convey investor expectations on businesses, helping watchdogs issue relevant policies.


Besides the criteria of high liquidity and market capitalisation, stocks to be included in the index's calculating basket must be listed on the bourse for at least six months without warning from management agencies.


The 30 shares will also be revised every six months.