Analyse: db x-trackers FTSE Vietnam ETF

Dieser Aktie-ETF ermöglicht einen einzigartigen Zugang zu einem Nischenmarkt - mit Nachteilen bei der Indexabbildung.

Lee Davidson 10.01.2012

Rolle im Portfolio

The db x-trackers FTSE Vietnam ETF is currently the only European-domiciled ETF to provide exposure to the Vietnamese equity market. Most index providers, like FTSE and MSCI, have classified Vietnam as a frontier market, which indicates a smaller, less developed, and less liquid market than a typical emerging market. Compounding the problem of liquidity, Vietnam has placed limits on foreign ownership of its listed companies to between 30% and 49%. These policies pose a problem for ETFs as managed funds have already bought up most of the Vietnamese investable universe. In order to gain exposure, this ETF has been forced to track small, low quality, and illiquid stocks.

For investors interested in Vietnamese equity exposure, the lack of liquidity directly impacts this fund's behavior. Over the past three years, the MSCI Vietnam index, which represents the broad Vietnamese equity market, has been moderately correlated to the MSCI World (~58%) and STOXX Europe 600 (~56%). However, the db x-trackers FTSE Vietnam ETF has exhibited no relation to international equities as evidenced by its correlation to the MSCI World (-1%) and STOXX Europe 600 (~5%) over the same time period. In fact, this ETF is barely correlated to the broad Vietnamese market (~38%) as measured by the MSCI Vietnam index, which represents all Vietnamese equities. These correlation levels indicate that an investment in this ETF does not guarantee the same directional movements as the broad Vietnamese equity market.

Given that it tracks a single country benchmark, this ETF is best utilised as a tactical tool. Investors most likely need not worry about accidentally overweighting their portfolio's exposure to Vietnam, since broader emerging market indices do not include Vietnamese equities. 

Fundamentale Analyse

Over the past three years, Vietnamese equities, as measured by the MSCI Vietnam, have significantly underperformed (- 4.6%) other Asian emerging markets (20.3%), as measured by the MSCI EM Asia, on an annualised basis. The db x-trackers FTSE Vietnam ETF has fared even worse with annualised returns equal to negative 16.6% over the past three years. The underperformance against the MSCI Vietnam is primarily due to the ETF's inability to achieve exposure to the broader Vietnamese market.

Vietnam first began to sow the seeds of economic growth in 1986 with efforts to encourage the development of private businesses and foreign investment. The liberalisation of Vietnam's foreign trade policy continued into the current century as the country signed a bilateral trade agreement with the US in 2000 and officially joined the WTO in 2007. Inflows of foreign capital and private enterprise formation have helped Vietnam slowly transition from a centrally-planned agrarian economy to a more viable, export-oriented economy. Undoubtedly, these policies amongst others were instrumental in spurring the last 25 years of economic growth, culminating in a stable 6-8% GDP growth rate since 2002. In 2011, GDP growth has slowed somewhat. GDP expanded 5.57% during the first half of this year--its slowest rate since 2009. Following the announcement of this figure, the IMF revised its GDP growth forecast for 2011 down from 6% to 5.8%--its third downward revision this year. However, the IMF still believes Vietnam's GDP growth rates will pick back up in 2012 with expectations for growth of 6.3%. Vietnam has stated that its top priority going forward is to protect the stability of macroeconomic growth, even at the expense of transparency in its fiscal and monetary policies.

The inconsistency of Vietnamese monetary policy in dealing with escalating inflation has been increasingly worrisome for investors. In February 2011, Vietnam unveiled Resolution 11, which is aimed at fighting inflation and supporting its currency with contractionary monetary and fiscal policies. Following the announcement, the State Bank of Vietnam raised rates incrementally to eventually reach 15% by July 2011 from the previous 7% at the start of November 2010. However, since July, Vietnam has begun to periodically cut rates, which now stand at 13% at the time of this writing. The IMF and economists have criticised the Vietnamese government for making confusing and contradictory statements about the direction of rates. If Vietnam is serious about solving its inflation issues, then it must avoid reducing rates again as it may weaken its currency and raise questions about the government's commitment to fight inflation. Meanwhile, in September, CPI rose a startling 22.4% year-over-year.

In the short-term, investor sentiment may be buoyed by a strong Japanese yen and worries about high labour costs in China. However, these competitive advantages will likely be offset by Vietnam's financial instability, massive trade and budget deficits, and low foreign currency reserves. 

Indexkonstruktion

The FTSE Vietnam Index is a sub-index of the FTSE Vietnam All-share Index and represents those companies (circa 20-30) that have sufficient foreign ownership availability. At the time of this writing, the index has 26 constituents. Component stocks have to be listed on the Ho Chi Minh Stock Exchange and those that are seen to have no ‘accurate and reliable’ pricing available will be removed from the index. The index uses the last quoted price for purposes of end-of-the day calculation and is reviewed quarterly. The weight of individual constituents is capped at 15% of the index’s total value and to be included, securities have to pass a liquidity screening. The 3 month average daily traded value is calculated for all constituents and those not turning over 40% of the 3-month average traded value of the FTSE Vietnam index will be excluded. The 3-month average traded value is calculated by multiplying closing prices by total daily traded volume. Once a security has been included and its turnover falls below the 20% level, the constituent will be removed. Furthermore, component stocks that have a free float of at least 5% but not more than 15% will be deleted if their full market capitalisation is less than VND25,000bn or if they are ranked below the 10th place by full market cap at the time of review. Constituents with less than 5% free float will be deleted as well. Finally, securities with less than 2% foreign ownership availability will not be eligible for the index.

Fondskonstruktion

The db x-trackers FTSE Vietnam ETF uses swap-based replication to track the FTSE Vietnam Index. The fund uses a funded swap, meaning db x-trackers delivers the cash received from investors to the swap counterparty (Deutsche Bank AG). Deutsche Bank in return contracts to pay db x-trackers the index return, as well as pledging collateral to the db x-trackers account at its custodian (State Street bank). The value of the collateral pledged to the fund is usually maintained within a range of 105-120% the fund’s net asset value. The swap is reset when exposure to Deutsche Bank reaches 5% of the fund’s NAV and/or whenever there is a creation or redemption. The db x-trackers FTSE Vietnam ETF reinvests dividends. db x-trackers publishes the details of the fund’s collateral basket on a daily basis on its web site. The fund is available in four currency denominations: Euros, Pounds Sterling, US Dollars and Swiss Francs. The fund trades on Euronext Paris, Borsa Italiana, Deutsche Börse, and the London Stock Exchange.

Gebühren

The fund levies a total expense ratio (TER) equal to 0.85%.

Alternativen

As of writing, the db x-trackers FTSE Vietnam ETF is the only ETF tracking Vietnamese equities domiciled in Europe. For more diversified exposure to Asian equities investors could consider the db x-trackers MSCI EM Asia ETF. This fund uses synthetic replication and levies a total expense ratio of 0.65%. The reference index favours China (29.3%), followed by Korea (25.7%) and Taiwan (19%). However, Vietnamese equities are not included in this index.

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Über den Autor

Lee Davidson  is an ETF analyst with Morningstar Europe.