Assessing the impact of Circular 183/2011/TT-BTC dated December 16th 2011, BIDV Securities Company (BSC) suggested that the establishment of an Open - End Fund would be a foundation for setting up different kinds of funds, included Exchange - Traded Fund (ETF).
On December 16th 2011, the Ministry of Finance issued Circular 183/2011/TT-BTC guiding the establishment and management of an open - end fund. In particular, this Circular regulates the capital mobilisation and management of the open - end fund, operations of fund management enterprises, banks supervision and other relevant institutions relating to fund management activities, particularly:
Unlike close - end funds, after sufficiently mobilising capital, open-end fund certificates will not be listed, but trades are only made directly between investors and fund management enterprise, at a price based on the Net Asset Value (NAV) at agreed time.
The application of Net Asset Value in pricing fund certificates at the current time brings a lot of advantages compared to some current close - end funds, such as VF1, VF4, and BF1, whose prices are always discounted 40 - 50 percent compared to the present time.
Assessing the impact of Circular 183/2011/TT-BTC dated 16th December 2011, BSC suggested that the establishment of the Open - End Fund would be a foundation for setting up different kinds of funds, included Exchange - Traded Fund (ETF). Furthermore, open - end fund also has its own advantages in attracting several domestic sources, for example to shape the open pension funds, insurance funds, and drawing foreign sources because of its higher flexibility than close - end funds in the recovery period of the shares market.
According to statistic, in Vietnam, many investment funds may have to shut down in 2012 as planned, with total divestment of VND24,000 billion. In connection with this current market situation, this divestment will negatively influence the shares market in particular, as well as financial market in general. Consequently, this foundation of open - end funds will lead to reconstruction of many funds to avoid the divestment pressure of close - end funds as planned.
The establishment of the Circular has partly unfrozen the waiting tendency of the market with new solutions, positive and necessary measures to increase demand and the currently low market liquidity.
However, with its flexibility, the structure of investment capital in open - end funds is not as stable as in close - end funds. Capital may suddenly flow out of the market when there are unfavourable conditions, making market shares fluctuate.
Besides that, with the small size of the Vietnam stock market, mainly individual investors engaged in the market, and imitative business tendencies, the appearance of open - end funds will cause more speculation on the market.
Regarding BSC, conditions for the most effective open - end funds application, are:
First, the sufficiently high recovery of trading value, liquidity in shares market must be a decisive condition, so the establishment and capital mobilisation of open - end funds or reconstruction of close - end funds into open - end funds will take place soon and become successful in 2012.
Second, new technology infrastructure applied to operate open - end funds is quite complicate and not only requires sufficient time to prepare, but also technical assistance from State Securities Commission in processes of establishing and reconstructing funds.
Third, State Securities Commission needs to carry out particular guidelines right after the Circular appeared, and organise training programmes for public and shares market members.
Along with the implementation of Circular 183/2011/TT-BTC, the Vietnam Government has also been taking action and showing signals to timely support the shares market. Therefore, investors will raise their confidence in the Government. And that helps the shares market recover growth in the coming days.
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