[Vnbiz] MSCI mulls index for Vietnam

[Phan, Tai]

MSCI mulls index for Vietnam

Thursday, April 05, 2007

MSCI Barra is looking at creating indexes that track the Vietnamese stock market as well as Southeast Asian countries in response to strong demand from investors, a top regional executive at the index compiler said Wednesday.
Outside Asia, MSCI Barra is eyeing Eastern Europe as another potential source of new indexes, as global investors are increasingly willing to take a chance on very small markets that have recently caught fire.

"The real growth story in Asia is in the emerging markets," said Deborah Yang, head of Asia-Pacific excluding Japan for MSCI Barra.

"The amount of client requests for these types of indices have been quite strong. I wouldn't be surprised if we made announcements on new indices but we don't have information on when and how," she added.

MSCI is treading carefully, mindful that markets such as Vietnam, which are currently outside the coverage of the index compiler, are small and have thin liquidity, and can thus be more volatile than other more established markets.

MSCI's head of research Chia Chin- ping said the index compiler was in the early stages of coming up with new products for markets such as Vietnam.

"From our perspective, we are very interested in looking into providing benchmark indexes and analytical tools to help invest in these markets." 

"But these are new frontier markets to investors, so the approach has to be right."

Chia added the markets were still far from being included in MSCI's broader index such as its MSCI Emerging Market Index .

"If we were to create any benchmark for these markets, it wouldn't be included in the emerging market relatively quickly but they would be independently structured." 

Vietnam's main stock index surged 144 percent last year, in part on the back of foreign funds chasing profits in an economy growing at a rate of more than 8 percent. 

It is up 40 percent so far this year, far ahead of more developed markets in the region.

But the main Ho Chi Minh City Securities Center and the over-the- counter Hanoi Securities Trading Center have a combined market capitalization of only about US$22 billion (HK$171.6 billion), or 38 percent of Vietnam's gross domestic product.

Meanwhile, Bangladesh is seeing record daily turnover in its Dhaka Stock Exchange and Chittagong Stock Exchange, although its total market value still remains below US$100 million.

As investors increasingly look overseas for returns, MSCI Barra last week said it would revise its widely-emulated equity indexes, emphasizing different investment styles, market cap and industry groups.

The changes also reflect growing interest by investors in emerging markets, especially in small caps, which will result in a new index that covers smaller stocks in these markets, said MSCI, which has about US$3 trillion benchmarked to its international equity indexes.

Emerging markets were a hot trend among global investors last year, with the MSCI's Emerging Market index gaining around 29 percent, compared with 13.2 percent for US stocks and 16.5 percent for European stocks.

The emerging market index's performance has been more uneven in the first quarter following a period of volatility in global markets. Still, it rose 1.8 percent, outperforming US indexes. 

REUTERS