VN-Index Rises on Large-Cap Stocks, But Active Funds Lag

Vietnam's benchmark VN-Index has risen 2.7% year-to-date, but this upward momentum is largely concentrated in a few large-cap stocks, leaving many actively managed equity funds struggling to keep pace. The market's structural biases are significantly impacting investor returns. As of the end of August, data reveals that out of 55 actively managed equity funds surveyed, only six recorded positive performance since the beginning of the year. The remaining 49 funds, or approximately 89.1%, posted negative returns, with 27 funds falling by 5% or more and five by over 10%. The median performance for the entire group stands at around a negative 4.6%, lagging the VN-Index by about 7.3 percentage points. This market characteristic is largely attributed to the calculation method of the stock index. The VN-Index employs a market capitalization-weighted system, meaning that the largest companies in the market, particularly major real estate developers like Vingroup (VIC) and its affiliates (VHM, VRE), exert a substantial influence on the index's overall movement. For instance, in August alone, the real estate sector contributed 48.7 points to the VN-Index's gains, while the banking sector added 36.6 points, accounting for 88.5% of the index's total increase that month. VIC alone pushed the index up by 32.1 points. Such market structures not only reflect stock selection capabilities but also create significant disparities in investor returns based on portfolio composition and the reference index used. Funds benchmarking against broader indices like the VN100 or VN30, or those with lower allocations to large-cap stocks, tend to benefit less from the VN-Index's rallies. Furthermore, while domestic equity funds are experiencing continued capital inflows, foreign-domiciled funds have seen net outflows. This is likely influenced by perceptions of domestic market growth potential and concerns over geopolitical risks. Vietnam's economy continues to grow steadily under its one-party system, but external factors such as global economic uncertainties and complex relations with China could also affect market dynamics. Source: The Saigon Times