Biến động quỹ đầu tư khủng hoảng Covid-19 Việt Nam Trần Thị Xuân Anh - Nguyễn Quỳnh Thơ - Ngơ Thị Hằng Khoa Tài chính, Học viện Ngân hàng Ngày nhận: 31/03/2021 Ngày nhận sửa: 06/05/2021 Ngày duyệt đăng: 19/05/2021 Tóm tắt: Các quỹ đầu tư đóng vai trị khơng thể thiếu thị trường vốn kinh tế toàn cầu quỹ cung cấp nguồn tài trợ vốn đầu tư đáng kể cho chủ khác thị trường, đồng thời đóng góp vào on định thị trường Tuy nhiên, tác động mạnh mẽ đại dịch Covid-19 chưa có tiền lệ trước tới tồn giới có thị trường tài chỉnh ngành quỹ đầu tư Việt Nam, gây sụt giảm nghiêm trọng giá trị danh mục đầu tư cùa quỹ khiến cho nhà đầu tư tháo chạy khỏi quỹ đầu tư, làm trầm trọng hem biến động cùa quỹ làm suy yếu vai trò ổn định thị trường cùa Investment fund volatility during the Covid-19 crisis in Vietnam Abstract Investment funds take an indispensable role in the capital market of any economy over the globe since they provide major sources of financing and investment for various market participants, and contribute to the stability for the market However, the unprecedented Covid-19 has catastrophically hit the entire world including Vietnam's financial market and the fund industry, specifically causing drastic plunge in value of fund holdings and investors to flee out of investment funds, magnifying the volatility and shrinking the market stabilizing role of investment funds Therefore, examining the investment fund volatility during the covid-19 crisis in Vietnam could benefit investors, investment funds, and market regulators in drawing solutions and better preparation in enhancing the resilience of investment funds as well as Vietnam's financial market for future unpredictable events This paper, by utilizing descriptive statistical tools combined with the aggregating method, finds that Exchange Traded Funds (ETFs) have proven their resilience better than open-end funds, especially under market stressed circumstances, and the effect of the Covid-19 on those funds seems to be smoothed out for later comebacks Then, to improve the presence and sustainable development of the investment fund industry in Vietnam, few valuable recommendations have been withdrawn Keywords: Investment, Funds, Volatitiliy, Covid-19, Vietnam Tran, Thi Xuan Anh Email: anhttx@hvnh.edu.vn Nguyen, Quynh Tho Email: thonq@hvnh.edu.vn Ngo, Thi Hang Email: hangnt@hvnh.edu.vn Finance faculty, Banking Academy of Vietnam Tạp chí Khoa học & Đào tạo Ngân hàng Số 231- Tháng 2021 24 © Học viện Ngân hàng ISSN 1859 - 01IX TRẦN THỊ XUÂN ANH - NGUYỄN QUỲNH THƠ - NGÔ THỊ HẰNG quỹ đầu tư Do vậy, việc nghiên cứu biến động quỹ đầu tư giai đoạn khủng hoảng covid-19 Việt Nam mang lại lợi ích định nhà đâu tư, quỹ đầu tư, quan quản lý thị trường việc hoạch định giải pháp hiệu xây dựng phương án chuẩn bị tot để nâng cao khả chống đỡ cho quỹ đầu tư thị trường tài Việt Nam trước kiện khó tiên lượng trước tương lai Bài viết này, sử dụng công cụ thông kê mô tả kết họp với phương pháp tống hợp, quỹ hoán đơi danh mục (ETFs) có sức chống đỡ tot quỹ đầu tu- dạng mở, đặc biệt giai đoạn thị trường căng thắng, đồng thời tác động dịch bệnh Covid-19 tới quỹ dần đợt dịch xuất sau dó Theo đó, số giải pháp đề xuất nhằm gia tăng diện trì phát triển bền vững ngành quỹ đầu tư Việt Nam Từ khóa: quỹ, đầu tư, biến động, Covid-19, Việt Nam Introduction After more than 20 years since its estab lishment, Vietnam’s stock market has witnessed a remarkable development path in terms of market size, diversified prod ucts and a stronger investor base As re ported by the State Securities Commission of Vietnam (SSC), by the end of 2020, 1,655 companies listed their shares on three Vietnam stock exchanges (including Hanoi stock exchange - HNX, Hochiminh City stock exchange - HOSE, and UpCoM), marking a massive increase from only listed firms at the opening of the stock market back in 2000 (SSC, 2021a) This provides investors with a diversified set of securities along with investment fund certificates, government & corporate bonds, and some of the securities deriva tives introduced recently, including cov ered warrants and future contracts The market capitalization of all Vietnam ese securities markets to GDP peaked 90.43% in 2017 and continued to hit new records during the period of 2018 - 2020 (Table 1) Particularly, closing the year 2020, Vietnam’s stock market is recog nized as one out of 10 global securities markets with surprising resilience against the Covid-19 pandemic coupled with the fastest-recovering speed (Hoa Son, 2021) Similarly, the Vietnamese securities market’s liquidity surged to an impressive record with the average daily trading value Table Market Capitalization of different securities markets in Vietnam from 2016 to 2020 Unit: Billions of VND Year HOSE HNX UPCoM Bond Markets Total Value %GDP 2016 1,491,778 150,521 306,629 931,340 2,880,268 68.7 2017 2,614,150 222,894 677,629 1,013,833 4,528,506 90.43 2018 2,875,544 192,136 893,777 1,121,307 5,082,674 101.50 2019 3,279,611 192,029 911,940 1,189,085 5,572,666 100.55 2020 4,080,757 212,320 1,000,696 1,385,867 6,679,640 110.64 Source: State Securities Commission of Vietnam (2021a) Số 231- Tháng 2021- Tạp chí Khoa học & Đào tạo Ngân hàng 25 Biến động quỹ đầu tư khủng hoảng Covid-19 Việt Nam of 7,420 billion Vietnamese dong (VND) in 2020, increasing by 59.3% compared to the year 2019 (Hoa Son, 2021) Other than that, the statutory framework has been noticeably strengthened with the first official Law on Securities No 70/2006/QH11 enacted in 2007, which was newly replaced by the new Law on Securities No 54/2019/QH14 approved in 2019 and taking effect in January 2021 This lays a solid legal foundation for grounding a more sustainably developed Vietnamese stock market with a higher quality of market products and market transparency Although Vietnam’s stock market had been lagged behind regional markets throughout its development path, it has risen significantly with positive moves and achievements since 2018 It has become a regional bright spot for investment, at tracting individual and institutional inves tors’ attention to foreign ones The proactive participation of the institu tional investors, especially various invest ment funds, is believed to considerably drive a sharp increase in the market capi talization and liquidity, even regardless of the severe impact of the Covid-19 crisis Additionally, according to Table 2, the in vestor base has also been improved thanks to institutional investors’ share The number of institutional investors’ trad ing accounts has increased roughly 71% over the last years Nevertheless, indi vidual investors still take a dominant share (remaining at roughly 99.5% throughout the period of 2015 - Jan, 2021) This questioned the probability of deteriorating investors’ herd behavior as well as mar ket volatility, especially against spillover effects from international economic and financial events Given those facts, investigating the perfor mance and volatility of investment funds operating in Vietnam plays a crucial role in finding feasible and appropriate solu tions on encouraging the development of the fund industry to strengthen the inves tor base and the sustainable development of Vietnam’s stock market as a whole, particularly under distressing circumstanc es such as the Covid-19 epidemic Current Status of Investment Fund Industry in Vietnam Firstly, the investment fund industry is op- Table Number of approved securities trading accounts in Vietnam from 2015 to Jan, 2021 Unit: one account Domestic Year Individual Investors International Institutional Investors Individual Investors Institutional Investors Total yoy 2015 1,486,644 6,343 15,221 2,656 1,510,864 2016 1,685,598 7,438 16,850 2,503 1,712,389 13,3% 2017 1,890,521 8,472 19,696 2,865 1,921,554 12.21% 2018 2,144,735 9,298 24,975 3,319 2,182,327 13.57% 2019 2,332,560 10,119 28,511 3,704 2,374,894 8.82% 2020 2,725,087 11,251 31,134 3,937 2,771,409 16.70% 1/2021 2,811,194 11,413 31,594 3,953 2,858,154 3.13% Source: State Securities Commission of Vietnam (2021a) 26 Tạp chí Khoa học & Đào tạo Ngân hàng- số 231- Tháng 2021 TRẦN THỊ XUÂN ANH - NGUYỄN QUỲNH THƠ - NGÔ THỊ HẰNG Table Number of Asset management firms in Vietnam, 2003- 2020 Year 2003 2004 Approved Operating 2005 2007 2008 2009 2010 2011 2012 2013 2020 18 25 45 47 47 47 47 47 51 18 25 44 46 47 47 47 41 45 2006 Source: State Securities Commission of Vietnam (2021a) Table Running Investment Funds in Vietnam’s stock market by type until Jan, 2021 Year Open-end Closed-end Partnership ETFs(a) REITs(b) Funds Fund Funds Total Number of funds Total NAV(c) 2016 19 31 7,759 2017 22 10 36 14,831 2018 25 10 40 22,485 2019 32 10 47 32,603 2020 34 13 57 57,693 1/2021 34 13 57 62,042 Note: (a) - Exchange Traded Funds; (b) — Real Estate Investment Trusts; (c) — Net Asset Value in trillions ofVND Source: State Securities Commission of Vietnam (2021a) erating with increasing, yet underperform ing fund managements The rising attrac tion of Vietnam’s stock market has also triggered investors’ demand for profes sional financial services, especially invest ment consultancy, and investment man agement related reservices These services are offered by asset management compa nies with qualified investment experience and profound local knowledge, leading to an increase in the number of management companies established in Vietnam While up to 2004, Vietnam’s stock market operated with only brokerage firms and asset management companies The situ ation changed quickly, with 47 manage ment companies managing over 100,000 billion VND in 2012 and falling to 41 firms as of 2013 (Table 1) The rocket jump in the number of broker age firms and their branches and man agement companies called for a closer supervision process and actions from market regulators, resulting in the ap358.000 400.000 300.000 200.000 100.000 0.000 2012 2013 2014 2015 2016 2017 2018 2019 6/2020 Figure Asset under management in all existing management companies in Vietnam from 2012 to June, 2020 Unit: Billions ofVND, Source: Nguyen Hai Nam (2020), SSC (2021a) So 231- Tháng 2021- Tạp chí Khoa học & Đào tạo Ngân hàng 27 Biến động quỹ đầu tư khủng hoảng Covid-19 Việt Nam Table Number of listed issuers in Vietnamese stock market, by securities types (updated in March, 2021) Year Firm shares Investment Fund Certificates Closed-end ETF Funds HOSE HNX UPCoM Total 2015 307 377 256 940 2016 320 375 414 1,109 2017 344 384 694 1,422 2018 373 376 804 2019 378 367 2020 392 353 Covered Warrants (CW) Bonds HNX HOSE 0 35 0 35 2 0 39 1,553 0 48 872 1,617 37 43 910 1,655 118 33 Source: State Securities Commission of Vietnam (2021a) Table Volume of securities listed and traded in Vietnamese stock market, by security types (updated in March, 2021) Unit: millions ofshares Year Stocks Government Bonds Corporate Bonds HOSE HNX UPCoM Fund Shares ClosedETF end CW Total 2015 53,080 7,530 86 5,060 38 0 65,800 2016 60,380 9,300 95 14,820 41 15 84,650 2017 71,820 9,980 160 24,710 180 20 106,870 2018 88,710 10,860 350 31,920 310 37 132,150 2019 97,840 11,520 340 25 41,840 470 37 98 152,170 2020 112,360 13,570 260 25 38,130 850 37 437 165,670 Source: State Securities Commission of Vietnam (2021a) proval of several circulars and decisions related to those financial institutions Of which, Ministry of Finance enacted the first official regulation on the operation of the asset management firms (Circular No 212/2012/TT-BTC) under the “Secu rities Market and Insurance Companies Restructuring” Scheme (issued in Deci sion No 1826/QD-TTg, 2012) in an effort of improving these intemediaries’ qual ity and raising investors’ trust in tandem with boosting their participation into these managements’ funds Eventually, during the period of 2013 - 2014, management 28 firms, accounting for 12% of total firms, ended their operations These strict moves by regulators have significantly gained much attention of the public and their trust in accessing collective investment vehicles (such as various investment funds) pro vided by the fund management companies As illustrated in Figure 1, by the mid of 2020, there were 45 normally operating management firms and other under restructuring-process firms, managing a total asset value of 358,000 billion VND, a threefold increase from the statistics recorded by the end of 2015 (Nguyen Hai Tạp chí Khoa học & Đào tạo Ngân hàng- số 231- Tháng 2021 TRẦN THỊ XUÂN ANH - NGUYỄN QUỲNH THƠ - NGÔ THỊ HẰNG Table Performance of closed-end funds, by the percentage of difference between market price and net asset value per share from 2006 to 2011 Unit: in percentage (%) Closed-end Funds 2006 2007 2008 2009 2011 2010 VF1 +14.45 -28.33 -54.60 -43.77 -46.38 -46.38 BF1 n/a -21.34 -50.75 -33.87 -31.37 -39.52 MPF1 n/a +8.29 -50.75 -33.87 -31.27 -39.52 VF4 n/a n/a -52.50 -21.79 -34.02 -44.84 VFMFA n/a n/a n/a n/a +3.17 -28.66 Note: “+ ” sign implies that market price is higher than NAV (premium), “+ ” sign implies that the market price is lower than NA V (discount) Source: Nguyen Thu Thuy (2012) Table Annual Performance of Various Investment Funds in Vietnam from 2014 to 2020 Year 2014 2015 2016 2017 2018 2019 2020 VN-lndex 8.1 6.1 14.8 48.0 -9.3 7.67 14.87 Open-end SSI-SCA 1.8* 17.7 24.1 38.2* -12.1* 3.91* 18.61 Open-end VFMVF1 9.0 13.6 15.0 44.84* -9.6* 10.61 25.23 Open-end VFMVF4 6.1* 19.9 16.38 46.2* -11.7* 17.84 26.8 Open-end VFMVSF -23.8* n/a Open-end VFMVFB** ETF SSIAM VNX50 ETF Fund Type 15.74 6.32 9.53* 15.94* 11.25 9.15 n/a 13.1 11.0 3.6* 60.4 -7.1* 6.04* 22.95 Note: Unit: in percentage, * for year that the fund underperformed the market index, ** VFMVFB is a bondfund while all otherfunds mainly invest in stocks; Shaded cells refers to years that this fund was not established yet; Source: SSI (2021), Dragon Capital (2021) Nam, 2020) However, the performance of those asset management firms seems to not keep pace with the achievements in aspects of quan tity and assets under management afore mentioned Completing the year 2009, merely 14/46 management firms could mobilize enough capital for establishing their investment funds, and that statistics was 13/47 as of 2010 (Nguyen Thu Thuy, 2012) The problem remains unsolved after roughly 10 years As reported in Nguyen Huu (2019), 19 out of 45 operat ing asset management companies, since establishment, carry neither investment portfolio management services nor invest ment funds which are the key mainline products formulating the role and the im portance of the management firms in the securities market Again, this should be taken into market regulators’ consideration to preserve the quality of fund managment firms and the sustainable development of the securities market as a whole Secondly, investmentfunds grow with more-diversifiedfund types, yet in imbal anced development The investment fund industry, officially putting first steps in Vietnam’s stock market since 2003, is considered a young market with numerous So 231- Tháng 2021- Tạp chí Khoa học & Đào tạo Ngân hàng 29 Biến động quỹ đầu tư khủng hoảng Covid-19 Việt Nam room for further development The num ber of funds tailored by management firms has witnessed a significant increase from only funds in 2005 to 16 and 23 funds in 2007 and 2010, respectively (Nguyen Thu Thuy, 2012) However, fund types are still less-diversified in serving investors’ vari ous needs and risk appetites Most of these funds are closed-end funds, and the rest are partnership funds In pursuing a more-developed invest ment fund industry, new fund types have been introduced to the market with firm statutory frameworks and regulations in 2012, including open-end funds, Real estate funds (REITs), ETFs Of which, the proactive participation of open-end funds and ETFs over the years has conveyed vast contribution to the market liquid ity, investor base coupled with providing diversified investment choices for inves tors, especially individual investors, which in turn raises the need for new open-end fund and ETFs, lifting the fund industry As of December 2020, the total number of funds operating in Vietnam has soared to 57, including 34 open funds, closed funds, 13 partnership funds, ETFs and I real estate fund, managing the total net asset value (NAV) of over 62 trillion VND (approximately $2.7 billion USD) (Table 4) (SSC, 2021a) Newly-established ETFs have especially attracted capital inflows from regional markets as Thailand and South Korea, which poured significant investment capital into Vietnam’s stock market, creating positive sentiment for the market (Vietnam News Agency, 2020) However, there seems an imbalance in the development path of different fund types with: (1) the open-end catergory taking the dominant market share over other funds in terms of fund numbers thanks to their flex ible fund share issuance and redemption as 30 well as their wide sets of asset allocation strategies (Table 4); (2) number of funds listing their shares on stock exchange fall heavily behind stocks, covered warrants and bond issuers (Table & 6), impeding the investment fund industry from ap proaching potential investors in the nu merous and rising secondary market Aside from a limited number of funds plus investors’ investment habits being prone to self-investment rather than authorizing via management companies, investment funds’ weak and unstable performance is another important element hindering investors from allocating their idle capital into investment funds The exit of closed-end funds in Vietnam’s stock market in the past was, if not be cause of reaching the end of the fund life, due to their disappointing performance with their fund shares’ market price be ing sharply discounted from the net asset value per share, ranging from over 20% to roughly 60% (Table 7) (Nguyen Thu Thuy, 2012) Although the erection of open-end funds and ETFs in the mar ket, compared to closed-end funds, have brought new hopes on better performance, their performance (except for big funds as SSI-SCA and VFMVFI run by SSI Man agement and Vietnam Fund Management), especially in terms their ability to beat market index during periods of turmoil, seems to be weak and quite turbulent (Table 8) This poses a concern towards investment fund’s volatility during distressing peri ods, specifically requiring a closer look over the funds’ performance during short er time frames rather than just looking at flattened annual statistics In particular, the bearish market’s impact on the fund’s asset allocation and the fund rigidity in adjusting its allocation strategies could Tạp chí Khoa học & Đào tạo Ngân hàng- Số 231- Tháng 2021 TRẦN THỊ XUÂN ANH - NGUYỄN QUỲNH THƠ - NGÔ TH! HĂNG magnify the fund’s weak performance during market downturns Afterward, this could dry out fund investors and indirectly affect individual investors’ trading behav ior, causing drastic washouts in the market and finally severely damaging the entire market Therefore, again, examining the volatility of investment funds, especially those with large market shares in the in dustry like ETFs, Open-end funds (Table 5), provides valuable and viable solutions to minimize the fund industry’s volatil ity lure investors’ capital into investment funds is crucial Methodology and Data By adopting the research approach of Con gressional Research Service (2020), the volatility of investment funds in Vietnam will be observed in different aspects de pending on types of investment funds As aformentioned discussion, for the recent rising prevalence of ETFs and open-end funds in Vietnams’ fund industry, the vol atility of those fund types will be analyzed as representative cases For ETFs, these funds provide investors with investment opportunities into funds in both primary market (transactions executed with NAV per share, which is calculated by taking total assets under managment of an ETF fund minus its total liabilities and then divided by the outstanding number of ETF shares) and secondary market (transactions executed with market price determined by the supply and demand of ETF shares on stock exchanges) Therefore, the volatil ity of ETFs could be witnessed through the divergence of the market price from the NAV To this, time series of NAV per share and market price of ETF funds’ shares are collected For open-end funds, for their special feature of containing no secondary market for investors’ trades, there is no market price for any single open-end funds, and then, the volatility will be examined on NAV movements only Due to limited access, we have to reply on two sources of daily database: (1) public database available on websites of invest ment funds (investment funds of SSI Asset Management, VanEck Vectors, and Vietnam Fund Management - VFM); (2) internal and confidential database provided by an anonymous brokerage firm for the confidential purpose (all other ETFs) The data is gathered from February of 2018 to February of 2021 As for data processing method and data analyzing techniques, this paper employs descriptive statistical tools combined with the aggregating method and qualitative analysis to assess those funds’ volatility during different Covid-19 waves occuring in Vietnam Volatility of Investment Funds in Vietnam under the Covid-19 Pandemic 4.1 Exchange Traded Funds (ETFs) Exchange-traded funds (ETFs) are consid ered as cheaper and effective alternatives to mutual funds when considerable market volatility exists (Congressional Research Service, 2020) Since ETFs first appeared in Vietnam in 2008, these investment vehicles have become more and more popular in the market due to their diverse portfolio and low transaction costs By the end of 2020, there were active ETFs in the Vietnamese stock market, including seven domestic ETFs and six foreign ETFs (Table 9) The first foreign ETF was FTSE Vietnam Swap UCITS ETF (set up in 2008), followed by VanEck So 231- Tháng 2021- Tạp chí Khoa học & Đào tạo Ngân hàng 31 Biến động quỹ đầu tư khủng hoảng Covid-19 Việt Nam Table Statistics of ETFs in Vietnam Stock Market by March, 2021 Unit: Billions USD Name of fund Ticker Benchmark Type Inception Beginning year NAV 2008 5.1 Ending NAV FTSE ETF FTSE FTSE VN Foreign VNM ETF VNM VanEck VN Foreign 2009 14 457.29 iShare Frontier Vietnam iShare MSCI Foreign 2012 11.4 418.5 VFMVN30 ETF E1VFVN30 VN30 Domestic 2014 332 KIM ETF KIM ETF VN30 Foreign 2016 163 189 SSIAM VNX50 ETF FUESSV50 VNX50 Domestic 2017 3.6 9.1 Premia MSCI Vietnam PREMIA Foreign 2019 21 30.9 VFMVN Diamond FUEVFVND VNDiamond Domestic 2020 4.5 224 SSIAM VNFIN Lead FUESSVFL VNFINL Domestic 2020 9.4 47.66 VinaCapital VN100 FUEVN100 Domestic 2020 2.5 3.6 SSIAM VN30 ETF FUESSV30 VN30 Domestic 2020 2.4 2.8 Mirae Asset VN30 FUEMAV30 VN30 Domestic 2020 n/a n/a Foreign 2020 8.3 13.52 Kindex Vietnam VN30 368470 KS Futures Leverage MSCI VN VN100 VN30 394 Source: State Securities Commission of Vietnam (2021) Vectors Vietnam ETF (launched in 2009) Over the years, the size of total assets managed by ETFs has increased dramati cally Starting with an initial total asset of only 5.1 billion USD, the entire asset value of FTSE Vietnam ETFs has reached 394 billion USD by March 2021, increas ing its value by 77 times Those of another oldest ETFs in Vietnam, VNM VanEck Vectors Vietnam ETF, has risen from 14 billion USD to 457 billion USD, increas ing its value by 32.6 times Domestic ETFs were established later The first domestic ETF in Vietnam, VFMVN30, was established in 2014 with an initial asset value of million USD Its total asset also increased rapidly to 332 million by the end of 2020, changed 35.7 times VFMVN30 is currently consid ered as the biggest domestic ETF in the market at the moment Recently a series of domestic ETF funds were founded In 32 2020, there are five domestic ETFs newly launched, accounting for 70% of the total domestic ETFs operating in Vietnam According to VNDirect Securities Compa ny (2020), the total asset value of all seven domestic ETFs by the end of 2020 was 480 million USD Noticeably, VFMVN Diamond Fund has developed extremely fast Launched on May 2020 with an initial asset value of 4.5 million USD, it increased its value by 49.7 times to 224 million USD, becoming the second-largest domestic ETFs in Vietnam ETFs’ shares can be traded as stocks on stock exchanges at market price which could be different from its underlying port folio’s NAV per share, leading to a high probability of ETF’s liquidity mismatch - a threat to financial stability (Congressio nal Research Service, 2020) An ETF gap with premium to NAV implies that ETF shares are worth more than their underly- Tạp chí Khoa học & Đào tạo Ngân hàng- số 231- Tháng 2021 TRẦN THỊ XUÂN ANH - NGUYỄN QUỲNH THƠ - NGÔ THỊ HẰNG —VNIndex - Number of cases — Number of deaths Figure Correlation between VN-Index, number of confirmed cases, and deaths from Jan, 2020 to August, 2020 Source: Bloomberg (2021), KB Securities Vietnam (2020) Figure Phase 0: ETF NAV Gap before Covid-19 pandemic Source: Authors ’ calculations from database provided in Bloomberg (2021), SSI (2021), VanEck (2021), Dragon Capital (2021) ing holding, and vice versa This situation would not occur under normal market conditions During waves of Covid-19, the market has reacted in different ways There was a correlation between VN-Index, number of confirmed coronavirus cases, and deaths (Figure 2) Similar to VN-Index’s reaction, the vola tility of ETFs’ share varied during periods of market turbulence To clarify the re sponse of ETFs, we investigate the volatil ity of ETFs in different phases: Phase 0: before Covid-19: before November 2019; Phase 1: the first wave of Covid-19: from December 2019 to May 2020; Phase 2: the second wave of Covid-19: from June 2020 to November 2020; Phase 3: the third wave of Covid-19: from December 2020 to February 2021 Before the Covid-19 crisis, ETF shares traded smoothly on Vietnam stock ex changes The deviation of ETFs’ price from its NAV was relatively small in the range of -/+ 5% (Figure 3) Wave 1st: No experience - Huge volatility The market witnessed strong fluctua tions of ETFs’ NAV gap during the first wave of Covid-19 in March 2020 This period was considered the most chal lenging investment period in the history of many investors As this was the first time the Covid-19 outbreak in Vietnam, SỐ 231- Tháng 2021- Tạp chí Khoa học & Đào tạo Ngân hàng 33 Biến động quỹ đầu tư khủng hoảng Covid-19 Việt Nam investors had no experience dealing with such unprecedented market volatility The divergence between ETF price and NAV in this phase was huge The sudden hit has negatively impacted investors’ behavior and weakened ETFs’ NAV and price A lot of ETFs shrunk due to the Covid-19 outbreak Some funds even fell by 20% since the beginning of 2020 (Van Anh, 2020) The largest local fund management company, VietFund Management (VFM), paid 304.35 million USD to avoid the shock, but it did not work well Most of VFM’s investments lost their value Following the general trend on the stock exchange during the first wave of Co vid-19, the two major ETFs (VNM ETF and FTSE Vietnam ETF) also had a bad performance The biggest foreign ETF on Vietnam Stock Market, VNM ETF, recorded a capital outflow of 9.94 mil lion USD on 20 March 2020 when the Covid-19 situation in Vietnam became significantly worse From the beginning of 2020 to 23 March 2020, the total cash out flows of VNM ETF were approximately 25 million USD (Fili, 2020) At the peak, VNM ETFs saw their widest discounts of -10.11% to their NAV VFMVN30 ETF, the biggest domestic ETFs in Vietnam, also saw a decline of 18.21% in NAV per share on 12 March 2020 and recorded their widest discounts of -10.12% to their NAV Wave 2nd & 3rd: Minor volatility During the second wave of Covid-19, the market’s response differed from those of the first wave This time marked an unexpectedly successful period for big investment funds in Viet Nam Despite the resurgence of Covid-19 and the economic index’s slow recovery, the stock market moved positively Some argued that this 34 was because the Vietnamese government applied good policies to control the dis ease The interest rate was also set approx imately 2% lower, encouraging short-term cash flows, triggering an investment wave Since the resurgence of community Co vid-19 transmission in Danang on 24 July 2020, the stock market has faced a gloomy period Most ETFs recorded good per formances Along with the growth of the VN30 index, NAV per share of domestic ETFs grew NAV per share of VFMVN30 ETF rose 21.8%, followed by SSIAM VNX50 (increased 21.4%) Foreign ETFs also had a positive performance In par ticular, FTSE Vietnam ETF, Premia MSCI Vietnam ETF, VNM ETF increased 16%, 14%, and 9.2% respectively However, there was no big gap between ETF shares and the NAV of their holdings (Figure 5) The investors have had knowledge and experience to deal with this unexpected event after the first wave of Covid-19 According to the HOSE report (2020), a series of domestic ETFs were newly founded in this period, including VFMVN Diamond, SSIAM VNFIN Lead, VinaCapital VN100, SSI AM VN30 ETF, Mirae Asset VN30 These ETFs attracted a massive amount of capital and have become a source of support for the market during difficult periods In the second half of 2020, the capital inflow to Vietnam ETFs increased dra matically despite the bear market in March and April In July, the major ETFs on the market together attracted 21.3 million USD The biggest foreign ETF, VNM ETF, attracted 9.16 million USD, while the largest domestic ETF in the market, VFMVN30 ETF, drew 2.8 million USD The proportion of Vietnamese stock in ETFs portfolio increased, accounting for nearly 70% of the portfolio FTSE Viet- Tạp chí Khoa học & Đào tạo Ngân hàng- Số 231- Tháng 2021 TRẦN THỊ XUÂN ANH - NGUYỄN QUỲNH THƠ - NGÔ THỊ HẰNG 1.00% '01/2020 2020 -4.00% Median -9.00% -14.00% Figure ETF NAV Gap during the first wave of Covid-19 Source: Authors 'calculations from database provided in Bloomberg (2021), SSI (2021), VanEck (2021), Dragon Capital (2021) 45.00% aaFTSE MMVNM MMBE1VFVN30 MM Ehare na KIM ETF MM PREMIA MMIFUEVFVND MMFUESSVFL MW FUEVN100 FUEMAV30 Median 25.00% 5.00% 12/05/2020 12/06/2020 2/07/2020 12/08/2020 12/09/21 12/10/2020 12/11/2020 -15.00% Figure ETF NAV Gap during the second wave of Covid-19 Source: Authors' calculations from database provided in Bloomberg (2021), SSI (2021), VanEck (2021), Dragon Capital (2021) MBBFUEVFVND FUESSVFL FUEVN100 FUESSV30 FUEMAV30 Median Figure ETF NAV Gap during the third wave of Covid-19 Source: Authors’ calculations from database provided in Bloomberg (2021), SSI (2021), VanEck (2021) nam ETF also attracted 2.8 million USD only in July Other domestic ETFs such as VFMVN Diamond ETF and SSIAM VNFin Lead ETF drew 3.2 million USD and 4.3 million USD in the second half of July, respectively In December, the capital inflow to ETFs reached 140 million USD, mostly going to VFMVN Diamond SỐ 231- Tháng 2021- Tạp chí Khoa học & Đào tạo Ngân hàng 35 Biến động quỹ đầu tư khủng hoảng Covid-19 Việt Nam ETF and FTSE Vietnam ETF Although VFMVN Diamond ETF was newly es tablished in May 2020, it quickly became a target for foreign investors VFMVN Diamond ETF was considered the most effective fund in 2020, with the growth of NAV per share of 69.7% The fund’s size increased 49.7 times in only seven months from inception, becoming the second-big gest domestic fund in Vietnam Similarly, during the 3rd wave of the Covide-19 epidemic, little volatility was ob served in ETFs’ performance Following the bullish trend, ETFs attracted around 135 million USD The pandemic did not affect the market volatility much The gap between ETFs’ share price and the NAV of their holdings was much smaller The ETFs ecosystem has proved its resilience despite the high market volatility caused by the pandemic (Figure 6) The actual experiences of ETFs have shown that the ETFs ecosystem remained strong and functioned well In short, during the height of financial market stress, contrary to the pessimistic predictions, ETFs’ volatility has been smoothed out In the first wave, the diver gence of ETFs’ price and NAV was huge due to investors’ fragile manner After having experiences dealing with unex pected events, the gaps narrowed down, the market became more stable, and the liquidity mismatch level was also lower ETF performance throughout the market volatility demonstrated how ETFs could add stability to capital markets ETFs did not increase market volatility during the Covid-19 crisis, instead, they were a source of stability as investors increasing ly turned to ETFs to efficiently rebalance holdings, hedge portfolio and manage risk Throughout the pandemic and result ing market volatility, investors increas 36 ingly turned to ETFs to allocate capital and manage risk in their portfolio ETFs generally functioned well and delivered on investor expectations crisis despite facing the most turbulent market conditions of the Covid-19 4.2 Open-end Funds Different from other fund types such as closed-end funds and ETFs, open-end funds not list their fund certificates (fund shares) on the stock exchange and only allow investors to conduct fund share purchases and sales directly with the fund management (SSC, 2021b) Then, there is no stock exchange for open-end fund shares nor the market prices Therefore, the volatility of open-end funds is exclu sively observed with NAV movements over time For the first wave of the Covid-19, simi lar to ETFs, all of the open-end funds got hit by the Covid but in different magni tude Vietnam Fund Management (VFM), although widely recognized as the largest domestic management firm in Vietnam’s stock market with over 7.000 billion VND under management and good performance records of running its funds, could not avoid the hit from the covid epidemic in the first wave with most of their funds’ holdings losing value going along with the market In particular, according to Dragon Capital (2021) while VFMVF1 with 414 billion VND ($18 million) fund size, experienced NAV per share (NAV) falling by 16.18 percent compared to the beginning of the year, the other VFM fund with a smaller investment scale of 99 billion VND ($4.3 million), VFMVF4, was hit harder and recorded a slash of 20.21 percent, worse than a 19.95 percent decrease in the Tạp chí Khoa học & Đào tạo Ngân hàng- Số 231- Tháng 2021 TRẦN THỊ XUÂN ANH - NGUYỄN QUỲNH THƠ - NGÔ THỊ HẰNG VN-index of Ho Chi Minh City Stock Exchange (Figure 7) It could be seen that despite lower investment value, VFMVF4 still witnessed a drastic fall in NAV per share than VFMVF1 This is because of their difference in asset allocation strate gies Unlike VFMVF4 - an equity fund, being a balance fund investing in both equity and debt securities, VFMVF1 was less damaged and volatile On the other hand, VFMVSF and VFMVFC with smaller investment value (35 billion VND and 2.5 billion VND, respec tively), investor size, and the majority of their holdings falling into debt securities and certificates of deposit, suffered less losses than VFMVF1 & VFMVF4 with their NAV falling by only 13.75 and 2.12 percent (Van Anh, 2020) Especially being a bond fund, VFMVFB proved its resilience against shocks in the stock market as its NAV per share, from the beginning of the year to mid-March, grew by 2.02 percent (Table 8) The 2nd and 3rd phases of the Covid-19 crisis still slightly dragged down the operation of open-end funds but within a shorter time, about a half month since the beginning of the reoccurrence (Figure 8) The entire country and the fund industry have had experiences from the first wave of the Covid-19, the high alerted 2nd Co vid -19 detected in July 2020 was quickly under control As a result of successfully containing the Covid-19 outbreak in line with financial support via the State Bank of Vietnam’s monetary policy on cutting interest rates to support businesses and the economy, Viet Nam’s reputation as an attractive and safe investment destination has been cemented Investors’ panic was settled down, and the fund also restruc tured its asset allocation, with the number of target stocks cutting down to 28 - 32 from 35 -40 (Vietnam news agency, 2021) These explained the minimized change in NAV per share of open-end funds during these periods In a nutshell, similar to ETFs, the im pact of the unprecedented Covid-19 on open-end funds in Vietnam was recorded to be tremendously negative during the first presence of the pandemic, especially has weighted heavily on larger funds and funds with main holdings of listed shares, but seems to be smaller in magnitude for later comebacks Moreover, open-end funds seem to be more volatile compared to ETFs, as mentioned earlier So, the consideration of nurturing the flourishing of ETFs is worth looking to stabilize the market and investors’ trading behavior Concluding remarks, policy recom mendations and future research path Our paper contributes to the recent lit erature on how the Covid-19 crisis has affected different segments of the financial market in general and capital market in particular and literature on the investment fund industry The paper has found out that: (1) the investment funds and fund management companies are increasingly proving their importance in the capital market in providing investors with diversi fied collective investment vehicles supe rior to bank savings and strengthening the Vietnamese stock market’s investor base towards a rising proportion of institutional investors to reach a more stable market against shocks; (2) Under the Covid-19 crisis, ETFs proved to be more resilient than open-end funds and were additive to the overall functioning of markets; (3) As for open-end funds, bond funds and funds with smaller holdings of listed shares on major stock exchanges seem to be safe SỐ 231- Tháng 2021- Tạp chí Khoa học & Đào tạo Ngân hàng 37 Biến động quỹ đầu tư khủng hoảng Covid-19 Việt Nam from June, 2019 to March, 2021 Source: Authors ’ calculations from database provided in Dragon Capital (2021) 11.00% -14.00% ■■VFMVFl ™VF1WVF4 SST-SC A "Median Figure A closer look on NAV of open-end funds during 2nd & 3rd wave of the Covid-19 Note: Historical data of SSỈ-SCA s NAI'per share is available only from July, 2020 Source: Authors’calculations from database provided in Dragon Capital (2021), SSI (2021) investment spots In Vietnam, there has been estimated to be 19.000 investors participating in investment funds (Review of Finance, 2018), accounting for a modest number compared to 2.2 million investors in the Vietnam stock market by the end of 2018 Therefore, there is numerous room for the development of both asset management firms and investment funds In addition, the need for exchange-traded products classifications has underscored Without clear classification, it is difficult 38 for investors to distinguish among differ ent exchange-traded products in terms of structures and risks Therefore, ETF has become a blanket term for any product that offers exchange-tradability In fact, many products labelled as “ETFs” have characteristics different from the type of product most commonly associated with a benchmark index, exposure to the credit worthiness of the issuer of the underlying debt As a wider range of end-investors turn to exchange-traded products, it is be coming increasingly important to protect Tạp chí Khoa học & Đào tạo Ngân hàng- Số 231- Tháng 2021 TRẦN THỊ XUÂN ANH - NGUYỄN QUỲNH THƠ - NGÔ THỊ HẰNG investors by helping them acknowledge the wide range of structures and risks as sociated with the products, understand the way such products behave during periods of market volatility and the risks involved An exchange traded product classification system will better serve end-investors by providing more clarity on the specifics of these products as well as help policy mak ers and regulators focus their efforts Hence, market regulators should keep eyes on: (1) attracting investors pouring their money into investment funds by applying tools and approaches to raise investors’ awareness of investment funds and asset xem tiếp trang 82 References Bloomberg (2021), Database on Vietnam Investment Funds, Internal Access Congressional Research Service (2020), Capital Markets Volatility and Covid-19: Background and Policy Reponses, CRS Report Dragon Capital (2021), Forms & Literature: Database on Annual Reports ofVFMVFl, VFMVF4, VFMVFB, VFMVFS, VFMVFC, Retrieved on 3/3/2021 from: https://dcvfin.com.vn/en/forms-literature/literature/3report_ type=bao-cao-thuong-men&fund_code=VFMVF4&report_year=2021 Duy Thai (2015), Tái cấu trúc công ty quản lý quỹ - Những thành tựu bước đầu, Retrieved on 1/3/2021 from: http:// thoibaotaichinhvietnam.vn/pages/chung-khoan/2014-12-31/tai-cau-truc-cac-cong-ty-quan-ly-quy-nhung-thanhtuu-buoc-dau-16724 aspx Fili (2020), VNM ETF bị rút vốn gần 25 triệu USD kể từ đầu năm 2020, Retrieved on 3/3/2021 from:https://ndh.vn/ quy-dau-tu/vnm-etf-bi-rut-von-gan-25-trieu-usd-ke-tu-dau-nam-2020-l265568.html Hoa Son (2021), Thị trường chứng khoán Việt Nam năm 2020: Thể sức chống chịu trước đại dịch, Retrieved on 15/2/2021 from: https://tapchitaichinh.vn/kinh-te-vi-mo/thi-truong-chung-khoan-viet-nam-nam-2020-the-hiensuc-chong-chiu-truoc-dai-dich-331494.html HOSE (2020) "Thêm quỹ ETF nội mô theo chi số VN30” Retrieved on 6/3/2021 from: https://finance.tvsi.com vn/news/detailNews 3newsid=5333 72 KB Securities Vietnam (2020), Triển vọng thị trường chứng khoán Việt Nam Q4/2020, KBSV Research Nguyen Huu (2019), 19 Công ty quản lý quỹ chưa có quỹ, Retrieved on 19/2/2021from: https:// tinnhanhchungkhoan.vn/19-cong-ty-quan-ly-quy-chua-tung-co-quy-post2081 11.html Nguyen Huu Binh (2020), Thị trường chứng khốn Việt Nam: Sự trưởng thành sau 20 năm hình thành phát triển, Retrieved on 7/1/2021 from: http://consosukien.vn/thi-truong-chung-khoan-viet-nam-su-truong-thanh-sau-20nam-hinh-thanh-va-phat-trien.htm Nguyen Thu Thuy (2012), Kinh nghiệm phát triển Quỹ đầu tư số nước học kinh nghiệm cho Việt Nam, Retrieved on 1/3/2021 from: https://www.sbv.gov.vn/webcenter/contentattachfile/idcplg/dDocName-SBV281804 &filename=283572.pdf Review ofFinance (2018), Ngành Quản lý quỹ góp phần phát triển thị trường chứng khoán năm 2017, Retrieved on 19/2/2021from: https://tapchitaichinh vn/kinh-te-vi-mo/nganh-quan-ly-quy-gop-phan-phat-trien-thi-truongchung-khoan-trong-nam-2017-135704.html SSI (2021), Database on SSI Funds 'performance, Retrieved on 1/3/2021 from: https://www.ssi.com.vn/en/ssiam/ performance-ssi-sca State Securities Commission of Vietnam (SSC) (2021a), Database on Stock markets, Retrieved on 20/2/202lfrom:http:// www.ssc.gov.vn/ubck/faces/vi/vimenu/vipages_yithongtinthitruong?_adf.ctrl-state=ucu9dkf71 _86&_ afrLoop=98978096317000 State Securities Commission of Vietnam (SSC) (2021b), Legal Documents, Retrieved on 20/2/2021 from:https://ssc.gov vn/ubck/faces/vi/vimenu/vipages_vivbpl3_adf.ctrl-state=10d45p7ldp_81&_afrLoop=365928745543000 Van Anh (2020), Investment funds of VFM dropped by COVID-19, Retrieved on 10/3/2021 from: https://www.vir.com vn/investment-funds-of-vfm-dropped-by-covid-19- 74785 html VanEck (2021), VanEck Vectors Vietnam ETF: Documents - NA V daily, Retrieved on 2/3/2021 from https://www vaneck.com/us/en/investments/vietnam-etf-vnm/documents Vietnam news agency (2020), VN’s equity market attract capital via funds, Retrieved on 18/1/2021 from: https:// en.vietnamplus.vn/vietnams-equity-market-attract-capital-via-funds/193004.vnp Vietnam news agency (2021), Investment funds in Vietnam remain optimistic despite poor performance, Retrieved on 6/3/2021from: https://en vietnamplus vn/investment-funds-in-vietnam-remain-optimistic-despite-poorperformance/196789 vnp So 231- Tháng 2021- Tạp chí Khoa học & Đào tạo Ngân hàng 39 ... NGUYỄN QUỲNH THƠ - NGÔ THỊ HẰNG quỹ đầu tư Do vậy, việc nghiên cứu biến động quỹ đầu tư giai đoạn khủng hoảng covid- 19 Việt Nam mang lại lợi ích định nhà đâu tư, quỹ đầu tư, quan quản lý thị trường... As this was the first time the Covid- 19 outbreak in Vietnam, SỐ 231- Tháng 2021- Tạp chí Khoa học & Đào tạo Ngân hàng 33 Biến động quỹ đầu tư khủng hoảng Covid- 19 Việt Nam investors had no experience... học & Đào tạo Ngân hàng 25 Biến động quỹ đầu tư khủng hoảng Covid- 19 Việt Nam of 7,420 billion Vietnamese dong (VND) in 2020, increasing by 59.3% compared to the year 2 019 (Hoa Son, 2021) Other