VNSHINE AND THE NEXT STEP FOR VIETNAM’S ETF MARKET: GIVING INVESTORS A NEW WAY TO ACCESS THE MARKET
The challenge facing a still-young ETF market
As of September 21, 2026, FTSE Russell officially upgraded Vietnam’s stock market to Secondary Emerging Market status, raising the country’s weighting in the FTSE Emerging All Cap Index from 0.329% to 0.49% and widening access to international capital, particularly passive, index-tracking funds. The upgrade raises an important question: are domestic investment products, ETFs included, diverse enough to capture this new wave of capital?
PHFM’s decision to develop a new ETF product stem from growing demand for investment approaches that are systematic and transparent, but not built solely around market capitalization. Most traditional ETFs are constructed on cap-weighted indices. VNSHINE, by contrast, is designed as a Smart Beta product: it keeps the core features of index investing — transparency, discipline, and low-cost access — while adding a quantitative screening framework that selects companies based on how they create and distribute value to shareholders.
From an investor’s standpoint, the product adds a further way to access the market. Investors do not need to research, select, and rebalance stocks themselves as they would in active portfolio management, yet the resulting portfolio is not simply a reflection of company size either. Therefore, PHFM aims not merely to introduce a traditional ETF to the market, but to offer a new approach—providing investors with an additional tool to construct portfolios aligned with their specific investment goals and perspectives.
Why did VNSHINE choose Shareholder Yield?
Unlike traditional dividend-focused strategies, Shareholder Yield takes a broader view of portfolio construction. It looks not only at how high a company’s dividend is, but also at how the company deploys its financial resources and creates value for shareholders. A high dividend yield does not automatically signal strong financial quality: a company can pay a generous dividend while at the same time increasing debt materially or issuing new shares that dilute existing shareholders. Investors who focus on dividends alone risk overlooking important shifts in a company’s capital structure.
VNSHINE addresses this by combining three factors: a high cash dividend yield paired with a three-year track record of uninterrupted cash dividend payments, a low degree of share dilution, and the company’s ability to reduce net debt. Taken together, these three criteria capture what Shareholder Yield is meant to reflect — companies that generate real cash, share it fairly with shareholders, and do not trade away financial stability for short-term growth.
What investors can expect from FUEPHVNS in terms of return and risk?
VNSHINE is a strategy built on its own set of criteria to select investments capable of generating returns while still adhering to sound risk-management principles — forming an investment philosophy sturdy enough to help investors ride out market volatility.
The Shareholder Yield strategy tends to perform well in periods when the market rewards financial quality, cash-generation ability, dividends, and capital discipline. Companies with healthy balance sheets are typically less reliant on speculative drivers within their core operations. Conversely, the strategy may lag on a relative basis during periods led by speculative or high-volatility names, or by large-cap companies that do not meet the criteria for delivering real value to shareholders.
Investors should therefore view FUEPHVNS as a long-term, sustainable investment approach rather than a tool optimized for any single market phase.
Four conditions for turning an investment idea into an effective ETF
The rise of Smart Beta reflects the maturing of a financial market. As market size grows, investor experience deepens, and asset-allocation needs become more varied, investors no longer need just a tool to track the broad market — they also want to choose how they approach it. Philosophies such as quality, value, dividends, low volatility, or shareholder value can each be translated into a quantitative rule set and delivered in ETF form. At the same time, asset managers need to diversify their product ranges and build deeper methodologies to meet increasingly differentiated investor needs.
Not every investment idea, however, makes for a good ETF. Drawing on its experience developing VNSHINE, PHFM believes four factors determine whether an investment idea can become an effective ETF in practice, rather than remain a theoretical framework on paper:
1) Transparency of the screening rules: the index must be publicly disclosed and calculated automatically, without relying on subjective judgment.
2) Durability across market cycles: the strategy must be validated against sufficiently long backtest data spanning rising, falling, and sideways markets, rather than optimized for a single favorable period.
3) Liquidity of the underlying basket: the portfolio must be liquid enough to be rebalanced at a reasonable cost in practice.
4) An automatic, systematic risk-management mechanism: companies with latent investment risk should be filtered out at the screening stage, rather than dealt with only after risk has materialized.
Bottlenecks in Vietnam’s ETF market
Beyond the challenges of scale and liquidity, one key bottleneck is that the range of products allowed under the current regulatory framework remains relatively narrow compared with more developed markets. In Vietnam, fund portfolios are largely confined to securities and other financial assets defined by law. Notably, funds’ use of derivatives is currently limited mainly to hedging and tracking-error reduction, which means several ETF types common elsewhere — particularly commodity-derivative-based products and leveraged ETFs — do not yet fit within the existing framework.
In developed markets, investors can gain exposure to gold and silver through financial products designed to track price movements, without having to buy and store the physical metal directly; the same holds for other commodities such as oil. This shows that the constraint on ETF development lies not only in whether the market has enough investment ideas, but also in whether the mechanisms, regulatory framework, pricing, and risk governance are ready to turn those ideas into actual products.
Even if the regulatory framework were to expand, another factor would still take time to shift: investor habits. Most individual investors in Vietnam remain accustomed to picking individual stocks actively or chasing short-term opportunities, rather than pursuing long-term, systematic wealth accumulation. As a result, the role of ETF products is not yet fully appreciated, leaving limited momentum behind the development of new ETF offerings.
A further challenge for ETF products is ensuring sufficient scale and liquidity for investors to use them conveniently. Adequate scale allows a fund to operate more efficiently, while strong liquidity makes it easier for investors to trade without creating excessive price gaps. Achieving this requires not only attracting initial capital inflows but also the participation of market makers, authorized participants, and a sufficiently liquid underlying basket.
Room for growth over the next three to five years
Within its current scope, Smart Beta still has considerable room to grow, spanning selection strategies such as quality, value, dividends, low volatility, or multi-factor combinations. Over the longer term, however, the larger opportunity may lie in expanding ETFs into a wider range of asset classes.
Some products would be highly useful to investors but remain difficult to launch in Vietnam today — commodity-tracking products such as gold or silver being a case in point. In practice, domestic investors can already trade these assets through derivative contracts on the Mercantile Exchange of Vietnam (MXV), but this is a leveraged derivatives channel that requires specific expertise and carries fixed per-lot fees that are relatively high compared with the trade sizes typical of individual investors. In other words, an access channel already exists, but not yet in the form of a simple, low-cost ETF suited to long-term holding. Overseas, by contrast, numerous ETFs already use futures contracts to track commodity price movements.
If the regulatory framework eventually allows such products to develop, backed by adequate risk-management and investor-protection mechanisms, ETFs could become a more complete asset-allocation tool — rather than mainly helping investors choose among different groups of stocks.
Investment implication
Smart Beta is a necessary step toward a more mature ETF market: the emergence of strategies such as Shareholder Yield gives investors more choice and addresses their increasingly diverse needs for market access, rather than simply tracking a cap-weighted index. This is a natural trend that accompanies growth in market size and investor experience.
Screening quality determines an ETF’s practical value: rule transparency, durability across cycles, liquidity of the underlying basket, and an automatic risk-management mechanism are the four necessary conditions for an investment idea to become a viable product, rather than remain a theoretical framework.
Opportunity comes with challenges: over the next three to five years, the growth potential of Vietnam’s ETF market will hinge on two core variables — the regulatory framework and investor behavior. On one hand, constraints in the current mechanism are holding back diversification toward newer, more complex product structures. On the other hand, the short-term trading habits of individual investors are quietly eroding the market’s momentum for innovation. These are the two key bottlenecks to watch closely in assessing the next growth cycle for Vietnam’s ETFs.
PHFM