ETFs in Philippines versus Thailand and Vietnam

FMETF is currently the only exchange-traded fund (ETF) available in the Philippine Stock Exchange. FMETF was launched in 2013 and aims to track the performance of the PSE Composite Index (PSEI), which tracks 30 companies in the Philippine Stock Exchange.

As of November 4, 2019, FMETF’s total assets is PHP  1,680,365,665.87 or about $33.3 million. In comparison, the total PSEi market capitalization is PHP 10,073,517,502,927.30 or about $199.4 billion. So, FMETF’s market cap is 0.0167% of that of the PSEi, six years after it was first introduced. And again in that span of time, no other ETF was introduced in the market.

I was curious how ETFs in a neighboring countries fare. The Stock Exchange of Thailand (SET) has a quite a few ETFs available. The TDEX ETF introduced in 2007 tracks the SET50 index, and the ETF has total assets of $3.1 billion compared to SET50 capitalization of  $388 billion. TDEX’s market cap is about 0.8% of that of the SET50 index. Keep in mind that there several ETFs in the Thailand market, some covering the larger SET100 and quite a few covering specific sectors. Needless to say, the Thai stock market is larger than the Philippine market.

On the other hand, Vietnam’s Ho Chi Minh Stock Exchange is smaller than the Philippine market. There are two ETFs available. The VFMVN30 ETF, launched in 2014, tracks the VN30 index. It has total assets amounting to $280 million compared to the VN30 total capitalization of about $44.2 billion. So the VFMVN30 ETF’s market cap is about 0.63% of that of the VN30 index. Another ETF, the  SSIAM VNX50, tracks another index.

Note that the largest ETF in the world, SPY, has about 1% of the capitalization of the S&P 500 that it tracks. Now, are these percentages a valid metric for comparison? I don’t know. It’s interesting that in absolute asset terms, Vietnam’s VFMVN30 ETF is more than 8 times bigger than the FMETF. Why is the FMETF’s market cap percentage so low compared to the cap of the index it tracks? While there’s no other ETF to invest in, there are quite a few mutual funds and so-called unit investment trust funds (UITFs) that also track the same index. That could dampen interest in FMETF.

Limits on foreign ownership of Philippine companies may also be another factor limiting interest in FMETF. Interestingly, the VFMVN30  ETF supposedly has no foreign ownership limit. In fact, it is now also listed in the Thai stock exchange as a depository receipt.

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