The VN Diamond Index’s latest version 3.0 introduces more stringent liquidity requirements for constituent stocks. According to Section 3.4 of the new rules, stocks that were not part of the previous index’s constituents and have a trading value of “less than VND 20 billion” will be excluded from the index consideration. Stocks that were part of the previous index’s constituents and have a trading value of “less than VND 10 billion” will be removed from the index.
In contrast, version 2.1 mentioned conditions of “less than VND 10 billion or a matched trading volume of less than 200,000 shares” and “less than VND 8 billion or a matched trading volume of less than 100,000 shares.”
Regarding the criteria for selecting stocks to enter the index for the first time, Section 3.7 of the VN Diamond Index 2.1 rules stated that stocks meeting the requirements of Section 3.6 and having a Foreign Ownership Limit (FOL) coefficient of at least 90% while the remaining foreign-owned capital limit (GTVH_ngm) did not exceed VND 500 billion would be selected. However, version 3.0 has removed the GTVH_ngm criterion.
When it comes to determining stocks for periodic index inclusion, version 3.0 stipulates that for stocks already included in the previous index’s constituents, the FOL coefficient must be at least 65%. On the other hand, version 2.1 required a minimum FOL coefficient of 80% for such stocks.
In the event that the index constituents fall below 10 stocks, version 3.0 provides that selection will be made in descending order of FOL coefficient until the required number is met. If the FOL coefficients are equal, the selection will be based on the matched trading volume instead of the GTVH_ngm criterion used in version 2.1.
Additionally, the 3.0 rules introduce specific sub-indices, including a provisional stock basket, a stock basket for potential exclusion, a stock basket for new entrants, a stock basket for stocks maintaining their position for two consecutive periods, and the official stock basket for the current period.
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Changes in the Construction Rules of the VN Diamond Index
Source: Author’s Compilation
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