Bien Viet Securities Co. has joined forces with South Korea-based Woori Investment & Securities Ltd to develop an index on investor confidence in the domestic stock market.

The Investor Confidence Index would be a quantitative tool which would measure the buying and selling patterns of domestic and overseas investors who execute securities trades on the domestic market, with half of the index weighted towards an examination of price-to-earnings ratios relative to the yields of 10-year Government bonds. The index would be set at a base point of 100.

"If the index is higher than 100 points, it would show confidence growing stronger and investors increasing allocation of assets to equities," explained Bien Viet director Vu Duc Nghia. "Meanwhile, investor confidence would be more negative towards securities investment if allocations to this investment channel slowed, and the index would fall below 100."

For instance, Nghia said, the Investor Confidence Index in May was measured at 109.19, signalling the return of domestic investors to a more risk-taking attitude. "This was a very good sign for the stock market after eight months on hiatus."

Meanwhile, the index measured foreigners at 97.21. "While the risk tolerance of domestic investors has increased to the point where they are more confident to add high-risk assets to their portfolios, the same may not be said of overseas investors who, while more confident than in recent months, continue to be ambivalent."