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ETF Monitor – LPB might be excluded from VNDiamond

Strategy Note 20/09/2021    267


  • New VNDiamond index basket will be announced on 18 Oct 2021, which will come into effect on 01 Nov 2021.
  • According to our estimates, LPB will be excluded from VNDiamond following the new rule and MWG, FPT will be strongly sold by ETFs with the value of VND220bn and VND190bn as they reduced their weight after rebalancing in this review.

VNDiamond has experienced capital outflow since this Aug

We observed that a large capital has flowed out of ETFs investing in Vietnam. DCVFM VNDiamond ETF, after a period of continuous increasing in the number of fund certificates, has tended to decrease since Aug 21 when the number of fund certificates decreased by 48.4m in the period from 11 Aug to 17 Sep, which is similar to fund outflow in period of Aug – Sep 21 with a value up to more than VND1,200bn.

We think the capital outflow from VNDiamond ETF may come from PYN Elite Fund as they have reduced the weight of VNDiamond ETF in their portfolio from 9.2% in Jun 21 to 2.9% in Aug 21.

LPB might be excluded from VNDiamond, following the new rule

The Ho Chi Minh Stock Exchange (HOSE) has announced some changes in VNDiamond index rule on 15 Jun 2021. These new rules are expected to take effect in Oct 2021 review period. New rules will tighten some criteria of listing time, capitalization, liquidity and foreign ownership limit in order to enhance the quality of index.

  • LPB might be excluded from VNDiamond: According to the new rule, the maximum foreign ownership percentage to calculate the FOL ratio of LPB is 20% (instead of 5% as set by company), therefore, new LPB’s FOL ratio (%foreign ownership/%maximum foreign ownership) only reached approximately 20%, not satisfying the requirement to stay in VNDiamond (FOL ratio >80% for stocks in the previous basket).
  • TCM and CTD still stay in VNDiamond: These two stocks have maintained their freefloat adjusted market capitalization larger than VND2,000bn to pass new capitalization screening.
  • Some stock will be reduced weight in index calculation: In this review, new liquidity ratio will be applied into index calculation, lead to the stocks with lower liquidity ratio will be reduced its weight in VNDiamond index calculation. As like our previous report, the weight of EIB, VIB, MWG and PNJ in index calculation will likely be reduced due to their current low liquidity.

New VNDiamond index basket will be announced on 18 Oct 2021, which will come into effect on 01 Nov 2021. Based on the above result, DCVFM VNDiamond ETF, with a total net asset value of VND12,819bn will rebalance its portfolio on the previous trading date (29 Oct 2021).
We estimate DCVFM VNDiamond ETF will buy 9.0m VIB shares and 4.6m TCB shares in this review. On the other hand, LPB will be strongly sold by ETF with 10.9m shares when it will be excluded from VNDiamond index.

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