VNDiamond 3Q22 review: NLG likely to replace TCM

Investors are waiting for VNDiamond 3Q22 review

Mr. Phan Nhu Bach, analyst at VNDirect, said Nam Long Investment Corporation (HoSE: NLG) would be incorporated in the review of the new basket that will be revealed on October 17, 2022, while Thanh Cong Textile Garment Investment Trading Joint Stock Company (HoSE: TCM) would be left out, according to VNDirect.

The DCVFM VNDiamond ETF reported a VND1,613bn outflow in the third quarter of 2022 and a NAV of VND14,820bn as of 30 September 2022. The significant outflow could be attributed to the Vietnam stock market's recent poor performance, which was negatively impacted by interest rate hikes and pressure on the VND to decline. Outperforming the VNINDEX (-27% ytd), VN30 (-27.6% ytd), and VNMidcap (-35.4% ytd), the VNDiamond index fell 16.3% year to date.

In 3Q22, total Vietnam ETFs saw a lower outflow of VND169 billion, primarily due to VNDiamond, while other ETFs still saw positive inflows despite market volatility.

The new VNDiamond index basket will be unveiled on October 17, 2022, and it will go into effect on November 7, 2022. Based on statistics through September 30, 2022, Mr. Phan Nhu Bach anticipates the following.

First, TCM will probably be eliminated. TCM's estimated 12-month average free float adjusted market capitalization is less than VND 2,000 billion, falling short of the required level.

Second, this review may include NLG in the VNDiamond basket. The removal of TCM will be followed by the addition of these non-bank stocks since VNDiamond must keep a minimum of 8 non-bank stocks in the basket. The candidate that most closely satisfies VNDiamond's standards and has the highest percentage of foreign ownership among non-bank equities, in VNDirect’s opinion, is NLG.

On November 4th, 2022, DCVFM VNDiamond ETF will rebalance its holdings. In this analysis, VNDirect predicts that DCVFM VNDiamond ETF will buy 5.4 million additional shares of NLG. There may also be an addition of 10.2 million and 5.5 million shares of Vietnam Technological and Commercial Joint Stock Bank (HoSE: TCB) and Gemadept Corporation (HoSE: GMD), respectively.

“About 617,500 shares of TCM will be traded on the sell side. In this review, the DCVFM VNDiamond ETF may sell 36.9 million, 3.3 million, and 1.8 million shares of Vietnam Prosperity Joint Stock Commercial Bank (HoSE: VPB), Mobile World Investment Corporation (HoSE: MWG), and Refrigeration Electrical Engineering Corporation (HoSE: REE), respectively”, said Mr. Phan Nhu Bach.