Which stock will be excluded from VNDiamond?

24/12/2024, 11:11

Dual transition – a pillar of Vietnam’s economic growth

New VNDiamond index basket will be announced on 18 Oct 2021, which will come into effect on 01 Nov 2021.

Capital outflow

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 August 21, 2021 when the number of fund certificates decreased by 48.4m in the period from 11 August to 17 September, 2021 which is similar to fund outflow in period of August – September 21 with a value up to more than VND1,200bn.

VNDirect said 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 June 21 to 2.9% in August 21, 2021.

Adjusting index basket following the new rules

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.

According to the new rules, 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), said VNDirect.

Meanwhile, TCM and CTD have maintained their freefloat adjusted market capitalization larger than VND2,000bn to pass new capitalization screening. So they could stay in VNDiamond.

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 VNDirect’s 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).

VNDirect estimated DCVFM VNDiamond ETF would 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.

VNDiamond’s rule changes

For listing time condition, there are at least 3 months on HOSE up to the closing date of the index review period. Concerning the market capitalization condition, minimum freefloat adjusted market capitalization of VND2,000bn. For liquidity conditions, the minimum daily trading value of VND8bn and the daily trading volume of 100k shares (for stocks of VNDiamond in the previous period) or daily trading value of VND10bn and daily trading volume of 200k shares (for stocks not belonging to VNDiamond in the previous period) are eligible to be considered for VNDiamond.

As for P/E conditions, eligible stocks of VNDiamond in previous period must have P/E in range of 0 to 3 times the average P/E. Eligible stocks of non-VNDiamond in previous period must have P/E in range of 0 to 2 times the average P/E.

Additional conditions when there is a 40% weight limit for 2 industries: if the number of stocks outside the industry subject to the 40% weight limit is less than 3 stocks, the stocks outside the industry will be added to make 3 stocks.