Global ETFs may eye eight VN blue chips

Eight large-cap stocks may be included in the Financial Times Stock Exchange (FTSE) Emerging Markets Index if Viet Nam gets upgraded from a frontier to an emerging market in 2020, according to Bao Viet Securities Company (BVSC).

In a recent report, BVSC said the eight large-cap stocks are property developers Vingroup (VIC), Vincom Retail (VRE) and Vinhomes (VHM), dairy producer Vinamilk (VNM), financial firms Vietcombank (VCB) and Bao Viet Holdings (BVH), and brewer Sabeco (SAB).

The eight firms are also among the top 30 largest companies by market capitalisation on the Ho Chi Minh Stock Exchange (HoSE).

Data from BVSC shows there are about 27 exchange-traded funds (ETFs) that are invested based on the FTSE Emerging Markets Index with total value of US$76.4 billion.

“In the case that Viet Nam gets upgraded by FTSE to a second-tier emerging market in March 2020 after the amended Law on Securities is approved by the 14th National Assembly in its eighth meeting [in the third quarter of 2020], global ETFs may disburse minimum $375.34 million in the Vietnamese stocks following ETFs’ portfolio shake-ups in the same month,” BVSC said.

Six of the eight mentioned stocks have met requirements of the FTSE Emerging Markets Index on market capitalisation, trading liquidity, foreign ownership limit and free-float share percentage, BVSC said, adding BVH and VHM are the two stocks having not met the requirements on trading liquidity.

“To meet the condition, each company must see an average of more than 508,000 shares traded in each session per month.”

BVSC also forecast VIC may account for the largest proportion of foreign purchases when ETFs flock into the Vietnamese stock market (0.11 per cent), worth $85.8 million, and BVH has the smallest amount (0.02 per cent), worth $18.25 million.

Six stocks targeted

Six blue chips that may be added into Morgan Stanley Capital International (MSCI) Emerging Markets Index are VIC, VHM, VNM, VCB, VRE and BVH, according to BVSC.

VIC may account for 0.12 per cent of all foreign purchases, worth $241.5 million, while BVH is still the smallest with 0.02 per cent, worth $47 million, BVSC forecast.

It may be more difficult for those stocks to be added into MSCI Emerging Markets Index because MSCI standards are harder to achieve than FTSE’s, the brokerage said.

Data provided by BVSC shows 94 ETFs are managing their portfolios based on the MSCI Emerging Markets Index with total asset value of $200.26 billion. If MSCI raises Viet Nam to an emerging market, the local stock market may receive $857.7 million capital from those ETFs. 

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