ETF rebalancing set to drive stock flows ahead of FTSE GEIS changes

ETF rebalancing set to drive stock flows ahead of FTSE GEIS changes

Vietnam’s stock market is bracing for a concentrated wave of ETF trading as foreign funds rebalance portfolios ahead of the FTSE Global Equity Index Series changes taking effect next week.

The trading week of September 14-18, is shaping up as an important period for Vietnam’s stock market, with several major foreign ETFs simultaneously rebalancing their portfolios ahead of changes to benchmark indices.

The funds involved include Fubon Vietnam ETF, VanEck Vietnam ETF, Xtrackers Vietnam Swap UCITS ETF, as well as Vanguard funds tracking the global FTSE Global Equity Index Series (FTSE GEIS) index series.

The transactions are expected to be completed in the September 18 trading session, before the changes in portfolio composition and weightings officially take effect.

The first tranche of purchases by funds tracking FTSE’s global indices is expected to take place on September 18, three days before the new index composition becomes effective on September 21. SSI Securities estimated that these funds could generate net purchases worth around $240 million in the first tranche, covering 27 Vietnamese stocks.

However, because September 18 also marks the portfolio-rebalancing date for major foreign ETFs already invested in Vietnam, including Xtrackers, VanEck and Fubon, individual stocks could see buying and selling pressure from multiple ETF flows at the same time.

This means the actual trading impact on each stock will reflect not only additions to and removals from the relevant indices, but also simultaneous portfolio rebalancing by the various ETFs.

Vingroup is a notable example. While the stock is expected to receive strong buying from Vanguard funds, it is also facing net selling pressure from other ETFs, particularly Xtrackers, which is set to cut its weighting from 31.6 per cent to 15 per cent.

SSI Research has provided the following estimates for ETF trading flows during the September 14-18 week.

VPBank is expected to attract the strongest buying, with an estimated inflow of $32.82 million, followed by Vinhomes at $30.85 million and Masan Consumer at $22.10 million. FPT and Masan Group are next, with estimated buying flows of $21.48 million and $20.92 million, respectively.

On the selling side, Vingroup stands out by a wide margin, with estimated net selling of $28.06 million. Sacombank follows at $8.71 million, while SHB, Kinh Bac City Development Holding Corporation and Khang Dien House are expected to see selling of $3.97 million, $3.24 million and $3.19 million, respectively.

Photo: tinnhanhchungkhoan.vn

Pham Luu Hung, chief economist and head of SSI Research, said that under SSI Research’s base-case scenario, assuming Vietnam’s weighting remains around 0.51 per cent in the FTSE Emerging All Cap Index, total capital inflows from this group of funds could reach approximately $2.4 billion over the full implementation process.

Under a more positive scenario, with Vietnam’s weighting gradually rising to 0.95 per cent, the figure could climb to more than $4.4 billion.

“This development is consistent with independent estimates in the market. Previously, several securities companies estimated that passive and active capital flows into around 28 stocks expected to benefit directly from the market upgrade could reach more than $1.3 billion by 2027, with most of the value expected to come in the final two tranches rather than the first tranche,” said Hung.

“Meanwhile, among foreign ETFs undergoing periodic rebalancing, the fourth-quarter review of the MarketVector Vietnam Local Index, which serves as the reference index for VanEck Vectors Vietnam ETF, added SSB and removed CEO, in line with SSI Research’s earlier forecasts. Similarly, the STOXX Vietnam Total Market Liquid Index, which serves as the reference index for Xtrackers Vietnam Swap UCITS ETF, removed Nam Kim Steel without adding any new stocks.”

For the FTSE Vietnam 30 Index, which serves as the reference index for Fubon and CSOP funds, the official review results have not yet been released. Securities companies are therefore maintaining their preliminary forecasts of additions to VPBank, FPT Corporation, Asia Commercial Bank, Masan Consumer and Vinpearl, alongside the removal of Kinh Bac City Development Holding Corporation, VNDirect Securities Corporation, Viet Capital Securities and Khang Dien House.

“Against this backdrop, the September 18 trading session could become a key point of ETF-driven volatility across a number of Vietnamese stocks. FPT Corporation, VPBank, Hoa Phat Group, Vinhomes and Masan Group are among those expected to attract the strongest buying flows, while Vingroup, VIX Securities, VNDirect Securities Corporation, Kinh Bac City Development Holding Corporation and Khang Dien House are expected to face the strongest selling pressure,” Hung said.

VIR