March rebalancing porfolio to turn stocks sour

March portfolio rebalancing spells trouble for major tickers

March 02, 2020 | 11:18
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March rebalancings of investment portfolios may impede shares of FLC Faros, Novaland, PetroVietnam Power, and Phat Dat Real Estate, leaving investors high and dry.

FTSE’s portfolio review is scheduled to be announced on March 6, while changes to the MVIS Vietnam index is expected to be published on March 13.

However, the impact to individual stocks from the next month rebalancings would be based on the ETFs currently using both indices as benchmarks.

march portfolio rebalancing spells trouble for major tickers
The March rebalancing of investment portfolios will impact many of Vietnam's corporations

The AUM of the FTSE Vietnam ETF sits at $257 million and the VanEck Vectors Vietnam ETF sits at $416 million.

According to KB Securities, all the stocks listed in Vietnam examined in the MVIS index met inclusion criteria, thus it is likely there will be no newcomers or dropouts.

Shares of Sacombank (STB) also meet inclusion requirements but the number of Vietnamese stocks in the index is reaching its cap of 25. Thus, STB may only be included if MVIS gets rid of one of their existing members.

The weighting of stocks listed in Vietnam is also relatively low, below 70 per cent, so the rebalancing will likely increase the weighting of Vietnamese stocks to the 70-71 per cent level.

Shares of Vincom Retail (VRE), Vinamilk (VNM), Vietcombank (VCB), Hoa Phat Group (HPG), and Vinhomes (VHM) are predicted to be the greatest beneficiaries since they are likely to receive additional injections.

march portfolio rebalancing spells trouble for major tickers
Faros Construction (ROS) will likely be removed from FTSE Vietnam in the March rebalancing

On the flip side, Faros Construction (ROS) – a subsidiary specialised in construction and heavy engineering of real estate provider FLC – came under fire due to a strong selling pressure from investors.

Failure to meet the minimum market capitalisation requirements will likely see ROS deleted from FTSE Vietnam in the upcoming March rebalancing. ROS has the lowest free-float-adjusted market capitalisation in the basket and should fall short of the minimum requirement.

According to the company’s consolidated financial report for the fourth quarter of 2019, FLC Faros only completed about 56 per cent of the year’s after-tax profit target, and the value of receivables makes up nearly half of its total assets.

Other figures also showed that investors’ confidence fell to a low level, suggesting that FLC Faros Construction is unlikely to return to strong growth as it scrambles to rebound from its woes in the coming months.

Other stocks, namely POW of PetroVietnam Power, SBT of Thanh Thanh Cong – Bien Hoa JSC, TCH of Hoang Huy Investment Financial Services JSC, NVL of No Va Land Investment Group Corporation, and PDR of Phat Dat Real Estate Development JSC have also slipped.

A run of poor data from these firms fuelled concerns that the bloc’s anaemic recovery had ended, threatening bumpy roads ahead.

Previously, VIR also took a look at how VinaCapital Vietnam Opportunity Fund – the largest venture fund managed by VinaCapital, one of Vietnam’s leading investment management firms with $3.3 billion in assets under management – entered 2020 with a slew of difficulties in the current bearish stock market in the wake of the novel coronavirus outbreak.

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