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| A BIDV's staff member performs lending procedures for customers at a central Quang Tri Province branch. BIDV's shares were unexpectedly removed from two exchange-traded funds shortly after it was announced that the shares would be added in the two funds' index portfolios. — VNA/VNS Photo Tran Viet |
HA NOI (Biz Hub) — Shares in the Bank for Investment and Development of Viet Nam (BID), the second largest listed bank by market capitalisation in the country, were unexpectedly removed from the two exchange-traded funds, Market Vectors Vietnam (VNM) and FTSE Vietnam.
Late Tuesday on Market Vectors ETFs' website, it announced it would remove BID shares from the VNM Index, just two days after the fund declared it would add shares in BID into the VNM Index in the third-quarter Index review.
Following the VNM ETF decision, Europe-based FTSE Vietnam ETF also announced yesterday it would delete BID shares from its Index in the third-quarter Index review, revoking its statement on September 4 that it would include BID shares in the FTSE Vietnam All-Share Index and FTSE Vietnam Index.
This is unprecedented in the history of Viet Nam's securities market.
Both VNM ETF, managed by the New York-based investment firm Van Eck Global, and FTSE Vietnam ETF under Deutsche Bank track the performance of the largest and most liquid companies in Viet Nam.
BID shares took a big hit yesterday as the shares dropped to the floor price capped at 7 per cent per day on the HCM Stock Exchange following the information.
They rose to the daily ceiling limit of 7 per cent in the two previous sessions after the information of being added to the VNM Index was revealed.
BID's prices climbed nearly 24 per cent from September 4-15, shooting from VND23,000 ($1.02) to VND28,500 ($1.27) a share, after FTSE Vietnam Index and VNM ETFs announced they would include the BID shares in their index portfolios.
Foreign investors also bought more than 10 million BID shares during this period, including 5.46 million on Tuesday.
Many stock analysts had previously predicted the BID share price could climb to VND30,000 ($1.33), which helped keep demand for the shares at a high level.
The last 10-day average trading volume for BID reached more than 2.8 million shares, higher than the average of 2.2 million shares in August.
ETF's miscalculation?
In its announcement on September 23, VNM ETF seemed to miscalculate the number of BID final float shares, which it estimated to be 718 million shares (total outstanding shares of 3.41 billion shares minus the number of State holding of 2.69 billion shares).
This lifted the free float ratio (final float shares divided to total outstanding shares) to 21 per cent, higher than the minimum free-float ratio of 5 per cent set by the ETF.
However, the total outstanding shares in fact were just 2.81 billion shares as more than 600 million shares have yet to be listed on the exchange. This made the free-float ratio just 4.2 per cent, lower than the minimum rate of 5 per cent.
According to analyst Bach Duong on the financial website ndh.vn, BID's price will not decline sharply in the long term thanks to its financial strength.
The bank posted a pre-tax profit of almost VND3.15 trillion ($140 million) in the first six months of this year, up 27.8 per cent over the same period of last year. By June 30, its total assets reached VND724.8 trillion ($32.2 billion), up 11.5 per cent since the beginning of the year. — VNS