Liquidation of Blackrock-run ETF unlikely to hurt Vietnam stock market: broker

Liquidation of the iShares Frontier & Select EM ETF, managed by BlackRock, is unlikely to have a significant impact on Vietnam’s stock market, given its relatively thin exposure, analysts say.

BlackRock, the world’s largest asset manager, on June 7 had announced the liquidation of 15 mutual funds and ETFs. One of them, Shares Frontier & Select EM ETF, which is exposed to Vietnamese equities, will close in March 2025, 12 years after its inception.

Since the announcement, the ETF has been strongly selling equities to reduce its exposure.

Hanoi-based BIDV Securities (BSC) attributed the liquidation decision to a switch to higher effectiveness given a large portfolio of 600 mutual funds and ETFs while other assets, including Bitcoin ETF, have proven more lucrative, prompting Blackrock to reassess underperforming funds.

In addition, the iShares Frontier and Select EM ETF has become more diverse and less focused on equities of frontier markets as initially targeted after changing its underlying index.

At its peak, the iShares Frontier and Select EM ETF had net asset value touch $800 million in 2014 and 2018, but its size has been on the fall since, except for November 2022.

The ETF’s performances have lagged behind the S&P500 and VN30 Index, which comprises the 30 most liquid and biggest tickers on the Ho Chi Minh Stock Exchange.

Lower returns have made it more difficult for the ETF to raise funds from investors when they have better options like the Taiwan-based Fubon FTSE Vietnam ETF.

Between June 7 and 18, the iShares Frontier and Select EM ETF cut the weight of Vietnamese shares from 28% to 13.77%, or $49.35 million. Selling pressure peaked on June 10-11 and slowed afterwards.

BSC analysts reckoned that net selling force from the ETF would wane and is unlikely to dampen investor sentiment. Instead, they suggested paying attention to active funds and other large ETFs such as Fubon and Diamond ETF. They also urged market authorities to soon find solutions to hurdles pointed out by FTSE and MSCI to get the local stock market status upgraded next year.

“The upgrade will be a turning point for Vietnam’s stock market to lure foreign investors, new capital flows and open up opportunities for domestic companies,” the analysts noted.

ETF offloading has contributed to strong sales of foreign players in Vietnam. After net selling a historic high value of Vietnamese securities on the Ho Chi Minh Stock Exchange (HoSE) in May, overseas investors have net unloaded VND13.68 trillion ($537.4 million) on the bourse so far this month.

In total, they have net sold VND49.16 trillion ($1.93 billion) on the HoSE in the year to date, exchange data showed.