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

The trading week of September 14-18 is poised to be a crucial period for Vietnam's stock market, as several major foreign ETFs rebalance their portfolios ahead of changes to benchmark indices. Funds such as Fubon Vietnam ETF, VanEck Vietnam ETF, Xtrackers Vietnam Swap UCITS ETF, and Vanguard funds tracking the FTSE Global Equity Index Series are set to complete their transactions by September 18, before the official changes take effect on September 21.

These transactions could generate net purchases worth around $240 million, covering 27 Vietnamese stocks.

However, the impact on individual stocks may be complex, as ETFs may simultaneously buy and sell shares during the rebalancing process. For instance, Vingroup is expected to see strong buying from Vanguard funds but also face net selling pressure from Xtrackers, which is reducing its weighting from 31.6% to 15%. Among the stocks, Vingroup is anticipated to experience the most significant net selling, with an estimated $28.06 million outflow.

According to SSI Research's base-case scenario, total capital inflows from these ETFs could reach approximately $2.4 billion over the implementation period. In a more optimistic scenario, with Vietnam's weighting in the FTSE Emerging All Cap Index rising to 0.95%, inflows could exceed $4.4 billion. This growth aligns with independent market estimates, suggesting that passive and active capital flows into around 28 stocks could total over $1.3 billion by 2027, with the majority of value generated in the final tranches rather than the first.