In early June 2024, BlackRock suddenly announced the liquidation of iShares MSCI Frontier and Select EM ETF (specializing in investing in frontier and emerging regions) after 12 years of operation.
As of June 21, 2024, the total net asset value (NAV) of iShares MSCI Frontier and Select EM ETF is approximately more than 363 million USD, of which cash accounts for 76.25%. The proportion of Vietnamese stocks accounts for only 5.55%, equivalent to a total value of nearly 20.3 million USD (500 billion VND).
Previously, Vietnam was often the market with the highest proportion in the portfolio of iShares MSCI Frontier and Select EM ETF. At the end of Q1/2024, the proportion of Vietnamese stocks accounted for 28.5% of the fund's NAV. However, this number has continuously decreased in recent times when the fund decided to stop operating.
iShares MSCI Frontier and Select EM ETF is an ETF that specializes in investing in frontier and emerging markets, formerly known as Ishare MSCI Frontier Markets 100 ETF with the reference index being MSCI FM 100 Index. In March 2021, the fund changed its name to iShares MSCI Frontier and Select EM ETF as it is now and uses the MSCI Frontier & Emerging Markets Select Index as a reference.
In early June 2024, BlackRock unexpectedly announced the liquidation of the iShares MSCI Frontier and Select EM ETF after 12 years of operation. According to the plan, BlackRock expected this ETF to cease trading and no longer accept creation and redemption orders after the market closes on March 31, 2025. However, the announcement also emphasized that this date is subject to change.
During the extended liquidation period, the iShares MSCI Frontier and Select EM ETF will no longer be managed in accordance with its investment objective and policies as the fund will sell off its assets, BlackRock said. Proceeds from the liquidation are expected to be distributed to shareholders approximately three days after the last trading day, according to BlackRock.
According to some analysts, the closure of the iShares MSCI Frontier and Select EM ETF will not have a big impact on the Vietnamese stock market. However, it is undeniable that the supply from this foreign ETF is also contributing to the strongest net selling wave in recent years.
After a record net sale in May, foreign investors continued to dump more than VND12,000 billion since the beginning of June on HoSE. Accumulated from the beginning of the year until now, the total net selling value of foreign investors has reached nearly VND48,000 billion (~USD2 billion).
According to SGI Capital, the persistent net selling by foreign investors may come from concerns about exchange rate risks when the VND interest rate is lower than the world, divestment of some groups of stocks with high local risks, and the impact of the general net withdrawal trend from emerging markets... This investment fund believes that this trend currently shows no signs of ending or reversing.
According to some comments, foreign capital flows will reverse when the prospect of upgrading becomes clearer. In a recent report, VDSC forecasts that if upgraded by MSCI, the capitalization of Vietnamese stocks will account for 0.44% in the MSCI Emerging Market Index basket. This implies that there will be a capital flow of about 4 billion USD from foreign investment funds referring to this index pouring into the Vietnamese stock market.
However, according to the periodic market classification results announced on the morning of June 21, MSCI has not yet added Vietnam to the list of countries to be considered for upgrading from a frontier market to an emerging market. The positive point is that Vietnam has improved another important criterion according to MSCI's assessment.
Specifically, in the previous Global Market Accessibility Report, MSCI assessed that Vietnam's "Transferability" criterion had been changed from "Needs Improvement" to "No Major Issues" +. Vietnam has improved in transferability thanks to the increase in off-exchange trading and physical transfers that can be made without prior approval from the regulatory authority.
In addition, Vietnam continues to work on market development with plans to address some accessibility issues, such as foreign ownership limits, pre-funding requirements and the lack of English-language market disclosure. MSCI will continue to closely monitor the progress of these reforms.
However, Vietnam still has 8 criteria that need improvement including: (1) foreign ownership limit, (2) foreign block room, (3) equal rights for foreign investors, (4) freedom of the foreign exchange market, (5) investor registration & account establishment, (6) market regulations, (7) information flow and clearing.
In a recent report, BSC highly appreciated the efforts of the management agency in standardizing the system as well as resolving the remaining bottlenecks towards the goal of upgrading Vietnam's stock market by 2025. This securities company predicted that the Vietnamese stock market could be considered by MSCI to be included in the watchlist for upgrading to emerging market status in the near future, in June 2025.
Source: CafeF
