Yuanta Investment Trust announced on the 17th that Taiwan’s largest ETF, Yuanta Taiwan 50 (0050), will initiate a split, potentially becoming the first ETF split in the country. Based on past reverse split timelines for ETFs, it is estimated that around three months will be required from the announcement to the listing and trading of the new beneficiary certificates, with the earliest possible “affordable price” for 0050 expected in the second quarter.
Yuanta 0050 Initiates Split!
The closing price of 0050 on the 17th was NT$196.95. After the split, the net asset value per unit should be greater than or equal to the initial issuance price of NT$36.98. It is estimated that the split operation will likely be “1 for 5,” which means each share will be priced at NT$39.39, lowering the cost of purchasing one unit from NT$196,000 to NT$39,000, significantly reducing the entry threshold.
What is an ETF Split? What are its Impacts?
Similar to a stock split where one share is divided into multiple shares, an ETF split also divides one beneficiary unit into several units. It’s akin to exchanging a NT$500 bill for five NT$100 bills; the number of units held by the beneficiary increases, but the market value and return on assets remain unchanged.
Image / Yuanta Investment Trust
The primary benefit of stock or ETF splits is that by lowering the price per unit, liquidity is enhanced and more trading is attracted, making it easier for investors to enter the market, thereby stimulating buying interest. If this further boosts asset size, it can also increase the market share and revenue of the investment trust company.
Why does 0050 need to carry out a split?
Established in 2003, as of the 17th, 0050 had 849,100 beneficiaries, with a scale reaching NT$460.68 billion, making it the largest and longest-established ETF in Taiwan, poised to become the first ETF to exceed NT$500 billion in size. Having participated in the growth of the Taiwan stock market for 20 years, 0050 has seen its market price reach five times its initial issuance price, prompting many investors to begin purchasing through odd lot transactions.
However, Yuanta Investment Trust indicated that many investors in the Taiwan stock market are accustomed to trading in units of one lot (1,000 shares), and the odd lot market requires waiting for every five seconds for matching trades, resulting in lower liquidity. After the split, the stock price will be more accessible, lowering the investment threshold and potentially attracting more buyers. Yuanta Investment Trust also noted that a high price per fund unit is not conducive to investors adjusting their investment positions; if the price per unit decreases, investors can adjust their asset allocation more flexibly, increasing the liquidity of their portfolios.
Image / Yuanta Investment Trust
0050 will conduct a beneficiary vote from April 2 to April 21, with a written meeting scheduled for the 24th to decide whether to proceed with the split. The specific split ratio of “1 for 4” or “1 for 5” will also be determined through voting in the meeting.
Will 006208 follow suit with a split? Fubon Investment Trust: Actively assessing the situation
Earlier in January, Yuanta Investment Trust first announced a reduction in the management and custody fees of 0050, lowering the total expense ratio to 0.14%, a record low for Taiwan stock ETFs. Now, with the announcement of the split mechanism, the competition in the ETF market has intensified. Another ETF tracking the “Taiwan 50 Index,” Fubon Taiwan 50 (006208), closed at NT$115.6 on the 17th. In the past, due to lower internal expense ratios and stock prices compared to 0050, it has become a new choice for many long-term investors.
With Yuanta Investment Trust making its second move recently, the market is paying attention to whether 006208 will apply for a split as the second ETF product. In response, Fubon Investment Trust stated that it will actively assess the situation and does not rule out following up with a split or reducing management and custody fees. However, the specific plan is still under discussion and will require thorough communication with regulatory authorities before a formal decision can be made.
According to the latest statistics from the Taiwan Stock Exchange in January 2025, the number of regular deduction participants for 006208 has reached 242,000, surpassing the 239,000 for 0050. The deduction amount also leads at NT$2.06 billion, compared to NT$1.72 billion for 0050. As 0050 returns to an “affordable price” in the second quarter, how the competition between these two market capitalization ETFs evolves will continue to be a focus in the investment market.
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This article is a collaborative reprint from: Digital Age
Editor in charge: Li Xiantai