On the 17th, Yuanta Investment Trust announced that the largest ETF in Taiwan, Yuanta Taiwan 50 (0050), will initiate a split, potentially becoming the first domestic ETF to undergo such an action. According to estimations based on previous ETF reverse splits, it will take approximately three months from the announcement to the listing of the new beneficiary certificates, with the earliest possibility of seeing a “more affordable price” for 0050 in the second quarter.
Yuanta 0050 Initiates Split!
The closing price for 0050 on the 17th was NT$196.95. Following the split, the net asset value per unit should be greater than or equal to the initial offering price of NT$36.98. The split is estimated to be “1 for 5,” which means each share will be priced at NT$39.39, reducing the cost of purchasing one unit from NT$196,000 to NT$39,000, significantly lowering 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 divides a single beneficiary unit into several units, akin to exchanging a NT$500 bill for five NT$100 bills. The number of units held by beneficiaries increases, but the market value and return on assets remain unchanged.
Image / Yuanta Investment Trust
The primary benefits of stock or ETF splits include enhancing liquidity by lowering the price per unit, attracting more trading activity, and making it easier for investors to enter the market, thereby invigorating market demand. If this leads to a further increase in asset scale, it can also enhance the market share and revenue of the investment trust company.
Why does 0050 need to execute a split?
Founded in 2003, as of the 17th, 0050 has 849,100 beneficiaries and a scale reaching NT$460.68 billion, making it the largest and longest-established ETF in Taiwan. It is expected to become the first ETF to surpass NT$500 billion in scale. Having participated in the growth of the Taiwan stock market for 20 years, 0050 has achieved a market price that is five times its initial offering price, prompting many investors to begin purchasing in small amounts through fractional shares.
However, Yuanta Investment Trust stated that many investors in the Taiwan stock market prefer to trade in units of one lot (1,000 shares), and the fractional share market requires waiting for every five seconds for matching, resulting in lower liquidity. With a more accessible stock price post-split, the investment threshold is lowered, likely attracting more buying interest. Yuanta Investment Trust also pointed out that a high price per fund unit is not conducive to investors adjusting their investment positions; if the price per unit decreases, investors can more flexibly adjust their asset allocation, increasing the liquidity of their investment portfolios.
Image / Yuanta Investment Trust
0050 will conduct a beneficiary vote from April 2 to April 21, with a written beneficiary 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 a vote at this meeting.
Will 006208 follow suit with a split? Fubon Investment Trust: Actively Evaluating Response
In January, Yuanta Investment Trust first announced a reduction in the management and custody fees for 0050, bringing the total expense ratio down to 0.14%, setting a record for the lowest rate among Taiwan stock ETFs. This time, with the announcement of the split mechanism, competition in the ETF market is heating up again. Another ETF tracking the “Taiwan 50 Index,” Fubon Taiwan 50 (006208), closed at NT$115.6 on the 17th. In the past, due to its internal expense ratio and lower stock price compared to 0050, it has become a new choice for many long-term investors.
With Yuanta Investment Trust making a second move recently, the market is paying attention to whether 006208 will be the second ETF product to apply for a split. Fubon Investment Trust stated that it will actively respond and does not rule out following up with a split or reducing management and custody fees, but the actual plan is still under consideration and will require thorough communication with regulatory authorities before a formal decision can be made. According to the latest statistics from the stock exchange as of January 2025, the number of regular installment contributors for 006208 has reached 242,000, surpassing 239,000 for 0050, with contribution amounts leading at NT$2.06 billion compared to NT$1.72 billion for 0050. With 0050 returning to a “more affordable price” in the second quarter, the competitive dynamics between these two market-cap ETFs will continue to be a focal point for investors.
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This article is reposted in collaboration with: Digital Age
Editor in charge: Li Xiantai