Yuan Da Investment Trust announced on the 17th that Taiwan’s largest ETF, Yuan Da Taiwan 50 (0050), will initiate a split, potentially becoming the first case of an ETF split in the country. Based on historical timelines for ETF reverse splits, it is estimated that approximately three months will be needed from the announcement to the listing of the new beneficiary certificates, with the “affordable price” 0050 expected to be available as early as the second quarter.
Yuan Da 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. The split is estimated to be “1-for-5,” meaning each share will be priced at NT$39.39, reducing the cost of purchasing one lot 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. It is akin to exchanging a NT$500 bill for five NT$100 bills; the number of units held by the beneficiaries increases, but the asset value and return rates remain unchanged.
Image / Yuan Da Investment Trust
The main benefit of stock or ETF splits is that by lowering the price per unit, liquidity is enhanced, attracting more trading activity, making it easier for investors to enter the market, thus revitalizing market demand. If this can further boost the asset scale, it can also increase the market share and revenue of the investment trust company.
Why does 0050 need to execute a split?
Established in 2003, 0050 has reached 849,100 beneficiaries and a scale of NT$460.68 billion as of the 17th, making it the largest and longest-established ETF in Taiwan, poised 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’s market price has increased to five times its initial issuance price, leading many investors to start making small purchases through odd lot trading.
However, Yuan Da Investment Trust pointed out that many investors in Taiwan are accustomed to trading in lots (1,000 shares), and the odd lot market requires waiting for every five seconds for matching, resulting in lower liquidity. The split will make the stock price more accessible, reducing the investment threshold and attracting more buying interest. Yuan Da Investment Trust also noted that if the price of a single fund unit is too high, it may hinder investors from adjusting their investment positions. If the price per unit decreases, investors can adjust their asset allocations more flexibly, thus increasing the liquidity of their investment portfolios.
Image / Yuan Da Investment Trust
0050 will conduct a beneficiary voting from April 2 to April 21, and a written beneficiary meeting will be held on the 24th to decide whether to proceed with the split. The specific split ratio, whether “1-for-4” or “1-for-5,” will also be determined by a vote at the meeting.
Will 006208 Follow Suit with a Split? Fubon Investment Trust: Actively Evaluating Response
In January, Yuan Da Investment Trust first announced a reduction in the management and custody fees for 0050, with a combined expense ratio dropping to 0.14%, setting a record for the lowest fee among Taiwan stock ETFs. This recent move to announce the initiation of a split has further intensified competition in the ETF market. Another ETF tracking the “Taiwan 50 Index,” Fubon Taiwan 50 (006208), closed at NT$115.6 on the 17th. Due to its lower embedded fee rate and stock price compared to 0050, it has become a new choice for many long-term investors. With Yuan Da Investment Trust’s recent actions, the market is paying close attention to whether 006208 will be the second ETF to apply for a split.
Fubon Investment Trust has stated that it will actively respond and does not rule out the possibility of following up with a split or reducing management and custody fees. However, the actual plan is still under consideration and requires thorough communication with regulatory authorities before making a formal decision. According to the latest statistics from the Stock Exchange in January 2025, the number of regular investment contributors to 006208 has reached 242,000, surpassing 0050’s 239,000. The amount contributed has also led 006208 with NT$2.06 billion compared to 0050’s NT$1.72 billion. As 0050 returns to “affordable prices” in the second quarter, the competitive dynamics between these two large-cap ETFs will continue to be a focal point in the investment market.
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This article is collaboratively reproduced from: Digital Age
Editor in Charge: Li Xiantai