After the suspension of trading for Yuanta Taiwan 50 (code 0050) from June 11 to 17, it recently completed a 1-for-4 stock split. The last closing price was 188.65, and today it opened at 47.25, closing at 47.57. Some believe that stock splits make the price of 0050 more 'affordable', but in today's market of fractional shares, the impact is minimal. It is worth noting that stock pledge loans are often based on complete shares, and stock splits also reduce the threshold for pledging 0050 for loans.
What happens when Yuanta Taiwan 50 splits? The number of shares quadruples, and the price per share becomes one-fourth.
Yuanta Taiwan 50, officially named Yuanta Polaris Taiwan Excellence 50 Securities Investment Trust Fund, with code 0050, was established in 2003, focusing on the Taiwan stock market index and is known as the national ETF of Taiwan. 0050 consists of the top 50 stocks by market capitalization in Taiwan, while also considering stock liquidity and other values. Generally, it is believed that holding 0050 is equivalent to betting on Taiwan's economic development. Currently, over 770,000 people hold 0050, making it a common choice for many long-term investors and regular investment plans.
In Taiwan, 0050 is often the focus of discussions among stock investors. For instance, the financial influencer Chen Chongming and National Chengchi University professor Zhou Guannan have clashed over the topic of 'buying 0050 is not as good as buying TSMC.' The former believes that TSMC accounts for a significant portion of the 0050 component stocks and performs well, thus it's better to hold TSMC directly. However, others argue that this is purely hindsight reasoning; HTC was once the king of Taiwanese stocks, and holding HTC based on this logic would have been quite pointless. The mechanism of Yuanta 50 that eliminates the weak and retains the strong is more suitable for long-term investors.
Stock Split: Position value remains unchanged, and the collateral threshold decreases.
After confirming the stock split, Yuanta 50 will suspend trading from June 11 to June 17. A 1-for-4 split means that the number of shares quadruples, but the price per share becomes one-fourth.
For example, Xiao Ming holds one share (1000 shares) of 0050 before the split, with a closing price of 188.65. After the split, Xiao Ming's position will become 4 shares (4000 shares) of 0050, with a price of 47.25 per share, and the position value remains unchanged. Generally, it is believed that stock splits reduce the price per share, lowering the entry barrier and increasing liquidity. Additionally, once the asset scale surpasses 650 billion NTD, the management fee rate of 0050 has dropped to about 0.103%, making 0050 now more attractive with lower management fees and a reduced share price for easier entry.
Stock splits do not change the position value or the essence of the underlying asset. However, in the market, most pledges for stock loans are based on complete shares. For instance, Cathay United Bank cannot allocate fractional shares as collateral. Therefore, a 1-for-4 split of 0050 effectively reduces the collateral borrowing threshold for stockholders by 75%, from 188,000 NTD to 47,250 NTD, increasing operational flexibility.
0050 split or premium? Can be arbitraged through subscription methods.
Some believe that stock splits lower the entry barrier, which would increase buying interest and create a premium. The financial fan page 'Mr. Sandwich's Financial Notes' stated on Facebook that if the premium is significant, it can also be arbitraged through the subscription method. By purchasing component stocks in the market and exchanging them for an equivalent 0050, the 0050 obtained at the original price can quickly be sold in the market at a premium, arbitraging through the subscription method to bridge the price gap, so it actually wouldn't have any effect. However, it also pointed out that the required amount for subscription is relatively high, making it difficult for the average person to profit.
This article discusses whether the national ETF 0050's 1-for-4 split will create premium arbitrage opportunities. Financial influencer: Large investors will use the subscription mechanism for arbitrage. First appeared in Chain News ABMedia.
