As mentioned in another thread, I am only a casual investor who errs on the conservative side. I do reasonably well but generally invest in ‘safe’ blue chips and index funds/ETFs.
My question is regarding ETFs that are based on foreign indexes. ‘FXI’ is an ETF that *seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE/Xinhua China 25 index. *.
So my dumb investing question is this: If the ETF is based on 25 Chinese stocks that trade on an exchange that is currently closed (3PM EST), how does its share price move up and down during the day in the USA?
Is it purely due to supply and demand of available shares of the ETF?
Yes, and you can bet that there are traders in China trying to market time to opening of the ETF. There was a big scandal in our markets concerning that about 5-6 years back.
Many securities have after market trading. I can’t speak specifically to the Chinese market, though. People will try to execute transactions, especially when there is news regarding a company. All that is needed for a trade is a buyer and a seller. Exchanges function by bringer together large numbers of buyers and sellers, vastly improving market efficiency. After hours, there will be fewer buyers and sellers, and prices may be artificially inflated or deflated. An ETF based in the US or Europe, on a Chinese index whose constituents trade after hours, will see demand fluctuate based on news, global economic conditions, and after market trading (among many other factors).
OK, so major changes in share price (ie going from $90 to $200 over a period of a few months - which it has) are related directly to the index and the performance of those 25 companies but smaller intraday changes are due to the reasons given above?
I’m a little confused on the post. Most likely this china exchange traded fund does not own A shares, since they probably can’t legally unless a QFI. The 25 stocks are probably shares traded outside of China, with a correlation to the A share indexes. For example, having HK traded H shares.
Intraday changes should be based purely on the trading going on in the US and not related to the underlying asset value of the ETF