16 Oct 2020
For instance, whatever negative news that flow in US will hardly have any bearing on China stock prices listed in China. But will the same thing happen if i buy China ETFs listed on US stock market?
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Ngooi Zhi Cheng
15 Oct 2020
Student Ambassador 2020/21 at Seedly
Hi, let me just elaborate on what Frankie has just mentioned.
So to provide a counterexample: Let's take a look at an Irish Domiciled ETF and a US-listed ETF:
VUSA vs VOO
If you look into the composition of the companies held by both VUSA and VOO you will find that there are generally not many differences and are both affected (in general) by the companies' performance. As such a China ETF listed in the US or China, if all else remains the same, will have a similar performance.
However, you might want to keep a lookout for other differences, such as trading volume, AUM, expense fees, and tax laws as these do play a difference in your ETF selection.
For example, VUSA is traded on the LSE in GBP, VOO is traded on the NYSE ARCA in USD. According to Morningstar VOO also has a much lower annual fee (0.03% vs 0.07%), which may explain why it has historically performed better.
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The indices of most countries are all related to the world’s superpower;
I disagree that drops in US market hardly affects the Chinese market. The evidence is vast.
You can check out STI, Shanghai composite index’s, hang Seng index.
Even tho SG, China, HK and practically most of the world was hit by COVID earlier than US, but markets moved down only very minor until the US market started dipping. And march 23 was roughly the bottom for most indices.
Of course, with local impact there might be differences, for example Hang Seng index dropped 5% on one day and DBS, OCBC crashed hard the day China claimed HK’s government.
But majority of moves follows the world’s Super power. The reason isn’t rocket science; Majority of businesses that the indices track invests/have business related to some US company. It’s not 100% correlated, cause there are local factors but the US market will affect Chinese markets, like it affects other markets.