Chinese Fervor for Overseas Stocks Is Breaking ETF Trading
- Inflows to ETFs with foreign exposure reached $1.3 billion
- Chinese retail investors risk being hit twice, says BI analyst
A trader looks up from a work station at the Shanghai Stock Exchange in Shanghai, China.
Photographer: Qilai Shen/Bloomberg
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Burned by years of underperformance in Chinese domestic stocks, local investor appetite for overseas equities is running so high that it’s fueling huge price distortions in funds tracking these assets.
Chinese traders are willing to pay as much as 40% more than the value of the underlying assets in some exchange-traded funds in order to obtain exposure to foreign stocks. That’s triggering trading halts in a number of ETFs as well as purchase limits.