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Exchange Traded Funds

The short form of Exchange Traded Funds is called ETF. It is one kind of funds, could be traded in primary market (e.g. funds trading market) and secondary market (e.g. exchange). An ETF could track or duplicate a specific index, or a specific portfolio of securities or commodities to closely track the benchmark index or the performance of commodities. Since it does not invest in a single stock, it helps diversify investment risks. There are 3 kinds of ETFs: Physical ETFs, Synthetic ETFs, Futures Contracts ETF. It covers broad regions, provides international investment opportunities to investors.
Trading with Hong Kong Dollar

Securities Code

02800-02849
03000-03199
Trading with US Dollar

Securities Code

09800-09849
09000-09199
Trading with RMB

Securities Code

82800-82849
83000-83199
1

Simple:

Investors could trade ETFs in exchange, similar to trade stocks. Their target is to track the performance of specific indices.

2

Risk Diversification:

Investment risks may be avoided by investing in a basket of securities or commodities, such main composite shares of specific industry which is to reduce worries in selecting stocks.

3

High Transparency:

Information is public and transparent. Investors can easily obtain related information.

4

Changes of Investment Portfolio:

Compared to mutual funds, changes of constituents are rare.

5

Variety:

There are many kinds of stock index ETFs, they cover different markets and industries.

6

Low Trading Fee:

Compared to mutual funds, ETFs have no subscription fees and redemption fees, and low management fee, help reduce trading cost; compared to stocks, there is no stamp duty on ETF trading.

1

Market Risk::

Price of an ETF may be affected by local economy and political factors.

2

Currency Risk:

ETF could be traded by USD or RMB. Exchange rate, the potential currency risk may be varied and affects the investment return.

Pricing of ETF

The reasonable price of an ETF should close to its NAV, but is affected by the market supply and demand. Over – demand will cause that the trading price is higher than its reference NAV, vice versa. Contrarily, the price of an ETF will be discounted when trading price is lower than its reference NAV.