Below the charts showing the ^STI (Straits TIme Index) and EWS (iShares Singapore Index ETF) and the SGDUSD (Singapore Dollar and US Dollor conversion rate).
One can see that there is a little difference, but obvious, between these two ^STI and EWS. This is mainly due to the components in EWS is Singapore Stocks and need to convert to USD when it calculates the intrinsic values of ETF (EWS).
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But, when plotting the Currency chart, it shows that it has a significant moved on 10 Jul 2013 but not reflected on the EWS.
This was due to the Significant moved of SGSUSD happened ONLY AFTER the US market was closed, therefore, the changed of currency can only be reflected on the EWS the next day.
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This would also help in explain the divergence between the Foreign ETFs' price and their BBC Indicators.
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EWS and BBC indicator. Notice the Divergence.
^STI and BBC indicator. - No Divergence.
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Also note that there is a slight difference between the BBC Indicator in EWS and ^STI, for the portfolio managers can change slightly on the holding weightage dnd even the holding for foreign country stocks. BUT, ETF TRACK VERY EFFICIENTLY to the US market index, such as SPY to S&P500, etc.
The conclusion is that the ETF value track very efficiently to its sum of components value.
Question for ponder:
For any company, there is a fix amount of shares when the company went public. And, what about ETFs??? For example, if a sector ETF is hot, more and more public want to have own that sector ETF and less and less people willing to sell, how is the fund manager going to do? This is a question worth your research and understanding!
Bless You
KH Tang
1 comments:
Good day,
There is no sure way to get that information, but there is clue.
1. Rating from some services.
For example, S&P is a financial institution that provide ranking for all the stocks in US.
Form AAA to D:
http://www.standardandpoors.com/spf/general/RatingsDirect_Commentary_979212_06_22_2012_12_42_54.pdf
Their update the rating is faster than the change of S&P 500 (SPY)
components change. So, there would have rumors and speculation of the drop-out and add-in in the list in forums or articles.
Such as: http://www.insurancejournal.com/news/national/2013/05/17/292414.htm
But, as an individual, most would not have the resources (money to subscribe, and time to follow) to track it.
2. Technically.
For those stocks that continue to under-perform the index for long run. They would be fired.
Take for example, in a small universe of ^STI, it does change components every year. When it announces to drop out, one can use the TxData (Trend) to see that it has been among weakest for quit some time.
But then, to be qualified for getting into the list is difficult, because it needs to satisfy a list of criteria. Such as market cap, future prospect,
etc...
So. This is more of understanding rather than use it as a strategy for entry and exit for stocks timely.
And, if one is holding on a stock, he should seriously consider letting go if it drop out from the index. But, on the other hand, he would not likely to have the stock if he follow the trend.
Bless All
KH Tang
-----Original Message-----
Sent: Saturday, July 13, 2013 11:08 PM
To: KH Tang
Subject: Stock Remove from index
Hi KH
How do we get inform of such new first hand? I mean it would be too late to react when the stock trend down already...
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