Japan investors may have noticed that the Nikkei 225 recovered somewhat Friday, but related exchange traded funds continued to dip lower, bringing prices to a discount against Japanese equities’ net asset values.
However, this doesn’t mean there is something wrong with the ETFs. The discounts appeared due to time-zone differences because the U.S.-listed ETFs were trading while the underlying Japanese market had closed for the day.
In fact, ETFs can be price-discovery mechanisms when the overseas markets they tracked have ceased trading for the day.
The WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) was 3.1% lower in late afternoon Friday and the iShares MSCI Japan Index ETF (NYSEArca: EWJ) was down 1.8%, both trading at about a 1.8% discount to their respective NAVs. [What Now for Japan ETFs After Sell-Off?]
In comparison, the Nikkei 225 Index closed 0.9% higher Friday.