Chamois16

US Investors Not Feeling the Chinese Stock Market Sizzle

Using YTD data for closed end funds can be quite misleading if CEF dynamics are not understood. These CEF paid out large cap gains distribution at yearend, causing the NAV to drop precipitously and putting the market prices ata momentary high premium. These conditions qickly corrected in the new yearand and market prices in January, reflecting the distribution went to more noraml discounts, Since that time, the performance ofmarket prices and NAV have more closely followed the indexes they represent.

More fundamentally, there is a major performance distinction between A&B share mainland markets and HK. CAF, as the example, marches to a different drummer than the other China CEF, even if that drummer may potentially be out of control.

As long as these PRC markets are growing rapidly, I think it is wrong to discount the utility of ETF and CEF as vehicles, CEF, for example, must recognize harvested capital gains through distribution, reducing future market risk associated with ownership.