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Suppose I live in the US and want to buy an ETF share traded in the US. I would already know how Chinese stock market performed by the time the US market is open because of the 12-hour difference.

Let's say it's 1/21/2020 Tuesday in the morning Eastern Time, which is 1/21/2020 Tuesday evening time in China. If Chinese market gained (and suppose the top 50 stocks by market-cap gained) on 1/21/2020, would I gain if I buy an ETF (traded in the US) that tracks an index composed of top 50 Chinese stocks?

If that's case, is this a 100% win situation? If not, why?

Also, because Chinese market is already closed, why does the ETF price sticll change, if the underline index is not supposed to be changing?

Thanks!!

user12562215
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    "If that's case, is this a 100% win situation?" You can be positive that someone else has already thought of this, and the market has adapted to it. – RonJohn Jan 19 '20 at 21:20
  • @RonJohn right, but pre-market trading won't really reflect it 100%, right? – user12562215 Jan 19 '20 at 21:22
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    If such an arbitrage opportunity did exists, every major player (investment banks, trading desks, market makers, floor traders, etc.) and quants with faster computers, collocation and every other existing advantage would gobble these up before you would even realize the difference in prices. If it sounds too good to be true, it is. And for your dining pleasure, there are no free lunches. – Bob Baerker Jan 19 '20 at 21:29
  • "Pre-market trading won't really reflect it 100%, right?" Why wouldn't it? Major traders aren't stupid. They'll base their trading decisions on current data, not on outdated data. So the US opening price will be based on the Chinese closing price, not on the Chinese opening price. – Tanner Swett Jan 19 '20 at 22:37
  • @TannerSwett okay, but why do we see the ETF price changes during the day when American market is open while Chinese market is closed (so the underline index is not changing)? Isn't it suppose to track the index? Or are you suggesting the underline index is still chaning when the market is closed? – user12562215 Jan 21 '20 at 01:33
  • Even though the ETF is intended to track an index, it still gets its value from the assets it contains, not from the index. The value of the index really has no significance whatsoever. So, just like any other asset, the price of the ETF will rise if traders think it's more valuable, and the price will fall of traders think it's less valuable. If an event occurs which is bad news for Chinese businesses, then traders will believe that the ETF is less valuable, so the price will fall. – Tanner Swett Jan 21 '20 at 02:05

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