Though, i do believe that the rule may not be very significant in HK mainly for the reason that HKD is pegged.. Otherwise in the long run, currency risk is probably the single most important factor rather than cost of living or any other strings attached with economy (Thinking of hypothetical scenario where 50% of someone's portfolio was invested in GBP before brexit and 50% locally, assuming Brexit causes even harder landing of GBP, things might get ugly.. More crazy hypothetical, Xi dada suddenly decides to un-peg HKD/USD and peg HKD/RMB)..
for an international company - the fx risk may be hedged against their base currency / home country
but you buying their stock in foreign currency doesnt protect you from that at all!
unless that company is hedging their fx risk to HKD as their base currency!
If you convert the stock price to USD you'll see that before and after the British pound devalues makes no difference to the price in USD. Point being that where the company is domiciled and where the stock is listed is irrelevant. All that matters is the currency of the market(s) the underlying company serves.
If you want an extreme example think of a gold ETF. Do you think the currency it's listed in leads to currency risk. Absolutely not.
Following on this topic I have a similar question:
I used to invest 20K every month on the tracker, now I cashed most of it making a decent profit and I'm wondering what's next
I feel like I should diversify a bit more hence I was thinking of doing the below:
25% 03140 VG S%P 500
25% 03101 VG FTSE DEV EUR
50% 02800 TRACKER
Does it make sense? Or should I lower my Tracker %?
Does it make sense to add 02828 HS H ETF in the mix?
Go through the same example with gold. If you buy an ounce of gold through an ETF, do you think the currency it is listed in matters?
Can you see why there would be an arbitrage opportunity if this wasn't the case?
If this is not clear I'll explain to you over a beer sometime.
Last edited by cendrillon; 13-09-2017 at 06:02 PM.