Let’s start with a simple example

Say there are two ETFs which are perfectly identical in their holdings, cost, dividends, and thus returns. However, they differ only in the currency they are traded in. In this regard, would buying them give us the same return, or a different return? The short answer is that the returns will be exactly the same.

Let’s use a simple scenario whereby one ETF is traded in Singapore Dollars (SGD), and the other is traded in US Dollars (USD). Further assume that the ETF has only 2 shares, and both shares are from China.

After one year

After one year, the shares make a gain of 20% in Chinese Renminbi terms. You can assume they rise from $1 RMB to $1.20 RMB.

Before After
CNYUSD 5.0 6.0
CNYSGD 4.0 5.0
SGDUSD 1.25 1.20

The exchange rate of CNYUSD increases from 5.0 to 6.0. The exchange rate of CNYSGD also increases from 4.0 to 5.0…