Reading an ETF Premium or Discount

Take the market price less the iNAV, divide it by the iNAV and show the result as a percentage. A positive figure is a premium, meaning the market price sits above the fair value, and a negative one is a discount. The undervaluation on the screen is the same figure read the other way round, saying how much cheaper than fair value the fund is trading.

Once the Korean regular session is shut the ETF's market price no longer moves, so the last close is used as it stands. If the United States market and the exchange rate move in the meantime, only the iNAV moves, and the premium or discount shows that distance. A discount widening on a night when the United States market rose, and a premium widening on a night when it fell, is the natural shape.

When the domestic market opens the next day, the market price tends to move toward the new fair value. The gap opened overnight is a reference value for how far that move might run. Once trading starts, though, United States futures and the exchange rate move again and the distance changes with them, and a thinly traded fund can hold its gap for a while. It is a reference value and not a settled one.

It is worth checking how much of the holdings is frozen, when the anchor date falls, and whether the screen is showing the iNAV alone because no live quote is coming through. A large frozen share or an old anchor date weakens what the premium or discount means by just as much.