Curtis, see Fidelity explanation below. Julius
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Dow Jones Newswires -- October 29, 1997
[Image] Fidelity Defends Estimate Of Hong Kong Fund's Price
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By THOMAS D. LAURICELLA
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NEW YORK -- Fidelity Investments is defending Tuesday's
Briefing closing price of its $268 million Hong Kong and China
Books Fund while, at the same time, trying to explain why so
Quotes many of its funds had incorrect prices or no information
Journal at all in the morning newspapers.
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Special Fidelity says it followed appropriate procedures in
calculating a two-cent rise in the the net asset value of
Reports its Hong Kong and China Fund Tuesday, a day when the Hong
New Kong stock market collapsed nearly 14% and many other Far
Features East funds posted sizeable losses.
Glossary
In estimating the fund's price, Fidelity was acting
Your within rules that allow it to prevent traders from taking
Account advantage of a temporary drop in the fund's NAV.
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Advertisers 'We had a lot of money coming into these funds (Tuesday
afternoon) from arbitrageurs looking to take advantage of
E-Mart this,' says Jerry Lieberman, chief financial officer at
Fidelity. 'And that's not fair to the existing
Table of shareholders.'
Contents
At the heart of the issue is the fact that a fund's NAV
is set when the markets close in New York at 4 p.m., long
after markets like Hong Kong have finished trading for
the day. On Tuesday, U.S. markets rallied sharply after
Hong Kong stocks collapsed, making it likely that the
battered Far East market would rebound significantly.
That left open a chance for fast-on-the-trigger investors
to take advantage of the fact that the Hong Kong fund
would be priced at low levels when U.S. markets closed on
Tuesday, but would likely be heading higher in Hong Kong
trading overnight.
In such circumstances, Securities and Exchange Commission
guidelines allow fund companies to estimate the updated
values of certain securities, thereby closing the window
for opportunistic traders.
'Under certain cirumstances the funds have the authority
to estimate fair market value,' says Robert Plaze,
associate director in the division of Investment
Management at the SEC. 'A number of funds may have done
this Tuesday.'
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