SPDR S&P Emerging Asia P... (AMEX:GMF)
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A sudden run-up in the Taiwanese stock market upset the operations of two exchange-traded funds Thursday, prompting the firms that run the funds to suspend the mechanism that normally keeps trading prices in line with the funds' underlying values.

When news of a planned investment by a Chinese telecommunications company in a Taiwanese one stirred hopes of additional cross-straits cooperation, a number of Taiwanese stocks shot up 7% - the most local regulations allow shares to rise in a single day.

When these stocks essentially stopped trading, the two ETFs, iShares MSCI Taiwan Index Fund (EWT) and SPDR S&P Emerging Asia Pacific ETF (GMF), were left in the lurch, according to Barclays PLC (BCS), which operates the iShares fund.

Normally, the ETFs allow large investors to trade stocks for ETF fund shares at market prices. But since the market prices were frozen, arbitrageurs might have traded into the fund at artificially low prices, disadvantaging existing holders.

Barclays and State Street Corp. (STT), which oversees the other fund, both said they hope the ETFs will resume normal operations Friday.

ETFs need to continually create and redeem shares to ensure values of fund shares match those of their holdings.

iShares MSCI Taiwan Index Fund closed Thursday at $10.22, up 4.2% and about 7.6% above the notional value of its holdings.

SPDR S&P Emerging Asia Pacific ETF closed at $53.28, up 3.5% and about 3.1% above the notional value of its holdings.

-By Ian Salisbury, Dow Jones Newswires; 201-938-5219; ian.salisbury@dowjones.com