The market has been paying close attention as several cross-border exchange-traded funds (ETFs) have maintained persistently high premium rates.
For instance, on June 4th, Invesco Great Wall Global Semiconductor Chip Industry Equity Securities Investment Fund (QDII-LOF) triggered another temporary trading suspension due to its secondary market premium exceeding 20% on the previous trading day. Additionally, multiple cross-border ETFs, including Harvest Nasdaq 100 ETF (QDII) and GF Nasdaq 100 ETF, have been trading at sustained high premiums. Some of these products have maintained premium rates within the 5% to 15% range for an extended period, indicating that high premiums for cross-border ETFs have evolved from occasional events to a "semi-normalized" state.
Wind data shows that as of June 5th, there are 238 cross-border ETFs in the entire market, with an aggregate scale reaching 876.495 billion yuan, a year-on-year increase of 62.87%. This demonstrates a continued strong demand for cross-border allocation. Among them, six products primarily tracking popular overseas benchmarks like the Nasdaq 100 have premium rates exceeding 5%.
To understand the premium issue with cross-border ETFs, it's essential first to clarify the relationship between QDII (Qualified Domestic Institutional Investor) and these funds. QDII is a crucial institutional arrangement for opening China's capital markets, allowing domestic institutions to raise funds for investment in overseas securities markets. Cross-border ETFs are a specific product form under the QDII framework—after fund companies obtain QDII quotas, they issue ETF products tracking foreign indices (such as the Nasdaq 100, Nikkei 225, etc.). Investors can subscribe via the over-the-counter (primary) market or buy and sell on the secondary market.
In theory, the secondary market trading price of a cross-border ETF should fluctuate around its indicative optimized portfolio value (IOPV), with the premium rate close to zero. However, when the primary market subscription channel for a cross-border ETF becomes obstructed due to QDII quota limitations, investors can only flock to the secondary market to buy through competitive bidding. This supply-demand imbalance continuously pushes the price higher, forming a high premium.
An industry expert stated that investors should prioritize the premium rate as the primary risk control indicator before investing. Generally, a 5% premium is a signal that warrants high vigilance, while a rate above 10% typically indicates significant safety margin risks. Simultaneously, investors should remain alert when fund companies intensively issue premium risk warnings, implement intraday temporary trading halts, or announce the suspension of over-the-counter subscriptions. During investment, positions should be allocated reasonably, keeping cross-border ETF allocations within a certain proportion to mitigate the impact of single-market shocks. Additionally, investors should monitor fund subscription and redemption status announcements, avoid chasing highs during rapid surges, and establish clear discipline regarding premium caps and stop-loss rules.
A Morningstar (China) fund research analyst noted that when allocating to cross-border ETFs, investors must first strictly control the premium level and resolutely avoid high-premium products. A premium rate exceeding 3% requires increased caution; if it surpasses 10%, it indicates overheated market speculation, and investors should avoid buying at high prices on the secondary market. Secondly, investors can adjust their position-building pace by using long-term dollar-cost averaging to smooth out costs, adhering to a long-term allocation strategy rather than short-term speculation. Besides the averaging strategy, investors can also build positions in batches during periodic market pullbacks, which helps average down costs and reduce the negative impact of short-term premium volatility. Finally, investors can opt for alternative investment channels and targets to bypass on-market products with high premiums. By closely monitoring announcements related to product purchase limits, investors can prioritize over-the-counter QDII funds or corresponding ETF feeder funds that still have subscription quotas available. Alternatively, they can screen for products tracking similar indices with lower premium rates for substitution in their portfolio.
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