The Silver LOF managed by SDIC has hit the downside limit for the fourth day in a row as of February 5, continuing its steep decline. While the latest net asset value rose 8.05% from the previous day to 2.5108 yuan, the premium rate remains significantly elevated at 37.13%, indicating a persistent gap between price and intrinsic value.
As the only publicly offered LOF tracking silver futures in the market, this fund is undergoing a textbook example of bubble deflation. On the evening of February 2, when trading resumed, SDIC UBS announced the activation of a backup valuation method referencing international market prices. This adjustment led to a one-day net value plunge of 31.5%, setting a record for the largest single-day drop in the history of publicly offered funds.
Prior to this, tutorials promoting "risk-free arbitrage" strategies had circulated widely on social media, drawing hundreds of thousands of novice investors into the market. The core issue lies in a mismatch of cross-market trading rules. While international silver prices have no daily trading limits, silver futures on the Shanghai Futures Exchange are restricted to a 17% daily fluctuation cap. When international markets experience sharp declines of around 30%, domestic contracts cannot fully reflect the actual losses within a single trading day.
The valuation adjustment released all risks that had been concealed by the daily price limits in one go, triggering a series of limit-down sessions as the market works to absorb the excessive premium. Initial market expectations pointed to at least five consecutive limit-down sessions; with four already completed, a 37% premium still remains to be digested.
Combined with today's continued decline in silver prices, this situation is likely to sustain the high premium rate and potentially extend the number of limit-down sessions.
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