The surge in South Korea's stock market has fueled a frenzy in the only ETF product in the domestic market that offers direct investment access to the country. By June 3rd, the KOSPI index had risen 108.85% year-to-date, with SK Hynix Inc. soaring 263.20% and Samsung Electronics Co., Ltd. jumping 200.67%. This market fervor quickly spread to the ETF.
On June 3rd, the Huatai-PineBridge CSI Korea Exchange China-Korea Semiconductor ETF (513310, hereinafter referred to as the "China-Korea Semiconductor ETF") surged 3.26% to close at 6.136 yuan. Its indicative optimized portfolio value premium rate reached 21.96%, ranking first among all ETFs. Additionally, with a year-to-date gain of 138%, this product has become the "top performer" in the domestic ETF market so far this year.
However, the high premium has also pushed this ETF into high-risk territory. On June 3rd, Huatai-PineBridge Fund once again issued a premium risk warning announcement and implemented two temporary trading halts—one from market open until 10:30 a.m., and another from the afternoon session open until market close. Cumulatively for the year, the company has issued over 160 premium risk warnings and implemented 80 temporary trading suspensions.
On the same day, a batch of cross-border technology ETFs also exhibited high premiums. For instance, the Invesco Nasdaq Technology ETF premium reached 20.71%, while several Nasdaq and Nasdaq 100 ETFs saw premiums exceeding 7%. These funds have frequently warned about the risks associated with secondary market trading price premiums.
The Solo Performer's Rally
As the sole ETF product in the A-share market providing direct investment in the South Korean market, the China-Korea Semiconductor ETF was established in November 2022. Its popularity stems from the global memory chip rally driven by AI. By June 3rd, the fund's year-to-date gain reached 138%, with its net asset value skyrocketing from approximately 36.71 billion yuan at the end of 2025 to 111.88 billion yuan, nearly tripling in size.
The fund's portfolio structure is straightforward: the two South Korean memory giants, Samsung Electronics Co., Ltd. and SK Hynix Inc., together account for over 34% of holdings, combined with domestic semiconductor assets like Cambricon Technologies Corporation Limited, Hygon Information Technology Co., Ltd., and North Huachuang Co., Ltd.. As Samsung Electronics Co., Ltd. surged over 200% and SK Hynix Inc. rose more than 260% year-to-date, the fund's net asset value skyrocketed accordingly.
The issue lies in the fund's high premium. On June 3rd, its IOPV premium rate stood at 21.96%. This means the price investors pay in the secondary market is nearly 22% higher than the actual value of the stocks the fund holds. Huatai-PineBridge Fund explicitly warned in its announcement: "The secondary market trading price is significantly higher than the fund's net asset value, showing a substantial premium. We hereby remind investors to pay attention to the premium risk in the secondary market trading price. Blind investment may lead to significant losses."
On June 3rd, the fund also implemented two temporary trading halts: one from market open until 10:30 a.m., and another from the afternoon session open until market close. Data shows that, as of June 3rd, the fund had issued over 160 premium risk warnings and implemented 80 temporary trading halts year-to-date.
The high premium did not materialize overnight. Since the beginning of 2026, as South Korea's semiconductor sector continued its strong performance, capital continuously flowed in, pushing the fund's premium rate above 30% in mid-May. The fund company had to frequently halt trading during sessions to cool the market. From early May to the present, the fund has been subject to temporary halts for over a month.
Reasons Behind the High Premium
Why does the China-Korea Semiconductor ETF maintain a persistently high premium? A researcher points to three main reasons. First, global AI infrastructure construction is driving surging demand in areas like high-bandwidth memory and advanced packaging. South Korean semiconductor companies hold over 70% of the global market share in memory chips, making them core beneficiaries.
Second, this ETF is the only product in the A-share market offering direct investment in the South Korean market, with its top two holdings being Samsung Electronics Co., Ltd. and SK Hynix Inc.. The explosive rally in the semiconductor sector since 2026 has attracted massive capital inflows.
Third, as a cross-border investment product, the ETF's primary market subscriptions and redemptions require QDII quota. The normal ETF arbitrage mechanism is inoperable due to quota shortages, causing the secondary market price to detach from the net asset value and rise continuously.
The researcher notes: "The product's premium is highly correlated with QDII quota limitations. The quota is a key variable determining whether the premium can persist. The QDII quota allocated to fund companies by the State Administration of Foreign Exchange is a rigid constraint. Once the quota is exhausted, the primary market subscription channel closes, locking up the secondary market supply."
This is not an isolated case. By early June, nearly half of the approximately 330 QDII products in the entire market were "closed to new subscriptions." The additional $5.3 billion quota granted by SAFE in March was quickly absorbed by overwhelming demand. Quota scarcity has become a ceiling for the entire QDII ecosystem.
The researcher suggests that if the fund's quota cannot be expanded quickly, the high premium state may remain elevated in the short term but is difficult to sustain over the long term.
Caution Advised on High Premium Risks
The cross-border technology funds attracting investor enthusiasm recently are not limited to the China-Korea Semiconductor ETF. Products including the Invesco Nasdaq Technology ETF, Invesco Great Wall Global Chip LOF, and several Nasdaq and Nasdaq 100 ETFs are also trading at premiums. These funds have also recently exhibited high premiums, prompting them to warn investors to closely monitor the premium risks in their secondary market trading prices and make investment decisions prudently.
Huatai-PineBridge Fund's announcement also highlighted that the secondary market trading price of the China-Korea Semiconductor ETF is influenced not only by changes in the fund's net asset value but also by other factors such as market supply and demand, systemic risk, and liquidity risk, which could lead to investor losses.
Industry insiders point out three potential sources of return for the fund: net asset value growth (from rising South Korean stocks), premium expansion (from capital inflows), and foreign exchange gains (from Korean won appreciation). The convergence of the fund's high premium could occur through three main paths: expansion of QDII quota or the fund company obtaining new quota; a correction in the semiconductor sector or waning AI hype reducing capital inflows; or the launch of similar products diverting capital and easing supply-demand imbalances.
"The core risk lies in the fact that the high premium itself stems from a mismatch between immediate market liquidity and allocation convenience. Once market sentiment cools or quota issues are alleviated, the premium could converge rapidly, leading to dual losses," the researcher said.
Huatai-PineBridge Fund pointed out that chasing and buying cross-border ETFs at high premiums could lead to losses from a subsequent decline in the secondary market price, and in extreme cases, difficulty in selling the holdings.
The researcher recommends prioritizing products with a premium rate below 5%. If the premium rate far exceeds a reasonable range, ordinary investors should participate cautiously. For those bullish on the South Korean semiconductor sector, they could consider waiting for QDII quota expansion and then subscribing through the fund's feeder fund to avoid secondary market premiums, or opt for low-premium ETFs tracking global semiconductor indices for indirect exposure to South Korean semiconductor leaders.
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