Fifty risk warnings and eighteen temporary suspension announcements couldn't stop it, another ETF is pushed to a high premium

Cailian Press, February 28 (Reporter Yan Jun) The high premium risk of QDII funds is truly hard to ignore. Recently, a QDII-ETF fund has gained popularity.

As Samsung, SK Hynix, and other stocks surged, the Korean stock market hit new highs. The only ETF investing in Korea domestically has become a target for investors. Due to restrictions on QDII quotas and other reasons, the intra-market premium of the China-Korea Semiconductor ETF remains high. On February 27, the ETF’s premium once reached 30%, and by the close, it still maintained a 20% premium.

This ETF has achieved a 65% return year-to-date, leading all domestic ETFs. When chasing high on QDII ETFs, two scenarios may occur: one, the valuation is already high, and most investors are “late to the game,” only noticing after the sector has risen; two, “buying expensive,” when an ETF is heavily bought, its secondary market trading price may already exceed its net asset value (NAV), resulting in a high premium.

Since the end of last year, Huatai-PineBridge China-Korea Semiconductor ETF has issued 50 risk warnings and 18 temporary suspension notices, gradually increasing purchase restrictions. Industry insiders believe that if the high premium issue cannot be contained, regulatory upgrades and forced suspensions are foreseeable.

Another case of high premium in QDII, from one-hour suspension to half-day suspension

On February 27, Huatai-PineBridge China-Korea Semiconductor ETF was suspended for half a day, immediately attracting market attention. Usually, high premiums in intra-market funds prompt risk warnings, often resulting in a one-hour suspension. A half-day suspension is rare and signals an escalation in risk alert.

Launched in November 2022, this ETF is the only one targeting the Korean market and has a recent scale of 5.887 billion yuan. Benefiting from the surge in Korean stocks, it has gained over 65% in two months this year, leading all domestic ETFs.

Premiums essentially result from supply and demand imbalance. When a sector becomes a market hotspot, related ETFs attract large inflows. Investors rush to buy in the secondary market, pushing up the trading price. However, the IOPV (Indicative Optimized Price of the ETF) is determined solely by the underlying basket of stocks and is unaffected by secondary market supply and demand. When a gap appears between the two, a premium or discount occurs.

Huatai-PineBridge published an educational article on February 27 explaining that normally, ETF premiums are arbitraged away through a “arbitrage mechanism”: when a premium appears, investors can buy ETF shares at a low price in the primary market and sell at a higher price in the secondary market, earning the difference. This increases supply in the secondary market and quickly reduces the premium.

However, for cross-border ETFs, tight foreign exchange quotas hinder this arbitrage process.

When fund companies face foreign exchange restrictions, they often suspend or reduce the primary market purchase limits, significantly decreasing institutional investors’ participation in arbitrage and preventing entry.

Additionally, overseas markets’ trading hours often differ from A-shares, making real-time updates of component stock prices impossible. As a result, the IOPV loses its real-time reference value. More critically, when overseas markets are closed, cross-border ETFs usually suspend primary market subscriptions and redemptions, leaving only secondary market trading. Without the primary market as a price anchor, secondary market prices can drift far from the actual NAV, especially under strong demand, leading to high premiums.

Under the combined influence of market demand, policy quotas, and trading hours, cross-border ETFs have become hotspots for premiums. Statistics show that on February 26 alone, over 20 QDII ETFs issued warnings about premium risks. These notices essentially remind investors: buying now may be paying too much.

Huatai-PineBridge has now fully restricted purchases of its China-Korea Semiconductor ETF. Since February 27, subscriptions for the ETF’s A, C, and I shares have been suspended.

According to incomplete statistics, since October 2025, Huatai-PineBridge China-Korea Semiconductor ETF has raised purchase restrictions six times, from 10,000 yuan, 3,000 yuan, 1,000 yuan, 100 yuan, 10 yuan, to full restrictions.

Furthermore, in its risk warning, Huatai-PineBridge announced that based on Morningstar’s re-evaluation of the product’s rating, from February 27, the risk level of the China-Korea Semiconductor ETF has been upgraded from R3 to R4. Investors must understand this change and assess whether the fund’s risk level aligns with their investment objectives, time horizon, experience, and asset situation.

Warning: High Premium Risks Are Not “Hindering Investors’ Profits”

Many investors interpret high premiums as a sign of “hot” assets, but in fact, high premiums can hide significant risks.

First, prices will eventually revert to value. High premiums are driven by market sentiment. When sentiment cools or quotas are released, premiums can fall rapidly, meaning investors are paying for market emotions.

Second, buying at high premiums may entail additional losses. When the premium zeroes out, even if the NAV remains stable, secondary market investors may face losses. For example, buying a ETF at 15 yuan with a 50% premium means the price is effectively 22.50 yuan. When the premium drops to zero, the price may fall back to 15 yuan, resulting in a 33% loss, regardless of the NAV. This loss is essentially paying extra for market hype, unrelated to the ETF’s tracking performance.

Third, liquidity risk. A sudden wave of sell-offs can cause prices to plummet and make liquidation difficult, especially for less liquid ETFs.

Fourth, even the linked funds cannot fully avoid these risks. When QDII quotas are tight, linked funds may be forced to buy at a premium, and subscription funds may experience delays in fund receipt.

The Guotou Silver LOF also gained market attention due to its scarcity, and the high intra-market premium combined with complex commodity futures led to a dispute over claims. Unlike ETFs, LOFs involve primary market risks.

From social platforms like Xiaohongshu, investor education remains a challenge. Some investors claim, “Premiums are unrelated to the market; the intra-market price is the actual price,” or “Korean stocks are rising, so premiums exist; all ETFs are the same.” These views reflect a lack of understanding of premium risks.

For fund companies, addressing high premium risks involves continuous risk warnings, suspensions, purchase restrictions, dynamic quota adjustments, internal risk controls, cooperation with exchanges to monitor abnormal trading, and intensive investor education to raise awareness.

“You can check IOPV and premium rate on trading apps. A premium over 1% warrants caution; over 2% significantly increases the risk of chasing the high,” Huatai-PineBridge reminds investors. Paying attention to premium rates and timely notices of suspensions can help make rational decisions.

Most companies feel helpless regarding cross-border ETFs with high premiums. Due to QDII quota constraints, scale growth is limited, and high premiums pose operational risks. Similar situations have occurred with US stock ETFs and Saudi ETFs. Despite over 50 risk warnings and 18 suspensions for the China-Korea Semiconductor ETF, investor enthusiasm remains high.

Huatai-PineBridge states that they will continue to monitor premium trends closely, take temporary suspension measures when necessary, coordinate within quota limits, promote arbitrage mechanisms, conduct ongoing investor education, and maintain close communication with regulators and exchanges to safeguard market order.