In recent times, there has been a noticeable shift in investment trends among market participants, particularly influenced by the increased volatility of stock markets both domestically and internationallyAs these fluctuations intensify, a significant influx of speculative capital has started gravitating toward a certain type of financial product known as cross-border Exchange Traded Funds (ETFs), recognized for their smaller volumes and convenient trading mechanisms.

These cross-border ETFs have recently exhibited dramatic price premiums, with some products even experiencing continued price escalations during downturns in benchmark indicesOn one occasion, the premium rates soared to an alarming 38%, indicating a substantial risk for investorsSurprisingly, despite repeated warnings from financial institutions about the possible dangers associated with these high premiums, the scale of these ETFs has continued to rise, drawing significant attention from various investors.

On January 8, after a collective downturn in major U.S

stock indices, 15 cross-border ETFs, including the S&P Consumer ETF, S&P 500 ETF, NASDAQ 100 ETF, and a German ETF, issued premium risk alertsSome of these products even faced temporary halts in trading for an hour due to the excessive premium risk.

For instance, the S&P Consumer Select Index fell by 1.4% in the early hours of January 8. In response, the S&P Consumer ETF announced that its market trading price was considerably above its reference net asset value, posing an evident premium risk to potential investorsThe fund cautioned investors about possible significant losses in the event of blind investmentsAs a protective measure for investors, the fund temporarily suspended trading until 10:30 on the same day.

However, following the resumption of trading at 10:30, the S&P Consumer ETF experienced a sharp increase, closing with a whopping increase of 4.5% by midday, with the premium rate skyrocketing to 38.04%. Later in the afternoon, the price fluctuated, even dipping briefly, but recovered significantly towards the close of trading, ultimately finishing up 4.92% with a premium rate of 38.6%. Notably, the turnover surged to an overwhelming 1028.91%, facilitating a daily transaction volume of 6.064 billion yuan despite a circulating value of merely 600 million yuan for the ETF.

This trend has not been isolated; since early December, the market price of the S&P Consumer ETF has diverged significantly from its benchmark performance

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On January 7, the ETF's premium rate exceeded 38%, although it eventually settled at a premium of 30.05% at the closeAdditionally, on January 6, it outperformed the market robustly, leading to a one-hour trading halt due to its previously high premiums, followed by a strong close with a 10% increase on the day.

Beyond the S&P Consumer ETF, data from Wind indicates that as of January 8, the S&P 500 ETF and other related ETFs demonstrated premium rates of 15.67% and 10.09%, respectively, with a total of 26 cross-border ETFs reflecting premiums exceeding 5% across the market.

Analyzing the context, the ETFs displaying these high premiums generally share characteristics such as T+0 trading capabilities, limited circulation scale, a relatively small number of holders, and lower liquidity

Such traits render them particularly susceptible to speculative trading behavior.

For example, both the S&P Consumer ETF and the S&P 500 ETF have circulating scales below 600 million yuan, with the S&P Consumer ETF reporting only 1,798 holders as of the last mid-year reportUnder normal circumstances, the daily transaction volumes for these ETFs hover around the multi-million yuan markHowever, once speculative capital targets such products, the average daily transaction volume can escalate hundreds of times—as witnessed on January 8 with the S&P Consumer ETF achieving a transaction volume of 6.064 billion yuan.

An analyst noted that some investors are treating low-circulation ETFs akin to micro-cap stocks in their trading strategies, as the earnings potential appears more enticing amid a market with dwindling profitability prospects

This trend has been exacerbated as more investors look to diversify their asset allocations, increasing their overseas asset exposure.

However, challenges such as foreign exchange quotas restrict these investments, leading fund companies to pause off-market subscriptions once their currency allocations are exhaustedConsequently, investors are left with no option but to purchase relevant on-market products, consequently elevating the net value of these on-market funds compared to their off-market counterparts, thus inflating their premium ratesTherefore, a significant amount of capital is rapidly entering these on-market ETFs, often overlooking warnings about premium risks.

Recent data from Wind suggests that these high-premium ETFs have attracted notable capital inflowsFor example, the S&P Consumer ETF saw net inflows of 181 million yuan over the past month, leading to a scale increase of over 40%. The NASDAQ 100 ETF similarly experienced a net inflow of 558 million yuan, translating to an increase exceeding 36% over the same period.

Due to their smaller trading scales, liquidity flux can cause substantial price fluctuations in these minor on-market funds

This volatility is increasingly evident; instances of sharp price movements to daily limits are becoming commonA recent example occurred on December 26, 2024, when the Dividend Hong Kong Stock ETF and others witnessed unusual closing price spikes, only to reverse in the subsequent trading session.

Amidst this volatile market environment, several fund companies urgently alerted investors to the premium risks associated with secondary market trading prices, warning that unconsidered investments might lead to substantial losses.

Wind's data indicates that since the beginning of 2025, close to 150 risk alert announcements regarding fund premiums have been issued across the industry, with the S&P Consumer ETF leading with a prolonged string of premium warnings for 25 consecutive trading days since December

This trend has highlighted the persistent concern over premium sustainability.

Research analyst Li Lingbing advises investors to recognize that net asset value represents the fundamental worth of a fund, and extraordinarily high premium rates indicate a disconnect from this value, suggesting potential bubbles that might lead to significant downward pressures.

“Investors should closely monitor premium rates when purchasing on-market funds, focusing on the fundamentals and market trends while being wary of price changes to avoid thoughtless buying that may inflict severe lossesRisk management remains crucial; investors must devise appropriate risk strategies to safeguard their investments,” Li Lilin emphasizes.

A manager from a medium-sized public fund in Shanghai pointed out that price fluctuations could stem from speculative actions by a limited pool of investors; however, engaging with high-premium products might expose them to the dual risks of potential price corrections and declines in underlying assets