Nasdaq 100 ETFs See Persistent Premiums, Fund Firms Issue Repeated Warnings

By Yijun Yan, 21st Century Business Herald

As the Nasdaq Composite Index continues to climb, premium rates on China's domestic QDII funds tracking U.S. tech stocks have once again surged to elevated levels.

Repeated Warnings Fail to Cool Investor Enthusiasm

On the morning of September 24, before market open, Fullgoal Fund, Guotai Asset Management, and China Asset Management each issued announcements warning investors that the secondary market trading prices of their Nasdaq-100 ETFs had deviated significantly from net asset values, posing premium risks.

Despite these warnings, investor appetite remained strong. After the midday close on the same day, the fund managers of Fullgoal Nasdaq-100 ETF and Guotai Nasdaq-100 ETF issued a second round of premium risk alerts.

This is not an isolated occurrence. According to incomplete statistics from the 21st Century Business Herald, since the beginning of September, 12 fund managers have issued over 200 announcements regarding premium risks in Nasdaq-100 ETFs. Meanwhile, other QDII products—including the Dow Jones ETF, S&P 500 ETF, Global Chip LOF, and China-Korea Semiconductor ETF—have also frequently experienced high premiums, with some products seeing premium rates exceed 10% at one point.

Industry experts warn that a high premium essentially means the fund's trading price has significantly diverged from its net asset value. Once the premium narrows, investors who bought at elevated levels could face substantial price losses. They advise against blindly chasing rallies during periods of high premiums.

Premium Rates Remain Stubbornly High

In September, major U.S. stock indices showed notable divergence. As of September 23:

• Dow Jones Industrial Average: Down over 3% month-to-date
• Nasdaq 100 Index: Up over 3%
• S&P 500 Index: Slightly up 0.26%

Against this backdrop, capital flows into QDII funds targeting U.S. tech stocks have intensified.

On September 24, fund managers of several Nasdaq-100 tracking ETFs issued alerts stating that secondary market trading prices were significantly above the Indicative Optimized Portfolio Value (IOPV), resulting in substantial premiums. They cautioned that blind investment could lead to major losses.

Some fund managers attempted to curb premiums through temporary trading halts, but with limited effect.

For example, before market open on September 24, Guotai Asset Management announced that its Nasdaq ETF (Guotai) was experiencing significant premium pricing. To protect investor interests, trading was suspended from market open until 10:30 a.m. that day.

In its announcement, Guotai reminded investors that while the fund can be traded on the secondary market or redeemed via subscription, secondary market prices are influenced not only by changes in net asset value but also by market supply and demand, systemic risks, and liquidity risks—all of which could lead to losses.

These warnings did little to dampen investor enthusiasm. By the afternoon of September 24, Guotai was forced to issue yet another premium risk alert.

In fact, since September, cross-border ETFs tracking the Nasdaq-100—including Guotai's product—have maintained persistently high premium rates.

According to Wind data as of September 23, several Nasdaq-100 ETFs recorded IOPV premium rates exceeding 10% for five consecutive trading days, with some individual products sustaining premium rates around 15%.

Beyond Nasdaq-100 ETFs, fund managers of other QDII products—including the S&P 500 ETF, Global Chip LOF, U.S. 50 ETF, and Nikkei 225 ETF—have also frequently warned investors about premium risks in September.

Why Are Premiums So High?

Zeng Fangfang, a public fund product operations specialist at PaiPaiPai Wealth, explained to reporters that domestic demand for overseas asset allocation is rising. With optimistic medium-to-long-term expectations for U.S. broad-based indices, investors' willingness to allocate to overseas assets has increased, driving concentrated capital inflows into cross-border ETFs and LOFs such as Nasdaq-100 and S&P 500 products.

"Although QDII quotas have been expanded in phases, quotas for popular products are consumed quickly. Subscription channels on the primary market are restricted, making it difficult for ETF arbitrage mechanisms to function effectively and quickly add new shares to narrow the price gap," Zeng said. "Cross-border time differences, combined with trading sentiment, further amplify deviations. There is a time lag between domestic and overseas markets, so intraday reference net values lag behind. Short-term sentiment from concentrated capital trading further pushes up secondary market prices, widening the gap from the fund's net asset value."

Notably, at the end of August, a new batch of QDII quotas was issued, with several fund managers receiving additional allocations. However, the incremental quotas were quickly absorbed, and large subscription suspensions for popular QDII funds remain widespread. Some funds attempted to raise subscription limits, but after a flood of capital inflows within a single day, they were forced to tighten access again.

Don't Blindly Chase Rallies

The recent密集 of premium risk alerts from fund managers reflects, to some extent, a lack of full awareness among investors about the risks hidden behind high premiums.

At its core, a fund premium occurs when the secondary market trading price exceeds the IOPV—meaning the trading price has deviated from the fund's actual value. Therefore, the most direct risk of buying into a high-premium QDII fund is that once the premium narrows, investors will suffer price losses.

Example: If an investor buys an ETF at 15 yuan when the premium rate is 50%, and the premium later returns to 0%, even if the IOPV remains unchanged, the secondary market price would fall from 15 yuan to 10 yuan—resulting in a 33% loss.

Beyond losses from premium contraction, high-premium QDII funds carry multiple other risks.

Zeng Fangfang cautioned that the U.S. stock market itself faces valuation correction pressure, and changes in the RMB exchange rate can also affect fund net values, with currency conversion losses potentially eroding investment returns. Additionally, when QDII quotas are tight, products may suddenly restrict subscriptions; under extreme market conditions, cross-border trading and settlement may face delays. She advised investors to avoid blindly chasing rallies during high-premium periods and to carefully assess premium levels before making decisions.

On the other hand, allocating to QDII funds also requires close attention to the performance and risks of the underlying overseas markets.

Regarding the U.S. tech sector, market opinions remain divided.

A spokesperson from Bosera Asset Management noted that the U.S. stock market has entered a new equilibrium phase characterized by "strong earnings, limited valuations, and style shifts driven by long-end interest rates and geopolitical variables." The key factors to trade now, they said, include "how long high interest rates will persist, whether a 10-year U.S. Treasury yield of 5% is just the starting point, whether geopolitical conflicts will continue to push up oil price benchmarks, and whether AI capital expenditures and earnings can sustainably offset valuation compression."

Chen Meng, an analyst at Dongwu Securities, believes that rising interest rates at this stage are more likely to suppress tech stock valuations than to alter the AI industry's fundamentals or profit trends. As long as the pace of rate hikes remains moderate and AI revenue continues to materialize, large-cap tech and communication services sectors still have opportunities. Their strong cash flows, earnings certainty, and AI exposure give them a relative advantage even in a high-interest-rate environment.