Global chip LOF premium rate hits 47%, shocking the market! Is it an opportunity or hidden risk?

Recently, chip investments have been booming, and global chip LOFs have also been highly sought after. This year, over a hundred premium risk warning announcements have been issued, and they have recently come under key monitoring by the Shanghai Stock Exchange.

Last Friday, the premium rate of the global chip LOF reached as high as 37%, leading to trading suspension from the start of trading this Monday, with resumption at 10:30 this morning. After resumption, the fund quickly rose, and by noon, the premium rate had exceeded 46%. Due to the excessive premium, the fund was urgently suspended in the afternoon until market close, with only one hour of effective trading throughout the day.

On the evening of the 11th, the fund continued to issue a premium risk warning announcement and announced that it would suspend trading from the market opening on May 12, resuming at 10:30 on the same day.

The fund holds a large position in several U.S. semiconductor index products. Recently, leading chip companies like Nvidia and AMD have risen, which has also boosted discussions about this fund on social media platforms.

However, amid a high premium of up to 47%, some netizens expressed concerns, stating that under its T+1 trading mechanism, a decline in the premium could lead to losses, even recalling the previous hype around silver LOFs. Some investors said that due to the excessively high premium of the global chip LOF, they would switch to trading another popular chip fund—the China-Korea Semiconductor ETF. Industry insiders emphasize that this product also has a high premium rate of 20.41%, and blindly investing could also face the risk of losses.

Global Chip LOF Premium Rate Exceeds 46%

Last Friday, the secondary market closing price of the Invesco Great Wall Fund’s global chip LOF was 4.050 yuan, while its net value as of May 6 was only 2.9526, meaning the secondary market premium rate was as high as 37.16%.

This fund has maintained a high premium recently, with over a hundred premium risk warning announcements issued this year. From April 27 to May 8, funds with high premiums like the global chip LOF have also been under close monitoring by the Shanghai Stock Exchange.

Considering the excessively high premium rate, to protect investors’ interests, the fund was suspended from trading starting this Monday, with resumption at 10:30.

After resumption, the intraday trading price of this fund continued to rise, and the premium rate kept climbing. The fund was temporarily suspended again in the afternoon until market close, with only 1 hour of total trading time for the day.

The latest announcement shows that as of today’s close, the latest transaction price of this fund in the secondary market was 4.284 yuan, while its net value as of May 7 was only 2.9178, meaning the secondary market premium rate had surged to 46.82%.

Invesco Great Wall Fund also solemnly reminds investors, “Pay close attention to the premium risk of secondary market trading prices, and make cautious investment decisions. Blind investments may lead to significant losses later.”

The firm further points out that the trading price of the global chip LOF in the secondary market, besides the risk of fluctuations in fund share net value, is also affected by market supply and demand, systemic risk, liquidity risk, and other factors, which could cause investors to face losses.

As of the end of the first quarter this year, the holdings of the global chip LOF mainly include several U.S. semiconductor index products, which contain leading chip companies such as Nvidia, AMD, Broadcom, and TSMC. Recently, the rise in the U.S. semiconductor sector has also increased the fund’s popularity.

Another noteworthy point is that this fund has suspended subscriptions since January 23 of this year and remains in a state of suspension, with no outside subscription possible. Many funds have flowed into the on-market trading, further pushing up the premium.

High Premium Rate Sparks Worries, Investors Turn to China-Korea Semiconductor ETF?

Recently, the chip sector has remained highly active, and the global chip LOF has sparked widespread discussion on social platforms, with some netizens even calling it the “King of Semiconductors.”

However, the current high premium of up to 47% has also caused many netizens to express concerns on social media, saying they dare not enter easily.

Some netizens directly stated that the global chip LOF operates under a T+1 trading mechanism, meaning that after buying, it cannot be sold on the same day. If the premium rate falls the next day, they could face losses. Some also linked the high premium of the global chip LOF to the previous hype around silver LOFs.

But some netizens have boldly bought in, believing that the actual premium situation is not as exaggerated as it seems.

An industry insider told reporters, “The global chip LOF is a QDII product, and its net value updates are delayed. Today’s premium rate is calculated based on the May 7 net value, but the chip sector continued to rise on the 8th, and this increase has not yet been reflected in the net value. As the product’s net value continues to update, once the increase on the 8th is reflected in the net value, and if the secondary market trading price remains stable, the premium rate of this product could fall back to a less exaggerated level. That’s why some investors are willing to buy even at a 46% premium.”

Some netizens also said that due to the excessively high premium of the global chip LOF, they switched to trading the China-Korea Semiconductor ETF under Huatai-PineBridge Fund. But it’s worth noting that as of today’s close, the premium rate of the China-Korea Semiconductor ETF also reached 20.41%. Blindly buying could still lead to losses.

Industry experts emphasize that high premiums can lead to higher investment risks, and investors should remain rational and cautious. Especially for cross-border on-market funds, if overseas markets experience sudden fluctuations overnight, it could cause the related funds’ premiums to rapidly fall the next day, risking losses for investors. Additionally, investing in on-market funds also requires attention to liquidity risk. Some on-market funds have small scales, and a concentrated sell-off could potentially trigger liquidity issues.

(Source: Cailian Press)