Suspended for one hour, hitting the daily limit up until the close: the familiar arbitrage playbook of the China-Korea Semiconductor ETF is back again.

On May 11, the “China-Korea Semiconductor ETF Huatai-Pbree” once again demonstrated a “suspension cannot stop the limit-up” trend. Before the market opened, Huatai-Pbree Fund announced that the ETF’s secondary market trading price was significantly higher than the share reference net value, with a large premium, and to protect investors’ interests, it would be suspended for one hour at market open.

The suspension warning did not dampen market enthusiasm. After trading resumed, the ETF’s price quickly surged, hitting the daily limit-up strongly by the close, and by the end of the day, the fund’s intraday premium rate had exceeded 20%.

In the four trading days after the May Day holiday, the fund has applied for suspension three times. Previously, on May 6 and May 8, it was also suspended for one hour due to high premiums. As of May 8, the fund’s increase since 2026 had reached 73.63%, with a nearly one-year cumulative increase of 191.14%.

Circuit breakers, new all-time highs, and sky-high bonuses

The crazy performance of the China-Korea Semiconductor ETF Huatai-Pbree is rooted in the explosive rise of the Korean stock market. On the morning of May 11, the KOSPI index in Korea rose over 5% at one point, reaching a record high of 7,876.60 points; due to a 5% increase in KOSPI200 futures, the Korea Exchange triggered a circuit breaker, suspending algorithmic trading buy orders. The KOSPI closed the day up 4.32%, at 7,822.24 points.

Since 2026, the KOSPI has gained approximately 86%, with a cumulative increase of over 200% in the past year. JPMorgan has raised its bull case target to 10,000 points, and Goldman Sachs has also adjusted upward to 9,000 points.

The core driver of Korea’s stock market surge comes from the semiconductor industry, especially the super cycle of memory chips. Data shows that memory chips account for up to 50% of the KOSPI’s weight, contributing about 70% of this year’s gains, with Samsung Electronics and SK Hynix together making up nearly 40% of Korea’s market capitalization. On May 11, both stocks hit new all-time highs. In terms of performance, SK Hynix’s Q1 2026 operating profit reached 3.76 trillion won, a year-on-year jump of 405%; Samsung Electronics’ operating profit in the same period soared by 756.1% year-on-year, reaching 57.2 trillion won.

Market rumors earlier suggested that SK Hynix employees in Korea received bonuses exceeding 6 million RMB per person. Although the company responded that the exact amount was not yet determined, it had established a system where 10% of operating profit is used as performance bonuses. While Samsung Electronics did not trigger discussions of sky-high bonuses, its stock price has increased over 120% this year.

Suspensions cannot curb arbitrage impulses

Returning to the China-Korea Semiconductor ETF Huatai-Pbree itself, the persistent high premium of the ETF stems from structural supply and demand imbalances. This ETF is the only cross-border ETF in China targeting the Korean market, with a scarcity of underlying assets. Recently, the Korean semiconductor index has outperformed the domestic market, and the continuous activity in global and domestic semiconductor sectors has attracted substantial capital inflows.

However, as a QDII fund, its subscription quota is limited by foreign exchange restrictions. Currently, the daily off-market subscription limit for the China-Korea Semiconductor ETF is 20 million shares. Although the fund manager has increased the daily subscription limit from 3 million to 20 million shares at the start of the year, this level is already relatively high among similar cross-market, equity-focused QDII index products, but it remains insufficient against the tide of inflowing capital.

Quota constraints hinder the effectiveness of arbitrage mechanisms. In theory, arbitrageurs could buy shares off-market and sell them in the secondary market to reduce premiums, but limited subscription quotas greatly weaken this effect, making the continuous accumulation of premiums inevitable.

In fact, since October 2025, Huatai-Pbree Fund has repeatedly issued risk warning notices about the secondary market trading price premiums of this ETF. Since 2026, Huatai-Pbree Fund has issued a total of 127 premium risk warning notices for this fund. Despite repeated warnings from the fund manager, investor enthusiasm remains undiminished amid the ongoing surge in the Korean stock market.

Familiar scenes in capital markets

2026 is not the first time such high-premium phenomena have occurred. Just a few months ago, a similar scenario played out with the Guotou Silver LOF.

As precious metal prices continued to rise, the net value of Guotou Silver LOF surged rapidly. Since December 2025, the fund has almost daily issued premium risk warnings, and on January 28, 2026, it suspended subscriptions to cut off arbitrage sources. On February 2, 2026, after market close, Guotou UBS announced an adjustment to the valuation method of its silver futures contracts held by Guotou Silver LOF, which directly caused the fund’s net value to drop by as much as 31.50% that day.

The controversy over this adjustment centered on the fact that the announcement was made after trading hours but the adjustment was retroactively applied to before the close of that day. Guotou UBS explained that early disclosure might trigger panic withdrawals, but some investors still called it unfair. Ultimately, the fund company announced compensation.

The Guotou Silver LOF incident exposed the fundamental dilemma of high-premium cross-border funds: whether through purchase restrictions or suspensions, these measures can only temporarily protect latecomers. Once valuation rules are adjusted, the huge gap between book net value and trading price will be instantly revealed.

In fact, since 2026, high premium risks are not unique to the China-Korea Semiconductor ETF; they have almost become a widespread phenomenon across the entire QDII fund sector.

At the start of the year, ETFs tracking US stock indices became hotspots for premium risk warnings. Data from iFinD shows that in early February, dozens of popular products including Nasdaq ETFs and S&P 500 ETFs issued risk warnings; just this week, multiple funds including Nasdaq ETFs, S&P 500 ETFs, and Nikkei ETFs again issued premium risk warnings simultaneously.

Looking at the premium rate data, most QDII broad-based index funds currently have premium rates around 4%–5%. The focus of fund companies’ notices is not necessarily on the absolute level of premiums but on the potentially uncontrollable risk mechanisms behind them. When high premiums accumulate over time, a reversal in market sentiment could cause investors who entered at high prices to face a double blow of net value reversion and falling prices.