In recent weeks, the performance of Exchange-Traded Funds (ETFs) has been a hot topic among investors, showing a mixed picture across the marketAs investors sift through the noise of price fluctuations, it's clear that a stark divide exists within the vast array of ETFs available, particularly as the market faces continued adjustments.

This week alone, major stock indices such as the Shanghai Composite Index dipped below the crucial 3200 point mark, while the ChiNext index fell beneath 2000, marking the lowest levels seen since October of the previous yearThese shifts are not just numbers; they reflect the underlying economic dynamics and sentiments swirling within the market.

Despite a plethora of ETFs—over a thousand when excluding currency ETFs—only about 200 managed to log a gain this weekA deeper dive into these figures reveals that the total market ETF shares saw an increase of 1.368 billion this week, a slight rise of 0.05%, reaching a total of 26.81492 trillion shares

Advertisements

However, the overall scale of ETFs shrank by 13.248 billion yuan, a decrease of 0.37%, leading to a cumulative scale of 36.12754 trillion yuanAverage daily trading volumes also fell by 1.643 billion yuan, landing at around 210.245 billion yuan.

A standout performer amidst the decline has been the cross-border ETFs, which have notably outperformed their peersFor instance, the Invesco Great Wall S&P Consumption Select ETF, the Southern Fund Southern East England Saudi Arabia ETF, and the Harvest DAX Germany ETF are among those that surged over 15% this weekParticularly impressive was the Invesco Great Wall S&P Consumption Select ETF which soared over 29%, setting a new all-time high since its listing, driven by top holdings in major global brands including Amazon, Tesla, Procter & Gamble, and Home Depot.

Not just limited to the cross-border segment, various chip sector ETFs have also captured investor attention, with funds like the ZH-KR Chip ETF, the Guotai CSI All-Cap Integrated Circuit ETF, and the Harvest Integrated Circuit ETF all ranking among the top gainers this week, each with an increase exceeding 4%. Among these, the ZH-KR Chip ETF achieved a remarkable gain of 5.79%, showcasing its top ten holdings which include industry giants like Samsung Electronics, SK Hynix, and SMIC A-shares.

Investor excitement surrounding chips is partly fueled by significant company announcements, such as the advancements from SK Hynix, which reported a surge of nearly 12% in stock price within the week—primarily due to their cutting-edge innovation in HBM memory that has far exceeded market expectations

Advertisements

The overall performance in the chip segment underscores a pivotal moment for the semiconductor market, as analysts at Guojin Securities note that the initiation of new semiconductor cycles often arises from emerging technologies spurring product upgrades and innovations.

However, the question remains: how long can the cross-border ETFs maintain this momentum? The recent spike in these ETFs has come hand-in-hand with extraordinary turnover rates and premium ratiosSome reports indicated that as many as seven cross-border ETFs saw turnover rates surpassing ten times in just a week, with the Harvest DAX Germany ETF and the Invesco Great Wall S&P Consumption Select ETF both exceeding turnover rates of 33 timesAcross the board, the average turnover for 79 cross-border ETFs was a staggering 349.48%.

The high demand signifies a strong market acceptance, albeit at the risk of inflated premiums

Advertisements

The same week saw those top ten cross-border ETFs reporting an average premium rate of 13.69%. The Invesco Great Wall S&P Consumption Select ETF reported a price of 1.899 yuan per share, sharply above its net asset value of 1.2505 yuan per share, reflecting a jarring premium of 51.86%. Such elevated premiums often indicate an amplified risk of retraction; reminiscent of last year’s turmoil when a Saudi ETF experienced pronounced volatility shortly after its launch.

Fund managers have actively cautioned investors about the risks associated with high premiumsMajor investment firms—including Yi Fang Da, Hua Xia Fund, Southern Fund, and Huatai-PineBridge—all issued statements highlighting that their cross-border ETFs were trading significantly higher than their respective share price reference net asset valuesIn the wake of these irregularities, several funds even resorted to temporarily halting trading to mitigate further risk.

This week's performance among the cross-border ETF landscape has not been uniform

• Strengthening Cooperation for Global Energy Transition
• Rising Energy Prices and Dollar Interest Rate Hikes
• Differences in Inflation Between China and the United States
• Cross-Border ETFs Hit a Sudden Brake!
• Global Energy Crisis: Soaring Coal Prices

While some segments thrived, others, particularly those associated with Chinese concept stocks and Hong Kong tech companies, suffered considerable lossesThe Hua Bao CSI Hong Kong Internet ETF, along with its peers in the Hong Kong consumer sector and the E-Fonda CSI Overseas Chinese Internet 50 ETF, all recorded declines exceeding 5% this weekThe Hua Bao CSI Hong Kong Internet ETF alone dropped by 5.58%, primarily impacted by its significant holdings in major corporations like Meituan-W, Tencent Holdings, Alibaba-W, and Xiaomi Group-W, with Tencent experiencing almost an 11% plummet in stock value.

Noteworthy in this context is Tencent's response to being placed on the U.SDepartment of Defense's list, which deemed it a Chinese military enterpriseTencent argued that it does not belong to the general defense industry, and its classification is a misinterpretationThey emphasized that this situation would not adversely affect their business operations, though short-term market sentiments remained suppressed following the announcement.

Overall, analysts from institutions like Puyin International suggest that while this development may place heavy pressure on market sentiments, Tencent’s fundamental business potential remains intact, with expectations of sustained profitability moving forward