The landscape of cross-border Exchange-Traded Funds (ETFs) has witnessed a notable escalation in premium phenomena, drawing significant attention from investors and market analysts alikeAs of January 10, during the morning trades, major stock indices experienced a downward trajectory: the Shanghai Composite Index fell by 0.39%, slipping below the crucial 3200 points barrier, while the Shenzhen Component Index decreased by 0.65% and the ChiNext Index saw a 0.5% declineTrading volume amounted to approximately 740 billion yuan, which marks an increase of around 37.6 billion yuan from the previous dayInterestingly, sectors such as technology and innovation flourished, with the STAR Market indices, namely the STAR 50 and STAR 100, managing slight gains amidst the general downturn.

Investors observed a mixed response across various sectorsThe humanoid robotics, advanced packaging, and industrial core machinery sectors excelled, showcasing considerable gainsIn stark contrast, previously burgeoning domains like ice and snow tourism, optical communications, and the first release economy grappled with declinesA notable distress signal was the sell-off in multiple high-profile stocks, including Hai De Control, Hai Ou Co., and Xiongtai Co., all of which reached their daily trading limit in losses.

Amidst these fluctuations, the performance of cross-border ETFs stood out as remarkably robustDuring the morning session of January 10, several cross-border ETFs—including the Saudi ETF (520830), Asia Pacific Select ETF, S&P ETF (159655), and Germany ETF (513030)—recorded gains exceeding 5%. This surge in activity is representative of a broader trend where investors are increasingly drawn to international markets, leveraging the benefits offered by cross-border ETF structures.

Several of these ETFs showcased astonishing turnover rates, with ten experiencing more than 100% in trading volumeThe Saudi ETF (520830) and the Asia Pacific Select ETF particularly captured attention with turnover rates exceeding 500% during early trades

Advertisements

It is noteworthy that despite their relatively smaller sizes of 3.1 billion yuan and 2.41 billion yuan, their trading volumes surpassed 1 billion yuan in the same morning session.

When viewed through a longer lens, a handful of ETFs have surged more than 20% since the beginning of the year, including two Saudi ETFs, the S&P Consumer ETF, and the Asia Pacific Select ETF, marking a significant shift in investor sentimentFrom the onset of the year, the premium phenomenon has become increasingly pronouncedOn this day, four of the cross-border ETFs—including the S&P Consumer ETF, the Saudi ETF (159329), the German ETF (159561), and the S&P 500 ETF (159612)—were suspended from trading due to excessively high premiums, with announcements regarding resumption timing pending.

The premium rates from the previous day's closing were particularly strikingThe S&P Consumer ETF boasted an impressive premium rate of 51.82%, while the Saudi ETF (159329) was above 20%. The S&P Consumer ETF, notably, has been issuing continuous risk warnings regarding its premium since November 26, 2024, reflecting a concerning trend with over 10% premiums persisting for 17 consecutive trading daysThis scenario underscores the intense market demand that often overshadows the fundamental values of the underlying assets.

Cross-border ETFs are particularly appealing due to their pricing in Chinese yuan, enhancing accessibility for domestic investorsThey can be traded on exchanges as well as subscribed or redeemed both on-market and off-market, lowering the barrier of entry significantlyThe typical net asset value of these ETFs hovers between 1 and 2 yuan, enabling investments starting from as little as 100 to 200 yuan, vastly lessening the complexity associated with investing in foreign stock markets.

Additionally, cross-border ETFs operate under a T+0 trading system, subsequently boosting liquidityHowever, this has also led to frantic trading behaviors where the premiums are overlooked in favor of rapid speculative interests

Advertisements

The potential for unchecked trading momentum can create distortions in the market, distilling the essence of what should underpin the valuation of these funds.

On another front, approximately 5 billion yuan in principal funds saw net inflows into the semiconductor sector during the morning sessionThe semiconductor index opened flat but experienced an upward movement, peaking at a 3.16% increase before closing the noon session with a 1.13% gainIn this rising sub-sector, stocks such as Jinfeng Mingyuan, Fengfan Technology, and Changdian Technology all observed accolades in trading, surging more than 7% each.

The semiconductor sector's appeal during the morning trades was robust, registering a net inflow of 4.77 billion yuanNotably, Changdian Technology hit its daily limit while attracting a staggering net inflow of 2.125 billion yuanFurthermore, Cambrian Technology saw a peak increase of 9.19%, marking another historic high with a total market cap soaring past 320 billion yuan, although it closed the noon session with a more subdued gain of 4.29%.

Looking at the global semiconductor market, there has been a remarkable resurgence since the start of 2024. According to data from the Semiconductor Industry Association (SIA), global semiconductor sales reached a staggering 57.8 billion dollars in November 2024, marking a year-on-year increase of 20.7% and a sequential rise of 1.6%. As we move nearer to 2025, the demand catalyzed by sectors such as artificial intelligence, automotive applications, and new AI infrastructures is expected to stimulate further growth in the semiconductor landscape.

Forecasts from the International Semiconductor Industry Association (SEMI) predict a 6.6% increase in global semiconductor capacity for 2025, reaching a production of 33.6 million wafers monthlyIn response to the escalating computational demands, the advanced production capacity below 7nm is projected to reach a monthly output of 2.2 million pieces, reflecting an annual growth rate of 16%. Meanwhile, the mainstream process range of 8nm to 45nm anticipates breaking through 15 million pieces monthly by 2025, spurred largely by automotive and IoT sectors.

Reports from Guosen Securities suggest that the semiconductor sector will remain in double-digit growth patterns through 2025, leading to positive ripples through the entire industry chain

Advertisements

Advertisements

Advertisements