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

Caixin News, May 11 (Reporter Li Di) With chip investments heating up recently, global chip LOFs have also become highly sought after. This year, more than a hundred premium risk warning announcements have been released. They have also recently been placed under key monitoring by the Shanghai Stock Exchange.

Last Friday, the premium rate of global chip LOFs reached as high as 37%. As a result, trading was suspended starting from the opening of trading this Monday, and resumed at 10:30 this morning. After the market reopened, the fund rose rapidly. By the noon close, the premium rate had already exceeded 46%. Due to the excessively high premium, the fund was urgently suspended again in the afternoon until the close. The fund’s effective trading time for the entire day was only one hour.

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

The fund holds large positions in multiple U.S.-listed semiconductor index products. Recently, chip leaders such as Nvidia and AMD have risen, which has also driven up discussions about this fund on social media platforms.

However, with the premium as high as 47%, some netizens expressed concerns, saying that under its T+1 trading mechanism, if the premium falls, they would face losses—some even linked it to the previously hyped trading scenario of the silver LOF. There are also investors who said that due to the excessively high premium of global chip LOFs, they would instead trade another popular chip fund—the China-Korea Semiconductor ETF. But industry insiders emphasized that the premium rate of that product is also as high as 20.41%. If investors buy blindly, they still face risks of losses.

Global chip LOF premium rate exceeds 46%

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

The fund has recently continued to trade at a high premium. Since the beginning of this year, it has issued more than a hundred premium risk warning announcements. From April 27 to May 8, funds with higher premiums such as the global chip LOF were also under key monitoring by the Shanghai Stock Exchange.

Given the excessively high premium rate, to protect investors’ interests, the fund suspended trading from the start of trading this Monday and resumed trading at 10:30.

After resumption, the fund’s on-exchange trading price continued to rise, and the premium rate also kept climbing. The fund was temporarily suspended this afternoon until the close, with a total trading duration of only 1 hour for the entire day.

According to the latest announcement, as of today’s close, the fund’s latest transaction price in the secondary market was 4.284 yuan, while its net value as of May 7 was only 2.9178. This means the fund’s secondary market premium rate has risen to 46.82%.

Invesco Great Wall Fund also solemnly reminds investors: “You should closely monitor the risk of premium in secondary market trading prices and make prudent investment decisions. If you invest blindly, you may suffer significant losses later.”

Invesco Great Wall Fund further notes that the trading prices of global chip LOFs in the secondary market are not only affected by the risk of fluctuations in the fund unit net asset value, but also influenced by other factors such as market supply and demand relationships, systemic risk, and liquidity risk. These factors may expose investors to losses.

Based on the fund’s holdings at the end of the first quarter of this year, the global chip LOF holds large positions in multiple U.S.-market semiconductor index products. These holdings include leading chip companies such as Nvidia, AMD, Broadcom, and TSMC. The recent rise in the U.S. semiconductor sector has also boosted the fund’s popularity.

Another point worth noting is that this fund has suspended subscriptions since January 23 this year, and it remains in a suspended subscription state. As funds cannot be subscribed for over-the-counter, many funds flowed into on-exchange trading, further pushing up the on-exchange premium.

High premium rate raises concerns—are investors turning to the China-Korea Semiconductor ETF?

Chip sector heat has remained high recently, and global chip LOFs have also sparked widespread discussion on social media. Some netizens even called it the “king of semiconductors” in their posts.

But now that the premium is as high as 47%, many netizens on social media have also expressed concerns, saying they do not dare to enter easily.

Some netizens said outright that global chip LOFs operate under a T+1 trading mechanism, meaning that after buying, they cannot sell on the same day. If the premium rate drops tomorrow, they may face losses. Some netizens also associated the strong premium performance of global chip LOFs with the high-premium situation of the silver LOF in the past.

However, some netizens have boldly bought in, and believe that the actual premium situation is not as exaggerated as it seems.

An industry insider told reporters, “Global chip LOFs are QDII products, and their net asset value updates are delayed. Today’s premium rate is calculated based on the net value as of May 7, but the chip sector continued to rise again on the 8th, and this part of the increase has not yet been reflected in the net value. As the product’s net value continues to update, once the rise on the 8th is reflected in the net value, and if the trading price in the secondary market remains stable, the premium rate is expected to return to a less exaggerated level. So some investors still dare to buy despite the 46% premium rate.”

There are also netizens who said that because the premium of global chip LOFs is too high, they have switched to trading the China-Korea Semiconductor ETF under Huatai-PineBridge Funds. But it is worth noting that as of today’s close, the premium rate of the China-Korea Semiconductor ETF is also as high as 20.41%. If investors buy blindly, they may still suffer losses.

Industry insiders emphasize that high premiums may lead to higher investment risks, and investors need to remain rational and cautious. Especially for exchange-traded funds with cross-border investments, if overseas markets experience sudden overnight fluctuations, it may cause the relevant funds’ premium rates to fall rapidly the next day, exposing investors to loss risks. In addition, when investing in on-exchange funds, investors also need to watch for liquidity risks. Some on-exchange funds have small sizes, and if there is a concentrated sell-off, it is not ruled out that liquidity risks could be triggered.

(Caixin reporter Li Di)