Beware of high-level "standing guard" Over 10 QDII funds issue warnings about premium risk on the same day

Source: 21st Century Business Herald Author: Yi Yanjun

Against the backdrop of increased volatility in the international financial market, some cross-border ETFs and cross-border LOFs have been in high demand, leading to a sharp rise in premium risk.

On March 19 alone, more than ten QDII funds, including the Oil LOF from E Fund, the China-Korea Semiconductor ETF from Huatai-PB, the NASDAQ Technology ETF from Invesco Great Wall, and the Hua’an Nikkei 225 ETF, successively issued announcements urging investors to closely monitor the premium risk of related products’ secondary market trading prices and to make prudent investment decisions.

At the same time, reporters from 21st Century Business Herald noticed that the number of individual QDII funds frequently warning about premium risk is also increasing. Since the beginning of March, several cross-border ETFs and LOFs have issued over ten relevant risk warning announcements. During this period, some funds have implemented temporary trading suspensions during the day to curb the persistently high premium rates.

Interviewees suggested that current investors in QDII funds should pay close attention to the on-site premium rate, avoid chasing high premiums when prices are elevated, and prevent losses caused by premium retraction. They should prioritize products with good liquidity and low tracking errors, adhere to long-term allocation rather than short-term speculation, and view fluctuations in overseas assets rationally.

Multiple factors contribute to high premiums

Typically, when the “secondary market trading price” of an ETF or LOF is higher than its IOPV (Indicative Optimal Portfolio Value), a premium is formed. This means the secondary market price of the fund is above its actual value.

In the early hours of March 19, E Fund announced that the recent secondary market trading price of the Oil LOF (QDII) was significantly higher than the net asset value of the fund share. On March 16, 2026, the net asset value of this fund was 1.6414 yuan, and as of March 18, 2026, the closing price in the secondary market was 1.896 yuan.

In other words, as of March 18, this cross-border LOF had a premium rate of about 15%.

“We hereby solemnly remind all investors to closely monitor the premium risk of the secondary market trading price and to make prudent investment decisions. If investors blindly buy at a high premium that significantly deviates from the actual value of the assets, they may face substantial investment losses due to subsequent declines in secondary market prices,” E Fund stated.

This is the 13th announcement issued by E Fund regarding the premium risk of the Oil LOF since March began. During this time, the fund has frequently implemented temporary trading suspensions.

At the same time, Invesco Great Wall Fund has issued more than 20 premium risk warning announcements for its global chip LOF.

In fact, the situation of “frequently warning about risks, yet the fund premium rates remain high” is not an isolated case; many cross-border ETFs have also fallen into this strange cycle.

For example, since March, announcements regarding premium risk for cross-border products such as the Huatai-PB China-Korea Semiconductor ETF, Huaxia Nikkei ETF, Wellesley S&P Oil & Gas ETF, Southern S&P 500 ETF, and Hua’an France CAC40 ETF have been frequently issued.

Regarding the reasons for the persistently high premium rates of the aforementioned QDII funds, Sun Heng, the director of the Morningstar (China) Fund Research Center, pointed out to reporters that the core issue is the concentrated explosive demand for overseas popular assets (oil and gas, U.S. stocks, semiconductors, etc.), combined with the exhaustion of the QDII foreign exchange quotas of fund companies and the general suspension or limitation of off-market subscriptions, which has led to the failure of the “off-market subscription, on-market sale” arbitrage channel. As a result, on-market funds can only rush to buy existing shares, causing a severe imbalance of supply and demand that pushes up trading prices.

At the same time, “the misalignment in cross-border market trading hours and the long subscription and redemption cycles further amplify price deviations, ultimately resulting in sustained high premiums,” Sun Heng stated.

The “purchase restrictions” for QDII funds have indeed become a norm.

Wind data shows that currently, more than 60% of QDII products are in a state of suspended subscriptions or suspended large subscriptions. As mentioned above, the Oil LOF from E Fund and the China-Korea Semiconductor ETF from Huatai-PB have previously suspended subscriptions.

A person from a fund company told reporters that when QDII quotas are tight, if fund companies do not restrict large subscriptions, it may lead to some funds being unable to invest overseas and remain idle, while lowering positions may dilute the fund’s investment returns. Therefore, the purpose of subscription limits or suspensions is mainly to protect the interests of investors.

Beware of high premium risks

It should be noted that blindly investing in high premium ETFs may lead to significant losses.

Huatai-PB Fund pointed out that buying fund products at high premiums is equivalent to “paying for market sentiment.”

The company analyzed that the essence of high premiums is that the secondary market trading price has deviated from the actual value represented by the IOPV (Indicative Optimal Portfolio Value). This deviation is driven by short-term factors such as market sentiment and fund demand, rather than an increase in the product’s intrinsic value. The arbitrage mechanism will gradually correct excessively high premiums, and even if temporarily hindered due to quota restrictions, once the quotas are released or sentiment cools, the high premium levels are likely to quickly normalize.

When the price returns to value, even if the index tracked by the ETF has not declined, investors who bought ETFs during the high premium phase will incur losses due to the retraction of the premium.

For example, if an investor buys an ETF at a price of 15 yuan at a premium rate of 50%, when the premium rate returns to 0, even if the IOPV remains unchanged, the secondary market trading price will drop from 15 yuan to 10 yuan, resulting in a direct loss of 33% for the investor.

In addition, high premium ETFs may also face liquidity risks because some ETFs’ trading popularity is driven by short-term speculative funds.

“Once the market realizes that the secondary market trading price is too high or the underlying assets undergo changes, the funds that had previously rushed in may collectively sell off, leading to a rapid price decline, and the trading activity in the secondary market may plummet, resulting in a drastic deterioration of liquidity,” Huatai-PB Fund pointed out. At that time, if investors want to sell their shares, they may face not only the problem of a large bid-ask spread but also, in extreme cases, the difficulty of “not being able to sell.” Moreover, the panic exit of funds may trigger a halt in the secondary market trading price of the ETF.

In addition to avoiding products with high premium rates, investors in QDII funds currently need to pay attention to multiple factors.

Sun Heng suggested that investors should focus on the on-site premium rate, avoid chasing high premiums when prices are elevated, and prevent losses caused by premium retraction. At the same time, they should keep an eye on foreign exchange quotas, subscription limits, and redemption rules, and understand the time difference in cross-border markets, exchange rate fluctuations, and risks in overseas markets. They should prioritize products with good liquidity and low tracking errors, adhere to long-term allocation rather than short-term speculation, and view fluctuations in overseas assets rationally.

In addition, Huatai-PB Fund reminds that a long-term low premium rate is often one of the indicators of good ETF liquidity. Good liquidity in ETFs means that investors can buy or sell at prices close to the actual value.

On the other hand, to mitigate the high premium risks of QDII funds, efforts from multiple parties are also needed.

According to Sun Heng, this requires regulatory authorities to reasonably increase the QDII foreign exchange quotas and optimize quota allocation efficiency to unblock the arbitrage mechanism. On the other hand, fund companies should promptly announce premiums, implement subscription limits or suspensions, and guide rational trading. They should also strengthen investor education, alerting them to the risks of price deviations from net value, reducing blind chasing, and improving the efficiency of cross-border trading and subscriptions and redemptions to stabilize premiums from multiple dimensions.