Chinese chip ETFs pause trading as they warn of soaring premium risks

With two funds trading at least 30 per cent above net asset values, the large premiums would trigger sell-offs when sentiment turns Hutai-PineBridge CSI KRX China-Korea Semiconductor ETF, which invests in Chinese and South Korean chipmakers, was suspended from trading for an hour on the Shanghai Stock Exchange on Thursday, citing the risk of outsize gains. Meanwhile, Invesco Great Wall Global Semiconductor Chips Industry Equity Fund also paused dealing for an hour on the Shanghai bourse for a similar reason. “On top of the changes of net asset values, the fund’s trading price is also subjected to other factors such as the supply-demand relationships on the market, systemic risks and liquidity risks, which all could incur losses for investors,” said Huatai-PB Investments, the money manager of the China-Korea semiconductor ETF, in a statement filed with the exchange. “Investors should watch out for the premium risk from trading on the secondary market.” The China-Korea semiconductor ETF rose 1.7 per cent to 6.237 yuan in Shanghai after the trading halt, leaving it trading at a 33 per cent premium to its net asset value after an upsurge of 142 per cent this year.

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