Cross-border ETFs, which have been on a downward trend for over two weeks, made a strong comeback, dominating the screens with a "red-hot" performance. As of the close on July 29, the top 20 positions on the daily increase chart of the ETF market were all occupied by cross-border ETFs, with products like the Dow Jones ETF, Nikkei ETF, NASDAQ Technology ETF, and S&P ETF leading the gains.
The market enthusiasm, which had cooled somewhat due to the pullback, has once again heated up, with multiple products seeing active trading, and both turnover rates and transaction volumes have increased. There were 10 cross-border ETFs with an IOPV discount/premium rate exceeding 5%, and the NASDAQ Technology ETF, which had the most significant pullback, still had the highest premium rate, with an IOPV discount/premium rate over 10%.
The reporter noticed that some funds, disregarding the pullback, chose to accelerate their entry, with nearly 17.4 billion yuan of capital inflow into the cross-border ETF market this month. The main inflow products were the China Merchants NASDAQ 100 ETF, the Fullgoal CSI Hong Kong Stock Connect Internet ETF, and the Harvest NASDAQ 100 ETF, all of which attracted more than 1 billion yuan.
Industry insiders believe that the premium space for cross-border ETFs has been continuously lifted, reflecting the high enthusiasm of investors for overseas investments. However, emotions will eventually subside, and the premium rate cannot be maintained at a high level for a long time. Investors are advised to judge whether the future upward space of the product is sufficient to cover the premium cost and try to avoid purchasing high-premium varieties.
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On July 29, the three major A-share indices showed mixed performance, with the Shanghai Composite Index slightly rising by 0.03%, while the Shenzhen Component Index and the ChiNext Index fell by 0.96% and 1.44%, respectively. At the same time, overseas stock indices such as the NASDAQ and the Nikkei 225 rebounded. This was reflected in the ETF market on the same day, with cross-border ETFs dominating the scene.
Wind data showed that as of the close on July 29, overall, the average daily increase for 128 cross-border ETFs was 1.17%, while for equity ETFs it was -0.65%; the top 20 positions on the daily increase chart of the ETF market were all occupied by cross-border ETFs.
Among them, the Ping An Dow Jones Industrial Average ETF and the China AMC Nikkei 225 ETF both saw gains exceeding 4%, at 4.96% and 4.71%, respectively; the Invesco Great Wall NASDAQ Technology Market Value Weighted ETF, the China AMC S&P 500 ETF, and the China AMC NASDAQ 100 ETF, among other products, saw gains exceeding 3%.
At the same time, these products were actively traded, with increased turnover rates. Taking the two leading products as an example, on that day, the turnover rate of the Ping An Dow Jones Industrial Average ETF was 48.8%, an increase of 7.72 percentage points from the previous trading day; the daily turnover rate of the China AMC Nikkei 225 ETF rose from 26.35% to 43.85%. Both saw an increase in transaction volume of more than 100 million yuan compared to the previous trading day.
Driven by retail investors and speculative capital, some cross-border ETFs have maintained high transaction volumes in recent times. The China AMC Hang Seng Technology ETF's daily transaction volume exceeded 2.047 billion yuan, marking the product's 8th consecutive trading day with a daily transaction volume of over 2 billion yuan. In addition, the transaction volumes of seven other products, including the China AMC Hang Seng Internet Technology Industry ETF, the Invesco Great Wall NASDAQ Technology Market Value Weighted ETF, and the Huatai-PineBridge Southern Hang Seng Technology ETF, all exceeded 1 billion yuan.Journalists have observed that in the two weeks prior, cross-border ETF products have entered a pattern of fluctuating declines, with only 2 out of 128 products showing positive returns during the period. Wind data indicates that within the two weeks leading up to July 26th, the Harvest S&P Biotechnology Select Industry ETF and the Huitianfu NASDAQ Biotechnology ETF respectively rose by 2.39% and 2.18%.
Nearly 70% of cross-border ETF products experienced a decline exceeding 5%, with the Jing Shun Great Wall NASDAQ Technology Market Value Weighted ETF experiencing the most significant pullback, falling by 10.5%; the Hong Kong Internet ETF, Hang Seng Internet ETF, China Concept Internet ETF, and 27 other products also saw a decline of more than 8% over the past two weeks.
During the recent market consolidation, the premium rates of some cross-border ETFs have cooled down. On July 26th, the IOPV premium and discount rates of 5 products, including the NASDAQ Technology ETF and Saudi ETF, exceeded 5%. However, after the dominant rise on the 29th, this number increased to 10.
Among them, the Jing Shun Great Wall NASDAQ Technology Market Value Weighted ETF, which had the most significant pullback, topped the list with an IOPV premium and discount rate of 15.03%; several cross-border products tracking indices such as the NASDAQ 100, Nikkei 225, and S&P 500 also had IOPV premium and discount rates over 5%.
High premium risk warning:
So far this year, various stock indices in overseas markets have performed relatively well, with the NASDAQ Index, S&P 500 Index, and Nikkei 225 Index rising by 15.63%, 14.45%, and 14.95% respectively. Benefiting from this, as of July 29th, nearly 60% of cross-border ETF products have seen an increase within the year, with 7 products gaining more than 20%.
The strong performance has been greatly sought after by investors, with more than half of the cross-border ETFs experiencing growth in their share during the year, and 28 achieving more than double the growth. Wind data shows that as of July 26th, the fund size of the China Merchants NASDAQ 100 ETF increased from 127 million yuan at the beginning of the year to 2.236 billion yuan, an increase of nearly 17 times.
The fund size of products such as the Southern Dongzheng Index ETF, ICBC China Securities Hong Kong Stock Connect High Dividend Selection ETF, Huaxia Hang Seng China Enterprises High Dividend Rate ETF, and Huaxia China Securities Hong Kong Stock Connect Mainland Financial ETF has grown more than fivefold. Amid the speculative market within the year, cross-border ETFs have also taken turns performing high premiums, risk warnings, and suspensions, among other "good plays."
In the view of a cross-border theme fund manager, the most direct reason for the premium in cross-border ETF products is the outstanding performance of the indices they track over a certain period, which has sparked investors' enthusiasm for allocation, leading to an accelerated influx of funds in the short term. Additionally, it is not ruled out that some short-term funds may be speculating on related targets within the market based on the heat.
"The T+0 trading mechanism and quota restrictions further amplify the possibility of high-frequency trading. Under the combined effect of various factors, the premium space for cross-border ETFs continues to rise." He believes that the premium reflects the high enthusiasm of investors for overseas investment, but the premium rate cannot be maintained at a high level for a long time, and the sentiment will eventually subside.In the second-quarter report, some fund managers who primarily invest in overseas markets have begun to warn of risks. The team of Fang Le, the fund manager of the CCB Emerging Markets Select Fund, stated that looking ahead to the second half of the year, the world's major technology companies continue to increase their capital investments in AI-related fields. In addition to cloud and training demands, edge-side and inference demands are also expected to continue driving rapid growth in demand for AI hardware.
"As the stock prices of related companies continue to rise, the risk of short-term fluctuations is also magnifying. Although we continue to be optimistic about the long-term prospects of related technology companies and this fund, we also ask investors to pay attention to the short-term risks and to be cautious about chasing the market," said the team of Fang Le.
Standing at the current point, investment research personnel from China Merchants Fund told Yicai that, given the better performance of the U.S. stock market in the first half of the year and no signs of cooling in the AI boom, many institutions on Wall Street have recently raised their target levels for the S&P 500 index for this year. "If economic data continue to improve and inflationary pressures ease, the Federal Reserve may start to lower interest rates in the second half of 2024, but the specific timing and magnitude of the rate cuts still remain uncertain."
Based on this, the aforementioned investment research personnel said that in the future, they will focus on industries that are less sensitive to interest rate changes, such as healthcare, consumer goods, and energy industries, as well as industries that perform well when high inflation is declining, such as medical equipment, semiconductors, and consumer services. At the same time, as the fundamentals of China's economy improve, some Chinese concept stocks are undervalued, and Chinese concept stocks with less institutional investor allocation are also worth paying attention to.
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