The tumultuous waves in global financial markets lately have seen a surge of speculative funds flooding into a seemingly more nimble avenue: cross-border Exchange-Traded Funds (ETFs). This uptick comes at a time when traditional markets have shown significant volatility, with investors seeking more manageable assets that offer the allure of swift trading and the potential for quick profits.

Recently, a phenomenon has emerged: cross-border ETFs experiencing notable premiums, with some products even witnessing price increases amid declines in their benchmark indicesThis has led to scenarios where premiums soared beyond 38%, presenting a stark risk for potential investorsDespite several warnings from fund companies about the potential dangers of investing in these products, the overall scale of cross-border ETFs continues to climb, attracting considerable investment interest.

On January 8, as the major U.S

stock indices closed lower, multiple cross-border ETFs—including the S&P Consumer ETF, S&P 500 ETF, Nasdaq 100 ETF, and various German ETFs—issued warnings about premium risksSome of these ETFs even faced temporary trading suspensions due to these concernsFor instance, that day, the S&P Consumer ETF saw its trading price diverge significantly from its net asset value—an occurrence that necessitated a cautionary note to investors about the excessive premium they were being asked to payThe index of the S&P 500 Consumer Select dropped by 1.4%, yet upon reopening after a suspension, the S&P Consumer ETF surged by 4.5%, pushing its premium to an astonishing 38.04%.

Interestingly, the upward momentum of these ETFs highlighted a systemic issue; while premiums were high, the trading volume revealed extremes in market dynamicsDespite a market cap of a mere 600 million yuan for the S&P Consumer ETF, on that day alone, it observed total trading reaching 6.064 billion yuan

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Such staggering sheer volumes testify not only to speculative interest but also to the fragility of investor behavior influenced by greed and fear.

The S&P Consumer ETF is not an isolated caseData from Wind shows that the S&P 500 ETF and S&P ETF also posted premiums of 15.67% and 10.09% respectively by the end of trading on that dayA total of 26 ETFs in the market boasted premiums exceeding 5%, raising alarms across the investing community.

Analysts speculate that a number of the ETFs which have seen excessive premiums share several characteristics, primarily including T+0 trading capabilities, low market circulation, and limited availability to investors, which causes liquidity constraintsSuch conditions make them ripe for speculation, akin to micro-cap stocks that traders might exploit in a bid to reap profits.

For example, both the S&P Consumer ETF and the S&P 500 ETF reported circulating volumes below 600 million yuan

The S&P Consumer ETF, up until its last report, revealed just 1,798 accounts holding the fund—an impressionable statistic illustrating the small investor baseUnder typical market conditions, daily trading volumes for these funds hover around 10 million yuan, but during times of speculation, the trading amounts expand dramaticallyA stark example lies in the figures recorded on January 8—an illusory day of trading that reached extraordinary numbers due to heightened interest.

This kind of trading behavior raises concerns about market correction and price stability, as funds that become targets for speculation subject themselves to erratic market swingsHistorical cases illustrate this risk, such as a recent instance where certain ETFs were unexpectedly pushed to their limits only to subsequently crash back down, causing significant investor losses.

In light of these market developments, fund companies have made concerted efforts to alert investors about high premium risks

A staggering number of nearly 150 risk warnings concerning premium volatility have been released across the industry to date in the new year aloneNotably, the S&P Consumer ETF had issued premium risk warnings for an uninterrupted stretch exceeding 25 trading days by early January.

Investment analysts urge caution, advising that the net asset value of a fund remains the true barometer of value, emphasizing that excessive premiums hinder a fund's intrinsic worth and inflate the probability of price correctionsThere are recommendations for investors to remain vigilant about market trends, watch shifts in premium rates, and adapt their strategies to mitigate losses.

Furthermore, professionals recommend that fund management companies adopt a series of proactive measures, including risk warnings, withdrawal of poorly traded products, and closing down funds that fail to meet a competitiveness threshold