The Nikkei ETF has experienced a roller-coaster ride in the market. The Huaxia Nomura Nikkei 225 ETF surged by over 9% in the morning session, with a premium rate that once exceeded 24%. In fact, this year, due to the strong rise in the Japanese stock market, the Nikkei ETF, which is related to it, has become the target of investors' competition. However, due to the foreign exchange restrictions of QDII funds, investors can only buy on the secondary market, which has also led to a premium for the four domestic Nikkei ETF funds, with the Huaxia Nomura Nikkei 225 ETF having the highest premium rate.

The bubble of the Nikkei ETF continues!

On January 16th, the Nikkei ETF, which had previously soared, began to lose steam. By the close, the Huaxia Nomura Nikkei 225 ETF, which had approached the upper limit in the morning, closed down by 4.27%. This means that investors who bought high in the morning session could face losses of more than 13% at most.

At the same time, three Nikkei ETFs (Nikkei 225 ETF Yifangda, Huaan Nikkei 225 ETF, ICBC Credit Suisse Daiwa Nikkei 225 ETF), performed in the secondary market in the same way, turning from a rise to a fall.

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Even though it turned from a rise to a fall, the premium rate of the Huaxia Nomura Nikkei 225 ETF is still 9.46%, which also means that investors' enthusiasm for a rise is still there.

The soaring Nikkei ETF

Capital disregarded the high premium rate and poured into the Nikkei ETF crazily.

On January 16th, the Huaxia Nomura Nikkei 225 ETF once surged by more than 9% in the morning session, reaching 1.668 yuan per share during the session, setting a new high since its establishment on June 12, 2019, with a premium rate exceeding 24%.

By the close, the single-day transaction volume exceeded 4.7 billion yuan, far exceeding the scale of 505 million yuan.

At the same time, Huaxia Fund issued an announcement of the fourth secondary market transaction price premium risk warning for the Huaxia Nomura Nikkei 225 ETF today, which is the fourth time it has issued such an announcement this month. The content shows that the transaction price of the fund in the secondary market is significantly higher than the reference net value of the fund shares, resulting in a large premium.The net asset value per unit of the off-exchange fund is as of January 15th, assuming that day as the benchmark. The net asset value per unit of Huaxia Nomura Nikkei 225 ETF on that day was 1.3546 yuan per share, while the on-exchange fund was 1.524 yuan per share on the 15th.

This fund is not an isolated case in the market; currently, there are four funds in China that track the Nikkei index.

Specifically, the Nikkei 225 ETF Yifangda, Huanan Nikkei 225 ETF, and ICBC Credit Suisse Daiwa Nikkei 225 ETF rose by 4.8%, 1.45%, and 5.73% respectively in the early morning trading. These three funds, like Huaxia Nomura Nikkei 225 ETF, all set new highs since their establishment during the trading session, which are 1.489 yuan per share, 1.337 yuan per share, and 1.119 yuan per share respectively.

These funds also exhibit a phenomenon of excessive premium. According to Tiantian Fund Network, the net asset value per unit of the aforementioned three funds on the 15th was 1.3546 yuan per share, 1.2798 yuan per share, and 1.0085 yuan per share. However, the net asset value per unit of these three funds in the secondary market on the same day was 1.417 yuan per share, 1.312 yuan per share, and 1.047 yuan per share respectively.

The popularity of Nikkei ETFs is inseparable from the strength of the Japanese stock market. Since the beginning of 2024, the Japanese stock market has accelerated its rise. Choice data shows that the Nikkei index has risen by 6.44% in 8 trading days.

Against this backdrop, funds have poured into Nikkei ETFs. The increase in Huaxia Nomura Nikkei 225 ETF exceeded 15% on the 15th of the year; Huanan Nikkei 225 ETF, ICBC Credit Suisse Daiwa Nikkei 225 ETF, and Nikkei 225 ETF Yifangda rose by 4.68%, 7.38%, and 9.84% respectively during the aforementioned period.

At the same time, the India Fund LOF under ICBC Credit Suisse also set a new high since its establishment today, at 1.64 yuan per share. It has risen by more than 7% from the beginning of the year to the 15th.

Who is "overheating" the Nikkei ETF?

Behind the rising secondary market of Nikkei ETFs, who is the mastermind?

As the A-share market is bottoming out, the promising rise of the Japanese stock market is favored by investors, and as ETFs are deeply linked to it, they naturally become the target of investor pursuit.At the same time, considering the inherent attributes of cross-border ETFs, they adopt a T+0 trading method, which means investors can buy and sell on the same day, greatly reducing risk.

In addition to the aforementioned factors, the fundamental reason for the high premium of the Nikkei ETF is the foreign exchange restrictions of QDII funds. It is reported that cross-border ETFs investing in foreign assets require the use of foreign exchange quotas. If the fund company's quota is exhausted, it can only temporarily suspend subscriptions. Investors who want to purchase funds off-exchange at this stage can only wait for the fund company to be approved for new quotas or for the product's net redemption to release quotas.

For example, according to the subscription and redemption announcement of Huaxia Nomura Nikkei ETF on the 16th, its subscription limit is 3 million shares, and the redemption limit is 25 million shares. Previously, on January 4th, Huaxia Nomura Nikkei ETF also issued an announcement to suspend subscription and redemption business.

At the same time, the Shanghai Stock Exchange also disclosed information about the Nikkei 225 ETF Yifangda, Huaan Nikkei 225 ETF, and Japan Topix Index ETF. The subscription share limits for the three funds today are 3 million shares, 100 million shares, respectively, and the redemption share limits are 20 million shares, 20 million shares, respectively.

In addition, the minimum subscription and redemption units for the aforementioned three funds are all 500,000 shares. Taking Huaan Nikkei 225 ETF as an example, a maximum of 6 investors can subscribe to this ETF off-exchange daily.

The share that can be subscribed and redeemed is limited, and the minimum subscription share must be more than 500,000 shares, involving an amount of at least 500,000 yuan. Due to insufficient quotas, cross-border ETFs cannot arbitrage in the secondary market like other domestic ETF funds.

Under this background, buying Nikkei ETF in the secondary market to gain short-term profits has become the choice of investors. However, the overall market scale of Nikkei ETF is small, coupled with the crazy influx of funds, resulting in a situation of supply not meeting demand. This has led to the related funds soaring in the secondary market, allowing the price to rise ahead of the index increase, thus generating a high premium for related products.

The risk of following the trend and chasing highs

Continuous soaring may also be a game of hot potato. Investors who follow the trend and buy high in the continuous surge may become the ones to take over.

"If the premium is too high, and the secondary market price greatly exceeds the net value, it is equivalent to overvaluation, and there is a risk of the price returning to the net value." Some industry insiders view the current popularity of Nikkei ETF in this way.In the ETF domain, the secondary market prices of funds generally follow the net asset value (NAV) of the shares of funds traded over-the-counter (OTC). Moreover, the ultimate price of the funds will eventually revert to the vicinity of the OTC fund share NAV.

In fact, the current Nikkei ETF market may have entered a period of adjustment.

On the 16th, domestic Nikkei ETFs plummeted in the afternoon, with the China AMC Nomura Nikkei ETF closing down by 4.27%. In this regard, analysts have indicated that it might be due to the excessive premium, with investors exiting at high levels. If an investor had bought the fund at a high price in the morning, they would have to bear a loss of more than 13% at most.

At the same time, the trends of the Nikkei 225 ETF Yifangda, Huaan Nikkei 225 ETF, and ICBC Credit Suisse Daiwa Nikkei 225 ETF mirrored the aforementioned funds, transitioning from gains to losses.

In fact, last May, the China AMC Nomura Nikkei 225 ETF and the Yifangda 225 ETF experienced a surge and then a sharp decline in a short period. From May 12th to the 19th, the two funds rose by 22.24% and 27.74% respectively. However, after just two trading days of correction, the premium rates of the two ETFs were almost completely erased.

At that time, Huabiao Securities pointed out in its research report that historically, the premium rate of ETFs cannot be maintained at a high level for a long time. According to their statistics, since 2020, the domestic listed ETFs have seen a total of 47 instances where the premium rate exceeded 15%, with an average duration of only 1.7 days.