Caixin News Agency, June 17th (Reporter Li Di) Since the beginning of this year, Nvidia has maintained a high popularity, with an increase of over 160%. Two funds have also been ignited, attracting a lot of speculative funds. Recently, these two have also issued multiple premium risk warning announcements. Among them, Jingshun Great Wall NASDAQ Technology ETF (QDII) has issued 20 premium risk warning announcements within a month.
Many retail investors have also joined the hype. In addition to conducting buying and selling transactions directly in the secondary market, some retail investors also participate in short-term speculation through "tractor account subscriptions" and "transfer custody arbitrage". In this regard, industry insiders remind investors to invest cautiously and pay attention to the various risks that may be faced during the speculation process.
In addition, for investors preparing to invest in the technology sector of the US stock market for the long term, industry insiders also remind them to pay attention to risks such as fluctuations in the US stock market and differentiation in individual stock fundamentals.
Two funds frequently release premium risk warning announcements
On June 17th, Jingshun Great Wall Fund released a notice on the risk warning and suspension of trading price premium in the secondary market of Jingshun Great Wall NASDAQ Technology Market Value Weighted Open End Index Securities Investment Fund (QDII).
The announcement shows that recently, the secondary market trading price of Jingshun Great Wall NASDAQ Technology ETF (QDII) has been significantly higher than the reference net value of fund shares, resulting in a significant premium. In addition, the announcement also shows that the fund will be suspended from trading on June 17, 2024 until 10:30 on the same day.
The company also specifically reminds investors to pay attention to the risk of premium trading prices in the secondary market. If investors blindly invest, they may suffer significant losses.
In addition, on the same day, E Fund also issued a premium risk warning notice for E Fund's S&P Information Technology Index Securities Investment Fund (LOF).
The announcement mentions that recently, the trading price of A-class RMB shares (referred to as S&P Information Technology LOF on the exchange) of E Fund's Standard&Poor's Information Technology Index (QDII-LOF) in the secondary market has been significantly higher than the net value of fund shares. On June 12, 2024, the net value of the fund's shares was 4.6065 yuan, while as of June 14, 2024, the closing price of the fund in the secondary market was 5.168 yuan.
The fund manager reminds investors to pay attention to the risk of premium trading prices in the secondary market. If investors buy at a high premium, they may face significant losses.
Recently, due to the high hype in the secondary market, the two funds mentioned above have frequently issued premium risk warning announcements.
Including the above announcement, during the month from May 18th to June 17th, Jingshun Great Wall NASDAQ Technology ETF (QDII) issued a total of 20 premium risk warning notices, and the E Fund S&P Information Technology Index (QDII-LOF) issued 15 premium risk warning notices.
Why do these two foundations frequently issue premium risk warning announcements? Industry insiders have pointed out that "on the one hand, the rapid rise of Nvidia has driven up market investment enthusiasm, and many investors who cannot directly invest in US stocks choose to indirectly invest by purchasing QDII funds. On the other hand, some funds are relatively small in scale and have small transaction volumes on the market, and overall liquidity is not strong enough, making them susceptible to being quickly inflated by speculative funds."
It is worth noting that not all funds that issue premium risk warning notices face the problem of small transaction amounts. Taking Jingshun Great Wall NASDAQ Technology ETF (QDII) as an example, data from the Shenzhen Stock Exchange shows that the fund's transaction amount in recent working days has exceeded 700 million.
Two funds heavily invest in NVIDIA
According to their recruitment prospectus, both funds mentioned above are products that passively track indices using the complete replication method. Among them, Jingshun Great Wall NASDAQ Technology ETF (QDII) tracks the NASDAQ Technology Market Weighted Index, while E Fund's S&P Information Technology Index tracks the S&P 500 Information Technology Index. In both indices, Nvidia holds a significant weight.
The first quarter report of the fund shows that the market value of Nvidia stocks held by these two funds accounts for over 10% of their net worth. As of the close of last Friday Eastern Time, Nvidia has risen as high as 166.38% this year, contributing significant returns to the two funds.
Among them, Nvidia was the largest holding stock of Jingshun Great Wall NASDAQ Technology ETF (QDII) at the end of the first quarter of this year. The fund holds 160900 shares of NVIDIA shares with a market value of approximately 1.032 billion RMB, accounting for 14.33% of the net asset value.
In addition, among the top five holdings of the fund at the end of the first quarter, Meta and Google also achieved significant gains. As of the close of last Friday Eastern Time, the two companies rose 42.84% and 26.74% respectively.
Looking at the E Fund's S&P Information Technology Index (QDII-LOF), Nvidia was the fund's third largest holdings at the end of the first quarter of this year. The fund held 16800 shares of Nvidia, with a market value of approximately 108 million yuan, accounting for approximately 15.73% of its net worth.
In addition, among the top five heavily held stocks of the fund, Broadcom also saw a higher increase. Broadcom is also a chip stock, and as of the close of last Friday Eastern Time, the stock has risen as high as 56.17% this year.
Due to the good performance of heavy holdings, the two funds mentioned above have performed well this year.
In terms of performance, according to data from Tiantian Fund Network, as of June 13th, this year, the return of Jingshun Great Wall NASDAQ Technology ETF (QDII) was 33.45%, and the return of E Fund's S&P Information Technology Index (QDII-LOF) was 26.32%.
Speculation by retail investors is rampant, industry insiders warn of risks
In this wave of investment frenzy driven by Nvidia, many retail investors have also taken action. In addition to conducting buying and selling transactions directly in the secondary market, some retail investors also participate in speculation through "tractor account subscription" and "transfer custody arbitrage".
Recently, on social media, netizens have often posted "teaching posts" using "tractor accounts" to participate in QDII investment.
Due to the limited investment limit of QDII, some popular funds often impose restrictions on the subscription amount. Therefore, some investors may choose to unify the management and trading of three shareholder accounts and three fund accounts into one securities firm, forming a tractor account and using six accounts to subscribe to funds. This allows the subscription amount to reach six times the subscription limit. However, only some securities firms support this feature.
After successful subscription through normal subscription or tractor account, some investors will participate in the investment of ETF funds with obvious premiums through "transfer custody arbitrage". That is, after subscribing to funds off the exchange, the funds will be converted into on exchange funds, sold on the exchange, and enjoy premium returns. However, some institutions may charge a certain fee for transferring funds to custody, and some funds purchased from third-party platforms cannot be transferred to custody.
What are the risks associated with the above operations? An insider from a large securities firm in Beijing told reporters, "Firstly, the subscription of QDII funds is not received in real-time. Some QDII funds can only be sold on Thursday after subscription on Monday. During this period, if an unexpected event occurs that leads to a decline in speculation, investors will face certain losses.". In addition, if a fund has poor liquidity, investors may also encounter 'stampede' when selling on the exchange. In this case, if there is not much floating profit accumulated in the early stage, they often face the situation of selling at a loss
"In addition, the transfer of custody cannot be converted in real time, and some institutions may also charge certain fees for the transfer of custody. The time and cost of the transfer of custody operation are risk factors that affect investor returns," the person added.
Is the US technology sector still worth investing in?
The above two US stock technology themed funds still have a certain premium in the short term, and there will be many risks in on exchange trading and short-term speculation. From a long-term investment perspective, what is the investment value and risk of the US stock technology sector?
Industry insiders believe that the current risks in the US stock market are controllable, and investors can sustainably focus on the investment value of the US technology sector. Industry insiders also point out that the US stock market may maintain high volatility, while investing in the US technology sector requires attention to the risk of fundamental performance differentiation in individual stocks.
The fund manager of Jingshun Great Wall NASDAQ Technology ETF (QDII) pointed out in the first quarter report of this year that the strengthening of interest rate cut expectations helps the three major stock indexes maintain stability. The rising US stock assets that have been rising since last year have released some pressure from the valuation side, while the resilient economy continues to improve corporate profits. The current risks in the US stock market are still relatively controllable. Technological innovation represented by artificial intelligence is developing vigorously, and the profit forecasts of current technology leaders are generally optimistic. Coupled with the decrease in risk-free interest rates in 2024, it is expected that technology stocks will continue to show strong performance. Overseas investment is an essential part of asset allocation for domestic residents, and it is recommended to maintain attention to overseas technology investment products.
The Wealth Management Department of Guangfa Securities pointed out that the overall molecular end of US technology stocks still maintains a stable growth trend, but attention needs to be paid to the fundamental differentiation caused by the overall recovery and AI investment and redemption within the company; At the same time, it is expected that the US stock market will continue to maintain a high volatility trend while paying attention to the disturbance of the denominator end caused by the Federal Reserve hawk party under stubborn inflation.