In recent weeks, the overseas investment scene has seen unprecedented enthusiasm, particularly in the United States, Japan, and India, where major stock indices have reached new heightsThis surge in interest has prompted many Qualified Domestic Institutional Investor (QDII) funds to impose restrictions on large subscriptions and alert investors to the potential risks of market premiums.

On July 9 alone, 14 QDII funds announced subscription limitsCompanies such as Huaitianfu Fund, Manulife Fund, China Merchants Fund, and China Construction Bank Fund took action, with Huaitianfu imposing limits on ten of its QDII fundsFor instance, the limit for Huaitianfu's Manulife India Stock QDII was lowered to as little as 300 yuan.

As these restrictions on off-market funds have taken effect, the premium rates on on-market funds have skyrocketed, with some on-market QDII funds reporting premiums as high as 20% by the market close on July 9.

The collective subscription limit set on 14 QDII funds on July 9 highlights the urgency of the situation.

This collective announcement set the minimum subscription at a mere 300 yuan, demonstrating how drastic measures have become necessary in light of the current market conditions.

For example, Huaitianfu Fund collectively restricted ten QDII funds on July 9, including variants such as the Huaitianfu Hang Seng Index (QDII-LOF), the Huaitianfu Global Mobile Internet Mixed (QDII), and the Huaitianfu Gold and Precious Metals (QDII-LOF-FOF).

Specifically, 8 of these funds, including the Huaitianfu Hang Seng Index (QDII-LOF), the Huaitianfu Hang Seng Tech ETF linkage (QDII), and others have a subscription limit set at 5,000 yuan.

Additionally, the Huaitianfu Dollar Bond Fund (QDII) has a subscription limit of 10,000 yuan in yuan share and 1,500 dollars for dollar shares.

Alongside Huaitianfu, other institutions like Manulife, China Merchants, and China Construction Bank have followed suit with multiple QDII products announcing subscription limits on the same day.

For instance, Manulife Fund stated that from July 10, 2024, an individual fund account could only purchase and invest a cumulative amount of 300 yuan in the Manulife India Stock (QDII) fund per day

Just a week prior, on July 3, the amount had already been adjusted to 1,000 yuan and now faces another dramatic cut.

Overall, market data indicates that as of July 9, a total of 129 QDII funds were under suspension for large subscription active trade, representing over 40% of all QDII funds available.

For QDII funds, the primary reason behind subscription limits pertains to currency quota restrictionsFund companies typically have a fixed quota for foreign exchange each year, meaning their overseas investments must abide by these limitsParticularly amidst a wave of surging demand for overseas investments, these funds are now resorting to limiting subscriptions to prevent scenarios where investors' funds are accepted while available quotas for foreign investments have already been exhausted.

The persistent rise in market premiums has become a topic of considerable concern.

Due to scenarios such as off-market subscription caps, there have been frequent alerts issued regarding the premiums on on-market QDII funds.

On July 9, multiple QDII funds including the Southern Fund’s Dongying Galaxy FTSE Asia Pacific Low Carbon Select (QDII), Invesco Great Wall Nasdaq Tech Market Cap Weighted ETF (QDII), and several others issued warnings about trading prices significantly exceeding the net asset value (NAV) of fund shares and exhibiting substantial premiums.

Specifically, the Southern Fund indicated that the trading price of its FTSE Asia Pacific Low Carbon Select (QDII) was significantly higher than the NAV, resulting in a considerable premium

Therefore, trading was halted from the start of the market on July 9 until 10:30 to protect investor interestsBy July 9, the premium rate for this fund was about 20%, marking it as the highest premium QDII fund on the market.

Moreover, the Invesco Great Wall Nasdaq Tech Market Cap Weighted ETF (QDII) gained significant market traction, with its premium rate surpassing 20% in late JuneAfter multiple risk notifications, it has since cooled down, with a premium rate of 16% by July 9. Since the beginning of this year, this QDII fund has seen a market rise of an astounding 60.44% with net capital inflow touching 4.843 billion yuan, ranking it at the forefront of all on-market QDIIs.

Looking back over time, more than 30 QDII products have released over 400 premium risk alert notifications this year, with funds like the Invesco Great Wall Nasdaq Tech ETF, Huaxia Nomura Nikkei 225 ETF, and others issuing alerts repeatedly—each exceeding 60 times.

The underlying cause of these occurrences can be traced back to the foreign exchange limits imposed on fund companies

When these quotas are fully utilized, QDII funds commonly halt subscriptions for off-market purchases, thus forcing investors toward on-market productsThis shift inadvertently causes the net asset values of these on-market funds to exceed those of their off-market counterparts, contributing to the inflated premium rates.

Additionally, due to timing differences in cross-border transactions and fluctuations in exchange rates, discrepancies in net asset values and trading prices often arise, further leading to premium or discount variations in fund products.

The backdrop for these restrictions and premium fluctuations is influenced significantly by the recent record highs achieved in the overseas markets.

The enthusiasm for QDII funds is reflective of a booming atmosphere in foreign markets, where major indices in the U.S., Japan, and India have each recently set record highs.

On July 8, the Nasdaq Composite Index reached as high as 18,416.94 points, while the S&P 500 peaked at 5,583.11. By market close that day, the Nasdaq's year-to-date gain stood at 22.6%, and the S&P 500’s was at 16.84%.

Simultaneously, on July 9, the Nikkei 225 index rose by 1.96% and peaked at 41,769.35 points, a new record high, bringing its year-to-date gains to 24.25%. Noteworthy individual stocks like Fujikura surged by 11.37%, and major players such as Hitachi and Sony saw increases exceeding 5%.

Furthermore, on July 9, the Indian SENSEX30 index rose by 0.49%, with its highest level reaching 80,397.17 points, another record high, while the index accumulated an 11.23% increase year-to-date.

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