As the Nikkei approaches 33-year highs, Chinese capital is flooding into Japan-focused stock funds, prompting frequent market risk warnings from fund managers.
Due to the ferocious demand, the prices of two Shanghai-listed exchange-traded funds (ETFs) that track the Nikkei 225 Index have skyrocketed.
Tuesday marked the third session in a straight that the ETFs’ managers, E Fund Management Co and China Asset Management Co (ChinaAMC), warned investors about risks.
“We caution investors to pay attention to price premium risks in the secondary market,” the mutual fund companies said in separate statements.
“If investors invest blindly, they may incur huge losses.”
The Nikkei has increased by 19% this year as a result of solid company earnings and indications of an economic rebound, which have particularly attracted international investors.
Under QDII, the overseas investment scheme, Chinese investors have been pouring money into a few ETFs that invest in Japanese companies.
The assets under management of the Hua An Mitsubishi UFJ Nikkei 225 ETF have increased by more than double this year to 123.5 million yuan ($17.52 million).
The price premiums of ETFs, which may be purchased and sold like stocks, also reflect demand.
Last Friday, the premium for the E Fund Nikko AM Nikkei 225 Index ETF spiked to 23% before falling after the fund manager issued cautionary statements. This year, the fund’s size increased by about 60%.
On Friday, the premium for the China AMC Nomura Nikkei 225 Index ETF increased to 18%.
(Adapted from Reuters.com)
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