Recently, several U.Sstock-related QDII (Qualified Domestic Institutional Investor) funds have raised alarms about premium risks, with some funds even temporarily suspending tradingOthers have imposed purchase restrictions or halted subscription servicesThis surge in caution comes as the market reacts to the Federal Reserve’s recent monetary policy moves, particularly the slowing pace of interest rate cutsIndustry insiders believe that this shift may increase volatility in high-valuation sectors, especially within the technology growth stocks, which have seen heightened attention from institutional investors.

On December 24, Changcheng Fund issued a premium risk warning for its Invesco S&P Consumer Select ETF (QDII), noting that the fund's secondary market price was significantly higher than its net asset value (NAV), resulting in a large premiumThe warning cautioned investors about the risks of trading at inflated prices, which could lead to substantial losses for those who purchase without full awareness

In response, the fund announced a temporary suspension of trading from the market open until 10:30 a.mthe same day.

Data released showed that, as of December 23, the secondary market price for the fund was 1.486 yuan, while the NAV was 1.2828 yuan, indicating a premium rate of 11.58%. This price difference between the market value and the NAV prompted the fund to issue a precautionary notice to investors.

Similarly, China Asset Management also issued a warning on December 24 regarding its China 100 ETF (QDII), which had also experienced a significant premium in recent daysThe fund was temporarily suspended from trading at the market open on December 24 until 10:30 a.mof the same dayLike the Changcheng Fund, China Asset Management's ETF was trading at a premium rate exceeding 10%.

In fact, several other U.Sstock-related QDII funds have issued similar premium warnings in recent weeks

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On December 24, funds from companies such as Bosera, Huatai-PineBridge, Hua'an, GF, and Da Cheng issued warnings for their respective Nasdaq-100 (QDII-ETF) and S&P 500 (QDII-ETF) productsThese funds include offerings from major financial institutions like Guotai and Hua’an, all of which are seeing significant premiums, reflecting growing investor interest in U.Sequity indices.

The frequency of these warnings is notable, with many funds repeatedly alerting investors to the risks of high premiumsFor example, the China S&P 500 (QDII-ETF) fund has issued 14 such warnings since December alone, adding to the five risk alerts it gave out in NovemberBosera's Nasdaq-100 (QDII-ETF) issued four warnings during the same period, underlining the growing concerns among fund managers regarding the inflated market prices of these funds.

The fund companies have emphasized that secondary market prices, in addition to fluctuations in NAV, are influenced by factors such as market supply and demand, systemic risk, and liquidity risks

Investors purchasing at high premiums may face significant losses if prices do not align with the intrinsic value of the underlying assets.

Along with the premium risk alerts, many QDII funds have also implemented restrictions on purchasesThese limits are most frequently seen with U.Sstock-related QDIIs, particularly those focusing on the Nasdaq-100 or S&P 500 indices.

On December 24, Morgan Fund announced that it would impose restrictions on subscriptions and regular investment purchases for its Morgan Nasdaq-100 Index Fund (QDII), effective December 25. The limits include a purchase cap of 100 RMB for a single fund account's RMB share class and 10 USD for the dollar-denominated share class.

Similarly, China Asset Management's Nasdaq-100 ETF Fund (QDII) and the China Global Technology Leaders Mixed Fund (QDII) both raised their purchase limits starting December 23. The former set a limit of 1,000 RMB for both A and C shares, while the latter imposed a maximum of 10,000 RMB for its RMB share class and 1,500 USD for its dollar-denominated share class.

Additionally, the Huatai-PineBridge Global Auto Industry Upgrade Mixed Fund (QDII) announced on December 20 that it would suspend large-amount subscriptions and large periodic investments, with a limit of 5,000 RMB for A and C share classes and 700 USD for the dollar-denominated share class.

This increase in purchase restrictions follows a surge in the U.S

stock market, particularly with the Nasdaq index, which surpassed the 20,000-point threshold for the first time in mid-DecemberHowever, following this historic high, the market experienced a pullback, prompting fund managers to take preventive measures.

In the context of these developments, major asset management firms have shared their views on the broader market outlookAccording to reports from Wells Fargo Fund, the Federal Reserve’s decision to cut interest rates by 25 basis points in December aligned with market expectationsHowever, the Fed’s adjustments to its inflation and growth forecasts, along with a more cautious approach to future rate cuts, suggest that there may be greater volatility in high-valuation sectors like technologyAs the Fed’s rate cuts slow down, the premium for growth stocks could increase, potentially amplifying market fluctuations in the coming months.

Bosera Fund, meanwhile, believes that the pace of interest rate cuts in the U.S

may be slowing, with expectations that the Fed could pause its rate cuts in January 2025, followed by two additional 25-basis-point cuts in March and September of that yearThe fund suggests that after a period of significant adjustments, the market has entered a more stable phase and is now awaiting new catalysts to drive further movement.

The current caution being exercised by both fund managers and investors highlights a growing concern about the sustainability of valuations in the U.Sstock market, particularly in the tech-heavy Nasdaq indexWhile these restrictions and warnings might be seen as short-term measures, they also signal a shift in investor sentiment, as many are bracing for higher volatility and are seeking ways to manage risk.

As the market adjusts to the new economic conditions, investors will likely need to recalibrate their strategiesThis could mean being more selective in their ETF purchases, keeping a close eye on premium fluctuations, and being more cautious in entering the market at inflated prices