(Yicai) March 15 -- The recent upswing of foreign stock markets has caused as high as a 15 percent premium on exchange-traded funds in China as mainland investors flock to join cross-border fund schemes.

The Invesco Great Wall NASDAQ-100 Technology Sector Market-Cap Weighted ETF, an investment fund that tracks the Nasdaq 100 and is managed by Invesco Great Wall, was trading at a premium of 15.15 percent yesterday, the highest among China's cross-border ETFs offered through qualified domestic institutional investor schemes, according to financial data provider Wind. 

Banks, brokerages, and asset managers offer QDII programs to allow affluent mainland-based retail investors to get access to foreign stocks and bonds such as the Nasdaq 100 index which comprises the biggest non-financial companies listed on the Nasdaq.

A cross-border ETF manager in eastern China said that a high premium reflects strong investor demand for the underlying product and investors are looking to further increase their exposure to stock indexes overseas. However, the manager said that the high premium cannot be maintained for long as investors are not recommended to enter the market blindly.

ETFs have different price formation mechanisms in the primary market and the secondary market, resulting in a premium or discount in the secondary price because of changes in demand, Wang Yang, general manager of ETFs and innovation at Invesco Great Wall, explained to Yicai. In that regard, the American-Chinese fund manager has issued several risk warnings, but investor appetite has not disappeared. 

An increasing number of investors are flocking to index funds. Since the beginning of this year until yesterday, nearly 70 percent of cross-border ETF products have grown in scale, including those that track the Nasdaq 100, S&P 500, and Nikkei 225, and each fund has added over one billion new shares during this time.

Fund management companies are actively seeking new opportunities to satisfy the big investor appetite. Currently, about 100 new QDII funds are waiting in line for regulatory approvals after a record high of 60 new QDII funds entered the market last year, according to Yicai’s review of incomplete market data.

Editors: Tang Shihua, Emmi Laine