Chinese investors are pouring money into Japan-focused stock funds as the Nikkei 225 Index hits 33-year highs. Two Shanghai-listed exchange-traded funds (ETFs) that track the Nikkei 225 Index have seen their prices far exceed their net asset value, prompting warnings from fund managers about market risks.
The Nikkei has gained 19% this year, with foreign investors in particular attracted by strong corporate earnings and signs of economic recovery. Chinese investors have been ploughing money into a handful of ETFs that invest in Japanese stocks under QDII, the outbound investment scheme.
The Hua An Mitsubishi UFJ Nikkei 225 ETF has seen its assets under management more than double this year to 123.5 million yuan ($17.52 million). Demand is also reflected in the price premiums of ETFs, which can be bought and sold like stocks. The premium for the E Fund Nikko AM Nikkei 225 Index ETF shot up to 23% last Friday, before shrinking as the fund manager issued warnings.
The mutual fund companies have cautioned investors to pay attention to price premium risks in the secondary market, warning that if investors invest blindly, they may incur huge losses.