US equity fund premiums prompt warnings from Chinese managers
After Beijing expanded outbound-investment quotas, demand for US equities remained strong, while some Chinese funds trading in US stocks moved well above net asset value. The South China Morning Post reported that at least six fund houses warned investors last week that losses could follow if those premiums shrink.
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The South China Morning Post describes a gap between expanded access to outbound investment and the risks facing buyers of some US-focused funds. Beijing expanded quotas, but demand for US equities persisted; the publication does not say the quota change caused the funds’ price increases.
Last week, at least six fund houses, including China Asset Management, Hua An Fund Management and China Universal Asset Management, issued warnings after some fund prices rose substantially above net asset value (NAV). NAV represents a fund’s value, while its market price can trade above that level. The managers’ warning was conditional: investors could lose money if the premium contracts. The report gives no individual fund figures.
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