In the world of stock markets, volatility is often the name of the game, and last week was no exception for the A-share market in ChinaWith key indexes such as the Shanghai Composite Index falling below the critical 3200-point mark and the ChiNext Index dropping under 2000 points, market participants felt the shades of uncertainty deepeningThe closure points reached a new low since October of the previous year, raising eyebrows across financial circles.

While the broader market experienced a downward trend, the Exchange-Traded Fund (ETF) realm saw a slight increase in total shares, exhibiting a modest week-over-week rise of 0.05%, amounting to an increase of approximately 13.68 billion sharesBy the end of the week, the total share count for ETFs reached roughly 26.81 trillionConversely, the total scale of these ETFs saw a decrease, losing about 13.248 billion yuan, which translates to a 0.37% decline, with the latest scale standing at around 36.13 trillion yuan

The daily trading volume also took a hit, dropping by approximately 16.43 billion yuan to settle at 210.25 billion yuan.

Interestingly, while many ETFs floundered amid the overall market dip, cross-border ETFs managed to shine brightlyAccording to data released by Securities Times, among over a thousand ETFs—excluding those associated solely with monetary functions—only around 200 noted an uptick in their performance within the weekLeading this success were the cross-border ETFs, with notable funds such as the Invesco Great Wall S&P Consumer Select ETF (QDII), the Southern Fund South East Asia Saudi Arabia ETF (QDII), and the Harvest Germany DAX ETF (QDII) each witnessing astonishing surges of over 15%. In particular, the Invesco Great Wall S&P ETF achieved an impressive gain exceeding 29%, reaching a new high since its listing.

It's crucial to note that the Invesco ETF comprises prominent stocks like Amazon, Tesla, Procter & Gamble, and Home Depot

However, the fund faced trading suspension last Friday due to its price straying significantly from its net asset valueThis occurrence serves as a reminder of the fragility and volatility that can accompany such investments.

In addition to the favorable showing of cross-border ETFs, the semiconductor sector displayed commendable performance, with several chip-focused ETFs entering the top ten gainersThe Zhonghan-Korea Chip ETF, the Guotai Zhongcheng Full Index Integrated Circuit ETF, and the Harvest Integrated Circuit ETF all recorded gains surpassing 4%. With a remarkable 5.79% surge, the Zhonghan-Korea Chip Fund's top ten holdings include major players such as Samsung Electronics, SK Hynix, Semiconductor Manufacturing International Corporation (SMIC), and Northern HuachuangThe strong performance can be attributed to SK Hynix, which surged nearly 12% due to exceeding market expectations concerning its development of High Bandwidth Memory (HBM) and serving as the exclusive supplier for NVIDIA’s HBM needs

Other stocks like Cambrian-U and GigaDevice showed week-on-week gains around the 17% mark, while SMIC and Huagong Information exceeded 5% gains as well.

Research conducted by Guojin Securities revealed a striking pattern: each cycle of semiconductor booms aligns with breakthroughs in emerging technology driving product upgrades and innovationThis process catalyzes the creation of new products, growth in penetration rates, and enhancement of the semiconductor value of individual items, ultimately propelling the semiconductor market to the next levelExperts believe that AI is set to steer the semiconductor industry into its next significant cycle.

However, this surge in cross-border ETF investments also carries risksWith high turnover rates and even soaring premium rates, there’s reason for cautionReports indicated that up to seven cross-border ETFs experienced turnover rates exceeding ten times their usual amount within the past week, with both the Harvest Germany DAX ETF and the Invesco Great Wall S&P Consumer Select ETF surpassing 33 times

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In a broad view, the average turnover rate across 79 cross-border ETFs reached an astonishing 349.48%.

This enthusiastic trading atmosphere has led to heightened premium risksThe cross-border ETFs with the highest turnover rates observed an average premium rate reaching 13.69%. For instance, the Invesco Great Wall S&P ETF was priced at 1.899 yuan per share, while its unit net asset value was only 1.2505 yuan, yielding an eye-watering premium rate of 51.86%. Such discrepancies between price and value signify vast potential for corrections.

There have been historical occasions, like last July, when cross-border ETFs faced significant volatility, with rapid spikes and drops creating a roller-coaster effectAfter a notable rise in the newly launched Saudi ETF within the first two trading days, its premium rate soared past 17%, only to plummet after consecutive daysBy August 5 of the same year, the ETF fell to a low of 0.95 yuan per share—under its unit net value.

In light of these developments, institutional fund houses have begun to issue alerts pertaining to these high premium risks

Prominent names in the industry, including E Fund, Huaxia Fund, Southern Fund, and Huitianfu Fund, have released notifications warning that the secondary market trading prices for their cross-border ETFs significantly exceed the estimated net asset valuesAdditionally, several funds, including Guotai Fund, Invesco Great Wall Fund, Huitianfu Fund, and Huaxia Fund, have publicly announced trading suspensions.

Remarkably, after implementing such measures, there was a noticeable retreat in the prices of cross-border ETFsOn January 10, a swift sell-off marked the end of day trading for numerous cross-border ETFs, echoing the cautious sentiment in the market.

Contrasting this boom among cross-border ETFs, the week also saw significant declines in ETFs related to Chinese concepts and Hong Kong tech companiesShare prices for five ETFs, including the Huabao Zhongzheng Hong Kong Internet ETF, the Hong Kong Consumer ETF, the E Fund Zhongzheng Overseas China Internet 50 (QDII-ETF), and others each recorded declines exceeding 5%. The Huabao ETF stood out with a 5.58% decline, while Tencent Holdings, a major holding within its top ten assets, experienced an alarming drop of nearly 11% within the same week.

This depreciation can be partially attributed to scrutiny regarding Tencent's inclusion on a U.S

Defense Department listIn a press release, Tencent asserted its position, clarifying that it is neither a Chinese military enterprise nor involved in the nation's military-civil fusion industryIt argued that such a classification is erroneous and not reflective of its business operations, indicating that the listing pertains solely to procurement issues linked to U.Sdefense contracts.

Short-term reactions to this news pressure market sentiment, but institutions like Puyin International remain optimistic about Tencent's strong market position and ongoing improvements in profitabilityTheir forecasts point toward a closer watch on Tencent's expansion in the WeChat e-commerce ecosystem come 2025.

To bolster its resilience in a fluctuating environment, Tencent has been increasing its stock buybacks significantlyBetween January 7 and January 10, the company executed buybacks totaling 15 billion Hong Kong dollars daily—double the amount compared to the previous week’s 7 billion Hong Kong dollars