Type to search

Risk Warnings as China Money Floods Into Japan-Focused Funds

Tokyo’s benchmark index has hit 33-year highs and two Shanghai-listed ETFs that track the Nikkei 225 now exceed their net asset value

A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration/File Photo
A China yuan note is seen in this illustration. Photo: Reuters


Chinese money is flowing into Japan-focused stock funds at an unprecedented rate drawn in by a surging Nikkei, triggering market risks warnings from fund managers.

Two Shanghai-listed exchange-traded funds (ETFs) that track the Nikkei 225 Index have drawn such feverish interest that their prices far exceed their net asset value.

The ETFs’ managers, E Fund Management Co and China Asset Management Co, flagged risks to investors for the third session in a row on Tuesday.

“We caution investors to pay attention to price premium risks in the secondary market,” the mutual fund companies said in separate statements. “If investors invest blindly, they may incur huge losses.”


Also on AF: Nikkei Snaps Winning Streak, Hang Seng Slips on China Outlook


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 size of the fund has expanded by nearly 60% this year.

The premium for the China AMC Nomura Nikkei 225 Index ETF surged to 18% in the secondary market on Friday.


  • Reuters with additional editing by Sean O’Meara


Read more:

Asian Funds Backing China Education Again, US AI-Tech Giants

Dollar-Hungry Mainland China Funds Head For Hong Kong

China’s Taiwan Threats Prompt Funds Strategy Rethink

Record Inflows to Emerging Market Funds After China Reopening




Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


AF China Bond