Chinese investors’ frenzy for precious metals has led to extreme measures in the investment field. The only fund in China solely focused on silver has been forced to halt new customer acquisitions after repeatedly issuing risk warnings that were ignored.
On Friday, December 26th, the UBS SDIC Silver Futures Fund LOF announced it would suspend the subscription of Class C fund shares starting next Monday, the 29th. These funds are typically favored by short-term traders.
Earlier this week, the fund’s premium over its net asset value had surged over 60%, with its underlying assets being silver contracts listed on the Shanghai Futures Exchange.
This year has seen a staggering surge in global precious metals such as gold, platinum, and silver, reaching historical highs. For individual Chinese investors, limited domestic investment options and restricted information access often result in herd mentality and irrational buying behavior.
With UBS SDIC being one of the few silver investment channels in China, and trading videos circulating on platforms like Xiaohongshu showcasing ways to arbitrage using the fund’s OTC and exchange-traded shares, investors flocked in.
The fund hit the 10% daily limit for three consecutive days this week, prompting adjustments to the regular installment amounts from 500 yuan to 100 yuan on Thursday, leading to a drop but still maintaining a 44% premium, higher than the 7% in early December.
The latest restrictions announced on Friday may further reduce the premium as the fund hit the 10% daily decline limit for the second consecutive day. Additionally, the fund manager will lower the installment limits for Class A funds from 500 yuan to 100 yuan starting next Monday.
The UBS SDIC fund has surged by 187% this year, while silver futures trading on the Shanghai Exchange rose by around 145% over the same period. The gap in performance between the two has significantly narrowed since Wednesday.