QDII funds face tight purchase restrictions; cross-border investments should beware of "speculative" allocations

Recently, the public fund market has faced a “purchase limit wave” for cross-border investment products, a trend that has intensified since late March. According to exchange announcements, multiple QDII funds, including S&P 500 LOF, S&P Biotechnology LOF, and S&P Information Technology LOF, collectively announced the suspension of subscription and regular investment services starting March 19, while redemption services continue as usual.

According to incomplete statistics, as of mid-March, a total of 52 QDII funds in the market have issued premium risk warnings, with some products issuing warnings more than 60 times this year and temporary suspensions occurring 22 times. From Southern Crude Oil LOF to FTSE Russell S&P Oil and Gas ETF, from Hua’an France CAC40 ETF to Guotai S&P 500 ETF, multiple products have continuously issued risk warning announcements due to high premiums, with some crude oil-themed LOFs seeing premium rates exceed 50% at times. On March 19 alone, more than 10 QDII funds, including the crude oil LOF from E Fund, the Korea-China Semiconductor ETF, the Nasdaq Technology ETF from Invesco Great Wall, and the Hua’an Nikkei 225 ETF, issued premium risk warning announcements on the same day.

Supply-demand imbalance under foreign exchange constraints

“This is not an individual action by a specific company, but a common constraint faced by the entire industry,” said a person related to a public fund.

This person revealed the core logic behind the current purchase limits on QDII funds. Although the total investment quota approved by the State Administration of Foreign Exchange has reached $170.869 billion, the quota tightness has not fundamentally eased in the face of the growing globalization allocation demand from domestic investors. After the quota expansion of $3.08 billion in June 2025, a new round of intensive purchase limits soon emerged, with the “sold out in one day” consumption speed of foreign exchange quotas becoming the norm.

An even more extreme case has appeared with crude oil-themed funds. On March 24, E Fund announced that its crude oil LOF’s secondary market trading price was significantly higher than the net asset value of the fund shares. On March 20, the net asset value was 1.7075 yuan, while as of March 24, the closing price in the secondary market had soared to 2.564 yuan, with a premium of nearly 50%. To protect investors’ interests, the fund temporarily suspended trading on the afternoon of March 24 and announced that it would continue to suspend trading until 10:30 on March 25; on March 25, FTSE Russell announced again that its S&P Oil and Gas ETF would suspend trading until 10:30 that day, and if the premium did not effectively decrease, further measures would be taken.

“Cross-border investment products face dual constraints: one is the hard constraint of foreign exchange quotas, and the other is the soft constraint of holdings in overseas markets,” explained a researcher from a brokerage fund to reporters. “Taking crude oil LOF as an example, it is not only limited by foreign exchange quotas, but some products are also subject to limits on futures contract positions.”

This supply-demand imbalance has directly led to high premium phenomena in the secondary market. As of mid-March, the premium rate of the Korea-China Semiconductor ETF had once exceeded 20%, with a single product issuing risk warnings up to 63 times this year and temporary suspensions occurring 22 times. The Invesco Great Wall Nasdaq Technology ETF is a typical case, having issued more than 30 risk premium and suspension announcements since 2026.

Investors need to be wary of “speculative” allocations

In the face of a surge in subscription demand and high premium rates, institutions are reinforcing risk warnings. On March 25, Manulife Fund announced that its Manulife India Opportunities Equity Securities Investment Fund (QDII) would resume subscription, redemption, and regular investment services on March 27 due to holidays in the Indian trading market. On the same day, Yongying Fund announced that its Hang Seng Consumer Index Fund (QDII) and other non-Hong Kong Stock Connect trading day funds would suspend subscription and redemption services. This series of announcements reflects the operational difficulties of QDII funds under the dual pressure of quota constraints and fluctuations in overseas markets.

“Many investors treat QDII funds as tools to chase the overseas tech bull market, but overlook multiple risks such as exchange rate fluctuations, time zone trading, and differences in overseas regulations,” said the aforementioned public fund person. “Taking the recently suspended S&P series LOFs as an example, although they track mature market indices, fluctuations in the RMB/USD exchange rate may erode index gains in the short term, and most individual investors have not adequately assessed this risk.”

Bank channel personnel have also observed subtle changes in investor behavior. “In the past, clients inquiring about QDII were mainly driven by the need for diversification in asset allocation, but now more and more people are chasing after high prices after seeing the rise of US tech stocks,” said a product manager from a private banking department at a bank. “We have already strengthened the warning of special risks for cross-border products in the client risk assessment process, but for retail investors entering through brokerage channels, risk education still has a long way to go.”

It is noteworthy that some fund companies are responding to quota constraints through product design optimization. For example, the Jia Shi crude oil LOF suspended subscription (including regular investment) services starting February 3, 2026, setting a very low daily subscription limit, thus retaining the product channel while avoiding rapid depletion of quotas. Other institutions have begun to guide investors to alternative channels such as Hong Kong mutual recognition funds, which are not subject to QDII quota constraints, allowing managers to autonomously expand their scale.

“The current intensive purchase limits on QDII funds are essentially a routine measure taken by fund companies to maintain product operational stability and protect existing investors during periods of rapid growth in scale,” summarized a head of a fund evaluation agency. “Investors should view this rationally and avoid turning cross-border allocations into short-term speculative trading, and instead genuinely assess the long-term value of QDII products from an asset allocation perspective.”