Due to the Christmas holiday, the Hong Kong stock market has been closed for two and a half days, but Hong Kong stock-related ETFs have mysteriously hit the limit up. What happened? On December 26th, the Hong Kong Stock Connect Low Volatility Dividend ETF and the Dividend Hong Kong Stock ETF hit the limit up, with a premium rate of as high as 14.11% and 15.31%. The Hong Kong-listed state-owned enterprise dividend ETF, which rose by 5.6%, had a premium of 15.28%. The Hong Kong stock market has been closed for two and a half days, but Hong Kong stock-themed ETFs continued to trade intraday, sparking discussions among investors about premiums, arbitrage, and risks for two days. Until the 26th, some investors were still wondering whether they should buy in with such a high premium. Why don't ETFs trade in sync with the Hong Kong stock market when the premium exceeds 15%? In the past two days, after cross-border ETFs, Hong Kong stock ETFs also hit the high premium list. The reason for the premiums for both types of ETFs is simple: cross-border ETFs are still limited by the QDII quota; Hong Kong stock ETFs are affected by the Hong Kong stock market closure, but on-exchange ETFs are still trading, and ETFs cannot adjust supply in real time through subscriptions and redemptions. Additionally, most ETFs have small scales, further fueling speculation. Specifically, the S&P Consumer ETF had the highest premium at 26.21%, followed by the Dividend Hong Kong Stock ETF, Hong Kong-listed state-owned enterprise dividend ETF, Hong Kong Stock Connect Low Volatility Dividend ETF, and S&P 500 ETF, all with premium rates exceeding 10%; in terms of turnover rate, the turnover rate of the S&P Consumer ETF ranked first at 646.67%, followed by the turnover rate of the Hong Kong-listed state-owned enterprise dividend ETF exceeding 610%, the turnover rate of the Hong Kong Stock Connect Low Volatility Dividend ETF exceeded five times, the turnover rate of the Hong Kong Dividend Low Volatility ETF and Dividend Hong Kong Stock ETF exceeded four times, and the turnover rate of the China-Korea Semiconductor ETF also exceeded one time. The smaller the scale, the better for speculation. Many Hong Kong stock-themed ETF shares are only a few tens of millions, and around 200 million funds can bring more than four times the turnover rate. Some industry insiders believe that the essence of ETF trading with substantial premiums lies in the special trading mechanism. ETF funds can be traded on two markets and have two prices, as they can be traded in the primary market and also in the secondary market. Due to the different pricing methods, the same product may have different prices in the two markets. In recent years, cross-border ETF investments have been booming, and secondary market demand has increased, but restrictions on QDII quotas and foreign exchange quotas have weakened trading efficiency, magnifying fluctuations in ETF premiums and discounts. Unlike the relatively smooth arbitrage mechanisms in the A-share market, limits on quotas reduce the number of investors who can arbitrage, limiting the efficiency of premium arbitrage and allowing related ETFs to experience significant premiums for a relatively long time. However, the main reason for the premiums on this dataset of Hong Kong ETFs is the differences in trading times. Overseas markets usually have trading times that are "out of sync" with the A-share market, making it difficult to update IOPV data in real time. When overseas markets are closed, the corresponding cross-border ETFs need to suspend primary subscriptions and redemptions and can only trade in the secondary market, exacerbating the situation of high premiums due to the mismatch between the primary and secondary markets. Investors may wonder why Hong Kong stock ETFs are not traded in sync with the Hong Kong stock market to avoid high premiums. Some public offering experts declare that the Hong Kong stock ETFs issued in mainland China have always suspended subscriptions and redemptions but not trading. Because of the suspension of subscriptions and redemptions, investor trading does not involve an increase in shares or ETF stock repair, only on-exchange speculation. Furthermore, some public offering experts indicate that the main issue lies in Hong Kong stock ETFs listed on the A-share market, which follow the trading hours of the A-share market, posing a problem that cross-border products inherently face. In just three days, there have been over 70 risk alerts about ETF premiums. So, going back to the investors' question, can these high-premium ETFs be bought? One fund manager mentioned that an increase in buy orders on the exchange pushes up prices, and commodity prices fluctuate around their value and will ultimately return to a reasonable value level. The discounts and premiums of ETFs will also be smoothed out at different times. Behind this process is an arbitrage mechanism. For investors, buying high-premium ETFs can involve buying a "bundle of stocks" in the secondary market and acquiring ETF shares through primary market subscriptions, then selling ETF shares on the secondary market to profit from buying low and selling high. "Once ETFs open for subscriptions, investors will purchase and sell ETFs for arbitrage," said the person mentioned above. A high premium often signals an overheated market, and when sentiment cools or the fund is open for subscriptions, arbitrageurs rush in, and fund prices may immediately return close to net asset value, potentially reducing or eliminating the premium. In the eyes of institutions, investors who have bought into the market at highs may face capital losses when premiums fall in the short term, essentially buying into expensive market sentiments. Therefore, when faced with high premiums, ordinary investors need to remain calm and pay attention to the underlying pullback risks. Hence, fund companies will issue risk warnings when ETFs have high premiums. Since the 24th, there have been over 70 risk alert announcements for cross-border and Hong Kong ETFs. Additionally, multiple fund companies have educated investors through articles, suggesting that when selecting ETF products, investors should consider various dimensions such as the scale, liquidity, tracking error, fees, and premiums and discounts. While enjoying the convenience of ETF investments, investors should remain cautious and rational, scientifically plan their asset allocation, and strictly implement risk control measures. This article is a reprint from "CaiLian Press," GMTEight editor: Liu Jiayin.