In a noticeable trend in the financial markets, two German exchange-traded funds (ETFs)—the Harvest DAX ETF and the Huaan DAX ETF—have recently emerged as standout performers, reflecting the current investor sentiment and market dynamicsOn January 20, these ETFs achieved remarkable gains of 8.20% and 5.78%, respectively, leading the ETF marketThe Harvest DAX ETF, in particular, recorded an astonishing premium rate and turnover rate of 30.78% and 2096.99%, respectively, marking a continuous six-day stretch with a turnover rate exceeding ten times.

This vigorous activity is notable, especially considering that the Harvest DAX ETF has surged by 35.88% since the beginning of January aloneMarket observers have noted that despite the pressures facing the German economy, the DAX index itself has displayed robust performance, hitting an all-time high on January 17. The index has delivered a substantial annual return of 19% in 2024 and has risen by a staggering 50% since 2023.

Given this environment, industry experts caution that smaller cross-border ETFs like these may attract speculative behavior as investor enthusiasm heats up, potentially leading to a rapid influx of capitalHowever, the lack of sufficient arbitrage capital to stabilize premiums can create volatility; hence, the high premiums and turnover in these products are not particularly surprisingInvestors are urged to be mindful of the risks associated with premium declines as prices return to net asset values and the potential for index pullbacks, implying that they should not simply chase the speculative advantage spurred by exuberant market sentiment.

This surge in cross-border ETFs is further underscored by a broader market trend, where last week saw a collective strenghtening of global stock markets and a robust performance from various cross-border ETF products, including those tracking the S&P consumer index and the Nikkei 225. The enthusiasm among investors remains unabated, even as fund companies issue risk warnings regarding potential over-exuberance in the market.

A fund personnel piece shed light on the dynamics influencing this cross-border ETF frenzy

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The speculative interest is intricately tied to broader market emotions, coupled with restrictions on Qualified Domestic Institutional Investor (QDII) quotas, challenges posed by arbitrage mechanisms, and currency fluctuationsAdditionally, this fervor is indicative of the “asset scarcity” phenomenon observed by investors at the start of the year.

On January 20, the most notable performers among all ETFs were undoubtedly the Harvest DAX ETF and the Huaan DAX ETF, where the former led with an exceptional daily turnover rate, surpassing 33.97 billion yuan and achieving a record-breaking single-day growth rate of 8.20%. The turnover rate for this product reached an extraordinary 20.97 times, marking an unprecedented trend for a continuous six days.

In terms of market performance, the Harvest DAX ETF has significantly carried forward a remarkable gain of 35.88% since January 2025. According to available information, this ETF was established on April 3, 2024, debuting with an initial size of 216 million yuanIts shares maintained a steady level above 100 million yuan since its inception, and as of January 16, the current size is pegged at 116 million yuan.

Public records indicate that the initial fundraising period was extended by more than a month due to subpar demand, and shortly after the turn of the year, trading was suspended on three occasions due to notable price premiumsThis led to a series of risk warning announcements from the Harvest DAX ETF, cautioning investors about trading price premiums and possible severe losses from unconsidered investment strategies.

This intensifying speculative activity raises questions about when the fervor will stabilizeDespite the strains on Germany's economy, the DAX index continues to ascend, arguably backed by the robust performance of the major companies tracked by these ETFs.

Recent data shows that the German blue-chip index has seen its value peak at historic highs over the past three trading days, while having risen by 19% in 2024 and 50% since 2023. However, it is worth noting that Germany's GDP growth has shown slight declines over the past two years, causing financial analysts to highlight the disconnect between local economic performance and the DAX index metrics.

Deutsche Bank has pointed out that the DAX index does not accurately reflect domestic economic realities, as it is more closely linked to global growth than to the German economy itself

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