(Bloomberg) — China’s only pure-play silver (SI=F) fund halted trading on Wednesday, after a frenzied wave of investment drove its premium significantly above the value of its underlying assets.
The UBS SDIC Silver Futures Fund LOF is halting trading until 10:30 a.m. Beijing time, the fund’s manager said in a statement. It also paused new subscriptions after issuing near-daily risk warnings — and frequently halting trading — since early December. The fund’s premium over Shanghai Futures Exchange silver contracts is currently around 36%, according to data compiled by Bloomberg.
The elevated premium is “unsustainable” and investors could face “significant” losses if the market suddenly turns, UBS SDIC Fund Management Co. said in its latest notice.
Silver buying in China, whether physical or speculative, has been on a relentless tear in recent months. Prices in Asia’s largest economy are trading at a premium to comparable international benchmarks, even after accounting for the 13% value-added tax borne by local importers. Spot silver has risen more than 50% so far this year.
