The proposed merger between leading computing firms Haiguang Information and Inspur has ignited a surge across China’s IT innovation sector, driving massive inflows into related ETFs. Five fund houses have issued warnings about growing tracking errors in their Innovation-themed ETFs, as trading halts of the two merger targets prevent timely portfolio rebalancing.
The suspension of Haiguang and Inspur shares has created an unusual market dynamic – investors anticipating significant price appreciation upon resumption are flooding into Innovation ETFs as proxies. Some products have seen their fund units grow more than tenfold recently, reflecting intense speculation around the merger deal.
This frenzy highlights both the market’s appetite for domestic tech consolidation plays and the challenges for passive funds when index constituents become untradeable. The situation underscores how major corporate actions in China’s strategically important sectors can create ripple effects across related investment products, with potential implications for pricing efficiency and risk management in the innovation-themed fund space.
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