China's silver fund plummets again after trading halt

SHANGHAI/HONG KONG Feb 6 (Reuters): China's sole silver futures fund slumped by its 10 per cent daily limit on Friday, its fifth straight session of decline, after a global selloff in precious metals wiped out significant investor gains.

Global gold and silver prices hit a series of record highs in January. But US President Donald Trump's nomination of Kevin Warsh as the next Federal Reserve chair triggered a selloff last week that is still being felt, with silver particularly hard hit in recent days.

The fund's tumble followed a one-hour trading halt at the open designed to protect investors in a product that was trading at a huge premium to net asset value.

The UBS SDIC Silver Futures fund , China's only exchange-listed pure-silver product, is now down more than 40 per cent from its January 26 peak.

But the fund, at 3.099 yuan ($0.4465) per unit on Friday, still trades at a 29 per cent premium over its net asset value of 2.4073 yuan.

The rich premium reflects both investors' feverish bets on silver when the metal was soaring, and China's daily trading limit, which prevents prompt valuation adjustment.

"Investors could suffer severe losses if they blindly invest in fund units trading at a high premium," the UBS SDIC Fund Management, which manages the silver fund, cautioned in a statement on Friday announcing the trading suspension.