The UBS SDIC Silver Future Fund LOF, China's only pure-play silver investment vehicle, experienced a dramatic 10.00% decline, hitting the lower circuit limit after fund managers warned investors about unsustainable market conditions. The crash came after three consecutive trading sessions of 10.00% upper circuit gains, highlighting the extreme volatility in silver-linked investments.

Silver Market Surge Drives Fund Premium

The fund's dramatic movements coincide with silver's exceptional performance in global markets. Silver prices crossed the $72.00 per ounce mark, driving year-to-date gains past 150.00% and positioning the precious metal for its strongest annual performance since 1979.

Fund Management Implements Risk Controls

In response to the excessive premium buildup, UBS SDIC Fund management has implemented several protective measures:

• Tightening subscription rules for new investors
• Limiting class C share subscriptions to ₹100.00 from the previous ₹500.00 limit

Class C shares represent the easier method for investors seeking short-term gains in the fund.

Premium Risk Warnings Issued

The fund's management has issued multiple warnings about the substantial premium the fund trades at compared to its underlying assets. Key points include:

• The fund's underlying holdings consist of silver contracts traded on the Shanghai Futures Exchange
• At the start of the month, the fund's premium over these underlying assets stood at 7.00%
• The premium expanded dramatically to 62.00%, creating significant risk exposure

Market Implications and Risk Assessment

The fund managers have explicitly warned investors that the high premium over the underlying asset value poses substantial risks for steep losses should silver futures prices reverse. Notable observations include:

• The 220.00% year-to-date performance of the China Silver Fund significantly outpaced the 128.00% rise in Shanghai-traded silver futures
• The dramatic circuit-to-circuit movement from upper limits to lower limits demonstrates heightened volatility risks
• The fund's recent 10.00% fall in the lower circuit after three days of gains underscores the fund manager's warning about the unsustainable premium

This volatility comes amid silver's remarkable 150.00% yearly surge, highlighting the potential risks in the volatile silver market.

China has sharply criticized the United States for what it described as an "irresponsible" attempt to damage Beijing's improving ties with India, escalating diplomatic tensions over a recent Pentagon assessment. Foreign Ministry spokesman Lin Jian accused the US of distorting China's defense policy and deliberately sowing discord between nations to justify American military hegemony.

Stronger Chinese Rebuke of Pentagon Assessment

Lin Jian delivered pointed criticism during a regular press briefing in Beijing on Thursday, responding to the Pentagon's annual report on 'Military and Security Developments Involving the People's Republic of China 2025.' The report had suggested that China "probably seeks to capitalize on decreased tension to stabilize bilateral relations and prevent the deepening of US-India ties."

Lin emphasized that China wanted to develop relations with India "along the track of sound and steady development," while describing the border situation as "generally stable." The spokesman characterized the Pentagon report as an attempt to "find a pretext for the US to perpetuate its own military hegemony."

Recent Diplomatic Breakthrough

China and India have made significant progress in stabilizing relations since last year, defusing their prolonged border standoff and initiating several normalization measures. The diplomatic reset gained momentum following the agreement in October 2024 to disengage from remaining standoff sites along the Line of Actual Control (LAC).

Broader Geopolitical Context

The improved China-India relationship has developed against the backdrop of both countries being affected by President Donald Trump's trade war policies. Beijing has also criticized other aspects of the Pentagon report, which described China as being in the midst of a "historic military buildup" that has made the US homeland "increasingly vulnerable."

The diplomatic exchange highlights the complex trilateral dynamics as China and India work to normalize relations while managing their respective relationships with the United States. Despite recent progress, the Pentagon assessment emphasized that continued mutual distrust and other irritants limit the bilateral relationship between the Asian giants.

People-Centric Measures

Beyond high-level diplomatic engagement, both countries have agreed on several practical measures to reset their ties, including enhanced visa facilitation and plans to commemorate the 75th anniversary of diplomatic relations. The normalization process includes monthly high-level engagements covering border management and various aspects of the bilateral relationship.