Laurent Kssis at LaBranche Structured Products Europe (LSPE) discusses European ETF trades for the week ending 11 February.
ETFs investing in Europe and Japan attracted very large inflows last week as developed markets continued to prove popular with investors.
The iShares S&P 500 topped the leaderboard for the fourth week running on inflows of $158m, and demand for growth stocks has also returned. iShares reported creations worth $38m on its Eurostoxx Total Market Growth Large ETF, of which LSPE supplied 20%.
Meanwhile money continued to come out of emerging market (EM) ETFs, with redemptions worth $3.1bn taking outflows over the past three weeks to $13.3bn.
Last week we saw large outflows totalling $550m from the db x-trackers MSCI EM Total Return ETF, and also helped a large on-exchange sale in iShares MSCI Taiwan. It should be noted though that in absolute terms the EM sell-off has been relatively small, amounting to 1% so far this year against an average of 14%. As a percentage of assets under management (AUM), outflows across global EM ETFs come to 1.9%, which compares to a norm of 4.2%.
That latter figure would translate to outflows of $16bn, suggesting that the EM sell-off still has some way to go. On the other hand, emerging markets are now looking oversold, which could trigger buy signals as soon as early March.
These movements come after global indices climbed to fresh, multi-year highs, the S&P 500 finishing the week up 1.4% and the Eurostoxx up 0.7% despite volatility. Asian indices have also moved higher, with particularly strong performance coming from China and the industrial sector.
The developed market charge in that region has been led by Japan and Australia, while among EMs Brazil in particular continues to underperform against the S&P.
Continued EM outflows last week helped push our strong primary market volumes, which grew 60% on the week before. This was also fuelled by very large creations in Russia ETFs, which pulled in flows of $267m last week alone and more than $1.65bn year-to-date. All in all, we saw twice as many sellers as buyers and redemptions outweighed creations at a ratio of 3:2.
TIPS funds recorded their seventh consecutive week of inflows, indicating that worries about inflation remain high on the agenda. However, US treasury products recorded their biggest outflows since October 2008. As UK gilt yields move to multi-month highs, the iShares FTSE UK All Stocks Gilt ETF is at one of its lowest prices since November 2008.
Last week was the first time LSPE did not create in iShares Markit iBoxx Euro High Yield Bond. Interestingly also, we witnessed decent orders in iShares Barclays Capital Euro Corporate Bond ex-Financials ETF, resulting in creations of over $59m - the largest we have seen in some months. We also saw decent sellers in German government bond ETFs and in iShares Markit iBoxx Euro Corporate Bond, where iShares reported $73m of outflows.
This Friday is likely to see increased volatility as a number of futures contracts come to expiry.
This report is not an offer to sell or a solicitation of any investment products or other financial product or service, an official confirmation of any transaction, or an official statement of LSPE.
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