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Weekly European ETF Trading Report

Written by Laurent Kssis

  
October 03, 2011 16:01 (CET)

European ETF trading commentary for the week ending 30 September 2011, provided by Cowen International Trading Ltd.

The quarter ending September was one to forget, with equity markets experiencing continued weakness right from its start in July. The VIX index (which measures the 30-day implied volatility of the S&P 500 index’s component stocks, as derived from at-the-money options prices) had its biggest quarterly gain ever and Treasuries saw their best performance in three years, with yields on short- and medium-term notes approaching record lows. Investors moved away from equities and into safe haven assets, and at the end of last week, the FTSE 100 was down 14 percent on the previous quarter, the Euro Stoxx 50 had fallen 23 percent, the DAX 26 percent, the S&P 500 15.6 percent, the Italian MIB 27 percent and the Athens Stock Exchange 38 percent.

Cowen’s primary market volumes increased significantly last week. Our ratio in the primary markets was 3:1 in favour of redemptions, and sellers outweighed buyers by a 4:1 ratio in our secondary market activities. Though the trend towards net outflows is now in its seventh consecutive week, the gap between buyers and sellers has narrowed by around half.

Globally, equity ETFs had outflows of US$8 billion. Of this, US$2.6 billion came from emerging market ETFs, which saw their ninth straight week of outflows, the longest losing streak since 2002.

Investors, largely from Germany and Switzerland, piled into the iShares S&P 500 ETF (LSE: IUSA) this week, and our creation orders in this fund represented two-thirds of all of our creation orders. Other liquid indices also saw good inflows, with the iShares Euro Stoxx 50 (DE) ETF (Xetra: SX5EEX) reporting inflows of €100 million. In the DAX, the iShares DAX (DE) ETF (Xetra: DAXEX) saw net creations of €90 million, while Lyxor reported €73 million in its ETF DAX (NYSE Euronext: DAX FP). We also saw strong demand for the db x-trackers MSCI USA TRN (Deutsche Boerse: XMUS).

Investors were selling Taiwan, China and developed markets property ETFs (with US$59 million in redemptions reported by iShares) and Far East Asia ETFs, albeit all with reduced volumes compared to the previous weeks.

Our biggest on-screen activities were focused on the db x-trackers MSCI World (LSE: XMWO), iShares’ FTSE EPRA/NAREIT Developed Markets Property Yield Fund (LSE: IWDP), db x-trackers’ MSCI Europe TR (Xetra: XMEU) and iShares’ iBoxx euro fund (IBCX).

Bonds ETFs had inflows of US$4.3 billion, which is the largest amount for four months, although much of this went into US/Euro corporate bonds as emerging market bond funds recorded their biggest outflows since Oct 2008. We helped buyers of US 10 year Treasury ETFs, for which Lyxor reported creation orders of €7 million. IShares reported a total of US$100 million in creation orders for its Barclays Capital $ Treasury Bond 1-3 (LSE: IBTS) and its USD Treasury Bond 7-10 (LSE: IBTM). We also saw small inflows into corporate bond ETFs, although iShares reported outflows of US$42 million in its Euro Corporate Bond ETF (LSE: IBCX).

Friday’s commitments report revealed substantial liquidation in all the precious metals, with some hitting historical landmarks. Gold, for example, is at its lowest net length since May 2009 and silver is at its lowest since October 2008. Interestingly, palladium reported a record weekly increase. Commodities experienced US$1 billion in global outflows, triggered by gold and precious metals, which saw their highest number of redemptions in five weeks.

Next Monday, October 10, is Columbus Day, but US markets will be open as usual. The Tokyo Stock Exchange will be closed due to a public holiday.

This report is neither an offer to sell nor a solicitation of any investment products or other financial service. Nor is it an official confirmation of any transaction or an official statement of CIT.


 



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