European ETF trading commentary for the week ending 11 November, 2011, provided by Cowen International Trading Ltd.
Last week was another volatile period for global equities, although indices closed in the upper half of the week’s range. The Euro Stoxx 50 finished the week 1.5 percent higher than the previous Friday’s close, while the S&P 500 climbed 0.9 percent over the same period. ETF volumes, however, remained lower than average, with the low participation levels suggesting an underlying lack of conviction amid the ongoing political uncertainty in Europe. At the end of the week, the three month average for Europe had fallen to 79 percent of the three month average at the end of the previous week, while the US fared slightly better, at 95 percent.
Global ETF inflows favoured equities over government bonds for the third consecutive week, though only marginally. (US$2.3 billion in bonds versus US$2.6bn in equities.) However, investment grade corporate bonds gained an additional US$1.1 billion and US money market funds recorded inflows of US$20 billion.
Our primary market flows were positive, with buyers outweighing sellers by a ratio of 5:2. This was mostly due to a high number of creation orders in iShares’ Markit iBoxx Euro High Yield ETF (LSE: IHYG), iShares’ USD Corporate Bond (LSE: LQDE) and the iShares eb.rexx Government Germany 5.5-10.5 ETF (Deutsche Boerse: RXP5EX), for which we executed a creation order of €40 million.
For the past three weeks there has also been an increase in creation orders for corporate bond ex-financial funds such as the iShares Barclays Euro Corporate Bond ex-financials ETF (LSE: IEXF) and Lyxor’s ETF Euro Corporate Bond ex Financials (NYSE Euronext: CNB), which had inflows of €17 million last week.
Investors continued to sell emerging market funds, with iShares reporting redemptions of US$60 million from its Korean ETFs and Lyxor reporting outflows of €18 million from its Russian funds.
In our secondary market activities, however, sellers outweighed buyers by a ratio of 7:5. Our top-ranking ETFs by on-screen volumes were iShares’ eb.rexx Government Germany 10.5+ ETF (Xetra: RXPXEX), iShares’ USD Treasury Bond 7-10 ETF (LSE: IBTM), IHYG, iShares DJ US Select Dividend (DE) ETF (Xetra: DJDVPEX) and iShares’ iBoxx euro fund ETF (LSE: IBCX). Between them, these funds accounted for two-thirds of our on-screen trading volumes.
In the commodities space, demand for precious metals ETCs led to $170 million of net creations.
Friday will see expiries in many options series, which may increase volatility in the markets. Tokyo will be closed on November 23 and the US on November 24 due to Thanksgiving Day.
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.