Last Updated: 31 January 2023
European ETF trading commentary for the week ending 25 November, 2019, provided by Cowen International Trading Ltd.
Unsurprisingly, the Thanksgiving holiday last week led to low ETF volumes and European trading was down 31 percent on the six-month average, while US volumes were down 21 percent. Germany’s failed government bond (Bund) auction and widening peripheral spreads took their toll on equity markets as well, with the Euro Stoxx 50 finishing the week 5.6 percent down on the previous week and the S&P 500 closing 4.7 percent lower.
Last week we observed a clear preference for physical replication among investors, with many switching out of synthetic ETFs. This was evidenced in outflows from ETFs issued by synthetic providers, such as Amundi, Lyxor and db x-trackers, in favour of iShares’ funds, in particular. We observed investors swapping Lyxor’s ETF MSCI AC Asia Pacific (NYSE Euronext: AEJ) for iShares’ MSCI AC Far East ex-Japan fund (LSE: IFFF), Lyxor’s ETF MSCI Europe (NYSE Euronext: MEU) for the iShares MSCI Europe (LSE: IMEU), Amundi’s ETF MSCI Emerging Markets (LSE: AEEM) for iShares’ MSCI Emerging Markets ETF (LSE: IEEM) and Amundi’s ETF DJ Stoxx 600 (SIX Swiss Ex: C6E) for iShares’ Stoxx Europe 600 (DE) ETF (Xetra: SXXPIEX).
Cowen’s primary market volumes decreased significantly, when compared with the previous week, while creations in bond ETFs continued to dominate our trading activities. The ratio between our bond and equity ETF trading activities was 9:1 in favour of bonds last week. In the primary markets, our most heavily traded bond ETFs were the iShares Barclays Capital $ Treasury Bond 1-3 ETF (LSE: IBTS) and iShares’ USD Treasury Bond 7-10 ETF (LSE: IBTM), in which iShares reported creations of US$44 million.
Investors appear to have stopped chasing corporate bond funds, though, as the clear losers last week were the iShares USD Corporate Bond ETF (LSE: LQDE) (with redemptions of US$81 million), iShares’ Markit iBoxx Euro Corporate Bond fund (IBCX) (with outflows of US$42 million). There were also outflows from German bunds, in the form of iShares’ eb.rexx Government Germany 5.5-10.5 ETF (Deutsche Boerse: RXP5EX) (with outflows of US$79 million). In these funds, CIT traded mostly on behalf of German investors.
US treasury bond ETFs fared better than their European counterparts—while Lyxor reported inflows of €24 million in its ETF iBoxx USD Treasuries 10Y (LSE: US10), it saw redemptions totalling €50m in its ETF EuroMTS AAA Government Bond (NYSE Euronext: MAA), ETF EuroMTS Global (NYSE Euronext: MTX) and ETF EuroMTS 5-7Y (NYSE Euronext: MTC).
With the European Central Bank’s next round of quantitative easing apparently around the corner, it is perhaps unsurprising that investors are looking towards gold, Gilts and TIPS and we saw significant orders for iShares’ FTSE UK Gilt All Stock ETF (LSE: IGLT) and iShares $ TIPS ETF (LSE: ITPS).
On the equity front, European funds suffered the heaviest outflows, with Lyxor’s MSCI Europe ETF (NYSE Euronext: MEU), Lyxor’s ETF DAX (NYSE Euronext: LYXDAX) and Lyxor’s ETF CAC 40 (NYSE Euronext: CAC) collectively seeing investor withdrawals of more than €132 million. This week Cowen executed its first creation order in the SPDR S&P US Dividend Aristocrats ETF (Deutsche Boerse: SPYD).
Our primary market activities were biased by 2:1 in favour of creations, but sellers still outweighed buyers by a 5:2 ratio in our secondary market trading. Our top-ranking ETFs by on-screen volumes were iShares’ MSCI AC Far East ex-Japan ETF (LSE: IFFF), iShares’ Markit iBoxx $ Corporate Bond ETF (LSE: LQDE) and iShares’ iBoxx euro fund (LSE: IBCX), which, between them, represented one-quarter of our total on-screen trading for the week.
On the commodities front, things were rather quiet. The only substantial event was a redemption of US$12 million in the ETFS Short Sugar ETC (LSE: SSUG), which was offset by a creation in the ETFS Physical Gold ETC (LSE: PHAU), meaning it was a flat week overall in the primary markets for ETF Securities.
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.