ETFs: Equities between inflation fears and economic optimism still a hit
Equities are back in the fast lane. Positive corporate news on the reporting season, minor setbacks and rising bond yields have once again encouraged buyers of value stocks in particular. But oil stocks and cryptocurrencies are also on the buy lists.
19 October 2021. Frankfurt (Börse Frankfurt). Momentum in equities is positive again, including European stocks. Concerns about weak economic growth in China lingered only briefly on the markets. At 4.9 percent, China's economy grew at its slowest rate in a year. While the DAX (DE0008469008) slipped well below 5,000 points last week, it is heading for the 5,500 mark on Tuesday.
ETF traders report sharply higher turnover in equity ETFs. "Rising bond yields and shifts toward value stocks have given European equities some boost in their year-long battle against U.S. stocks," says Hubert Heuclin of BNP Paribas. "Whether this will turn into a prolonged outperformance is still hard to say." Ultimately, he says, the STOXX 600 (EU0009658202) has merely made up for some of the underperformance of recent months.
"Weak economic growth in China is fueling concerns about further developments and their impact on global markets," Heuclin expects, looking ahead. In a worst-case scenario, he says, 0.2 percent growth is conceivable - disappointing, but possibly not enough to prompt the government to provide macropolicy support.
Heuclin
While U.S. retail sales data was unexpectedly strong on Friday, U.S. industrials were below expectations, Deutsche Bank analysts* wrote in their Markets in the Morning outlook.
Reporting season makes prices
Positive company news was immediately used to buy, noted Jan Duisberg of ICF Bank. SAP, for example, earned significantly more than expected in the past quarter and provided another positive surprise with an increased forecast. The quarterly reports of U.S. banks were also previously in positive territory and had given the markets the best stock market week since July. The question now is how the reporting season will continue, he said.
Positive momentum in the DAX - 14,800 points have held up
"After the DAX failed to slip below 14,800 points in the previous week, the momentum is now positive again," Duisberg added. "Markets are wavering between ongoing fears of inflation and positive surprises from the economy on the reporting season despite inflation." The trader sees in day-to-day trading that small setbacks are bought right away. "Investors know that central banks have neither the ability nor the will to fight inflation."
"In the past few days, the markets were quite volatile, which has calmed down again," adds Christian Dürr of Société Générale. "We see significantly more buying than selling in all major indices." Especially the topic of value is being taken up again by investors. The iShares Edge MSCI USA Value Factor UCITS ETF (IE00BD1F4M44) is particularly bought in this area, he said. Heuclin's clients are also asking for similar approaches. The iShares Edge MSCI USA Quality (<IE00BF2QSQ20>) is being bought, he said.
Global and Asian equities top turnover lists
In terms of global equities, the VanEck Vectors Sustainable World Equal Weight ETF (NL0010408704) tops Heuclin's top turnover list for the week. The iShares Core MSCI World UCITS (IE00B4L5Y983) is also heavily traded, as it usually is, he said.
Interesting remains apparently the China story, high turnover observes the dealers in ETFs with Asian shares. As Dürr reports, the Xtrackers FTSE China 50 UCITS ETF 1C (LU0292109856) is seeing busy trading in and out."
Heuclin is seeing heavy turnover in shares of the Amundi Index MSCI EM Asia SRI (LU2300294589), a variant of the Asian emerging markets ETF with sustainability filters. TheLyxor MSCI AC Asia Pacific Ex Japan UCITS ETF (LU1900068328), which focuses on Asian equities excluding Japanese, is primarily sold, he said.
All semiconductors or what?
With Netflix (US64110L1061), Tesla (US88160R1014), IBM (US4592001014) and Intel (US4581401001), tech heavyweights from the U.S. report on the past quarter this week. Jan Duisberg explains what matters here: "With Netflix, as always, the subscriber numbers are the highest in interest. At Tesla, IBM and Intel, the bulk will focus on how the shortage of semiconductors has played out and what impact it will have on future business development."
Dürr also sees "significant interest in the tech sector." This one, he said, is "right at the forefront." Once again, financials and energy stocks followed in second and third place, as in previous weeks, with trackers such as the Invesco EURO STOXX Optimised Banks UCITS ETF (IE00B3Q19T94) and the iShares STOXX Europe 600 Oil & Gas UCITS ETF (DE000A0H08M3). Here, the interest rate discussion plays a role, but also that the U.S. banks have done well with their quarterly figures, added Dürr.
Hydrogen shares on recovery course - oil story traded
With a view to the new government, hydrogen would also be in focus again. Rainy trading is recorded here by ICF Bank in the L&G Hydrogen Economy UCITS ETF USD Acc (IE00BMYDM794) as a sector ETF. "It has recovered very well from its low of €6.40," notes Duisberg.
Movement also among trackers of individual commodities in ETC form: Gold is still trading stable, which Duisberg says has had a positive impact on demand for the WisdomTree Physical Swiss Gold ETF (<DE000A1DCTL3>). The WisdomTree WTI Crude Oil (<DE000A0KRJX4>) was an investor response to rising oil prices.
Climate strategies in demand
Of the ETFs with a dedicated sustainability strategy, the UBS Climate Aware Global Developed Equity CTB UCITS ETF (USD (IE00BN4PXC48) attracted the most buyers* in Dürr's order books.
Cryptos: approval of Bitcoin Future ETF fires up the market
The approval of a Bitcoin Future ETF in the U.S. drove the price of the oldest cryptocurrency to more than $62,000 and caused crypto ETP sales to rise, Duisberg summarized. At ICF Bank, the 21Shares Polkadot ETP (CH0593331561) in particular was high on the turnover lists, performing just over 230 percent in the past three months alone, up just over 17 percent on a weekly basis. The 21Shares Ethereum ETP (CH0454664027), the 21Shares Cardano ETP (CH1102728750) and the VanEck Vectors Bitcoin ETN (DE000A28M8D0) are also doing very well, according to Duisberg, are very liquid and the latter is also trading with tight spreads.
If bonds, then from companies or emerging markets
In bonds, Heuclin reports purchases of the iShares Core EUR Corp Bond UCITS ETF (IE00B3F81R35) and the iShares J.P. Morgan USD EM Inv (<IE00B8JDT196>).
Dürr reports sales of the Lyxor EUR 2-10Y Inflation Expectations UCITS ETF - Acc (LU1390062245), which seeks to neutralize inflation by combining long and short exposure. "This is where the inflation theme continues to play out."
By: Antje Erhard, 19 October 2021, © Deutsche Börse AG.
Deutsche Börse 
